First-Time Buyers Need Help!

Szu Ping Chan looks at four mortgage products that help struggling first-time buyers onto the property ladder.

I'm a relatively young Foolish writer who is yet to get my foot on the property ladder. So mortgages for first-time buyers is a subject close to my heart.

Sadly, buying your first home has rarely been less affordable, according to the Council of Mortgage Lenders, which recently found that first-time buyers now have to spend a greater proportion of their income on mortgage payments now than at any time since 1992.

But don't give up hope yet. As property prices have risen, a plethora of new mortgage deals have been created to help first-time buyers with tight budgets. So here's a Foolish guide to some innovative first-time buyer mortgages that might suit you.

Buy With Friends

If you've been renting with friends for a while, why not buy together and save on rent money? Many lenders such as Britannia and HSBC will now consider lending to more than two parties. This makes monthly outgoings lower, and enables you to get onto the ladder with three or more friends.

However, although they are your friends, you should nevertheless protect yourself by planning ahead and figuring out what you would do if one of you wants to move out, for example.

It's a good idea to each have your own solicitor to look after your individual interests. In addition, you should usually make sure that you buy your property as 'tenants-in-common' as opposed to 'joint tenants'. This means that if one of you dies, your share of the property will go to your nominated heirs, as opposed to automatically passing to your co-owner.

Get help from Mum and Dad

If you're not earning enough to qualify for a standard mortgage, some lenders will still be willing to lend to you if you have a guarantor.

A guarantor is usually a close relative such as a parent or guardian, who agrees to meet your mortgage payments should a shortfall arise. They are putting their home at risk by agreeing to this, as the lender could pursue your guarantor for your debt if you failed to pay up.

For a guarantor mortgage with a twist, Bath Building Society offers a special 'Buy for Uni' mortgage, where university students and their parents can purchase a property to live in while completing their degree. The property can be shared with friends to assist with the cost of the mortgage, with the lender taking into account the rental income of the property when assessing how much you can borrow.

Different lenders have different criteria when considering a guarantor, so it's worth asking if the guarantor would be liable for all of the loan amount or only the percentage above what the main borrower would normally have access to. And remember, if you do default on payments, it won't just be the lender who comes after you -- it'll be Mum and Dad.

Graduate from university

Graduates present exciting prospects for lenders, and some will try to entice you with special deals. Scottish Widows are willing to lend up to five times your income and 102% of the property value depending on your circumstances, and even more if a parent or guardian can act as a guarantor.

Professional mortgages are an even finer niche in the mortgage market, aimed at certain professions such as accountants, dentists and solicitors on the presumption that these people have accelerated earnings potential. Lenders are more willing to stretch what they would normally lend because they know roughly how much you'll be earning in the next few years, and realise the potential gains of getting their mitts on it early.

Finally, remember that just because a lender will offer you a larger sum than usual, it doesn't mean you should take it. Don't be tempted into borrowing more than you can afford.

Get a Lodger

If you're keen to get on the property ladder, don't fancy buying with friends, but can't find a mortgage by yourself, then you could always get a lodger. The government gives a tax break of up to £4,250 a year through its Rent a Room Scheme. Some lenders such as Stroud and Swindon take this income into account when calculating how much you can borrow. So for example if you earned £30,000 and rented out a room for £4250 a year, you would be able to borrow £137,000 (4 x £34,250).

If you're considering this option, you've got to remember that the lodger income isn't guaranteed, and while you and the mortgage lender will be in bed together for years, the lodger may not necessarily stick around for the long haul.

No matter how you decide to get on the ladder, it's worth considering all your options. Shop around, compare mortgage deals and consider getting advice from our Mortgage Service before making a decision. Who knows? With a bit of luck, you may soon be celebrating in your new home.

>The Motley Fool Mortgage Service offers whole-of-market, no-fee advice. We can help you find the best deal for you.