Chapter 9: Getting on the Property Ladder

This is an extract from the ebook How to Really Buy a Property.

What's covered in this chapter
  • The myths about getting on the property ladder;
  • How to get someone else to pay your first deposit;
  • Why buying a less desirable property can help;
  • When 100%+ mortgages are not evil;
  • Working out if you are better off buying or renting, even in a falling market;
  • Why it's worth buying where you don't want to live;
  • How to outpace price rises.

There are a couple of myths which need to be set aside. Myths that stop many people trying to get on the ladder.
  • Myth: You need a 5% deposit
  • Myth: You can't afford to buy where you want
Knowing that the market will continue to rise over the long term means many buyers assume they will never be able to buy a property in an area they want and so give up and resign themselves to years of renting.

The Deposit for Buying a Property

Almost everything you read will tell you that in order to buy your first place you will need a cash deposit of between 5 and 10%. As such many first time buyers wait and save while pouring money down the drain in rent. There are three ways round this:
  • Buy in a new development where the builder offers to pay your deposit
  • Get a mortgage for 100%+ of the property value
  • Buy somewhere that you don't want to live!

Buying Property on a New Development

Reading the papers and surfing the net will give you no end of new developments where the builder is offering special deals on selected plots. These may be free flooring, stamp duty covered, or more significantly a 5% or 10% deposit paid. Many buyers avoid these because their dream property is a twee Victorian flat with fireplaces and walls that seep period features.

Remember that you are not looking for your ideal property, you haven't got the deposit so by definition you cannot afford it. You are looking for a stepping stone to your ideal property. If you are also financially stretched, even if someone else would be happy to pay your deposit on that lovely Victorian flat, what happens when the roof needs to be replaced and each leaseholder has to find £5,000?

The beauty of new developments is that they have little character. They are also extremely cheap to maintain unless you are paying for the upkeep of a communal gym, porterage, swimming pool, etc. Everything inside is also guaranteed for at least twelve months and the fabric of the building (roof, walls, foundations, etc.) are usually guaranteed for ten years.

A newly built property's value will change in the same manner as the rest of the market. When prices are rising you are gathering equity (profit) which will eventually become the deposit on your dream property.

Do not however assume that the new development will rise in value so fast you will be able to sell it as soon as it is ready and make a small fortune. This is and has been the case in a large number of off-plan purchases but it is not guaranteed. To see some examples of places where it did not work see Buying Property for an Investment.

Buying Property Where You Don't Want to Live