Get Help Onto The Property Ladder

Are you a struggling first-time buyer on a tight budget? Find out how you can take that vital first step onto the property ladder.

What are your options if you are young first-time buyer with a small income, no savings and no funding from the Bank of Mum and Dad?

To some extent, the chances of you getting on the property ladder soon probably look pretty slim. House prices are rising, competition from buy to let investors is increasing and interest rates are going up.

But let's look on the bright side. Yes, interest rates are rising, but historically, they are relatively low right now. Plus, the mortgage industry is much more competitive today than it used to be. This means there is a wider choice of mortgage products available, many of them specifically designed to help struggling first-time buyers onto the property ladder.

No deposit necessary

If you haven't got a deposit, then you may wish to consider a 100% or 100%+ mortgage from lenders like Birmingham Midshires, Coventry Building Society or Northern Rock.

As the name implies, these lenders will allow you to borrow 100% of property's value. You may even be able to borrow a further 25% on top.

THE CATCH: If house prices crash, you may be left in negative equity. In other words, you will owe the lender more than your property is worth and so you will not be able to move until prices scramble back up again. Furthermore, rates are usually higher on these products and it will probably take a long time before you can remortgage onto a cheaper rate.

ALTERNATIVE: Save up for a deposit.

Guarantor mortgages

Over the past three years, two out of five first-time buyers under 30 have received 'financial assistance' from their parents in order to buy a property, with some estimating the average hand-out at over £17,000.

If your parents aren't about to offer you oodles of cash, there is another option: they could guarantee your mortgage. This will allow you to borrow a larger sum than you would have been able to on your income alone.

THE CATCH: If you fail to meet your mortgage payments, the lender will expect your parents to pay the bill -- or lose their home

ALTERNATIVE: Borrow a smaller sum, based on your income alone.

Buy with friends

If you are renting with friends because you cannot afford to buy a place on your own, why not club together with your mates to buy a property?

A handful of lenders, such as Britannia Building Society, now allow up to four people to borrow three times each of their individual incomes. Others will allow three people or more to share responsibility for meeting the monthly mortgage payments.

THE CATCH: What if you want to sell up and move out? What if you can't meet your share of the mortgage payments? It's vital to think through all the legal consequences of a joint mortgage beforehand and draw up a binding agreement.

You should also be aware that, for as long as you are joint mortgage applicants, your credit rating will be inextricably linked to that of the other borrowers -- so a black mark on their record will also show up on yours.

ALTERNATIVE: Buy a property with the explicit purpose of taking in a lodger and renting it out. That way, you can live with your friends, but ultimately you alone hold the key to the front door.

Professional mortgages

If you're a certain type of professional at the start of your career, such as an accountant or a solicitor, some mortgage lenders will 'recognise your future earnings potential'. In other words, they see you and think 'Ka-ching!', and will offer you a special 'professional mortgage' deal.

These deals enable borrowers in certain professions (chosen by the lender) who have a small deposit -- or even no deposit at all -- access to cheap rates. It's really as simple, and as biased, as that.

THE CATCH: Before all you accountants and solicitors out there start singing 'ner ner na ner ner' at the rest of us lowly mortals, remember: you cannot work in these professions if you are declared bankrupt. So, if you fail to meet your mortgage payments, you not only stand to lose your home -- you also stand to lose your job. No wonder mortgage lenders see you as a safe bet.

ALTERNATIVE: Unless you are prepared to change careers, there is no alternative. Just make sure you don't overstretch yourself and your payments are affordable.

> Compare Mortgages at The Fool
> 5 Things A First Time Buyer Should Know
> How High Could Mortgage Rates Go?

Donna Werbner is deputy editor of Your Mortgage magazine