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Do You Really Need An Inheritance To Buy Your First Home?

Posted 26 May 2021 by Keith Osborne

Would-be first-time buyers don't have to rely on inheriting a large sum in order to step on the first rung of the property ladder...

There are several understandable reasons you may dream of owning your own home. Besides the obvious financial appeal – a house is an attractive long-term investment that helps to build equity – having your own place can also provide a sense of stability and access to community that combine to promote a higher quality of life.

Unfortunately, this dream and its associated benefits remain unachievable for many in 2021, especially when it comes to younger generations.

Millennials and homeownership: what’s going on?

Generation on generation, there has been a steady decline in homeownership rates. According to ABC Finance, over 50% of Baby Boomers in Britain owned property by the age of 30. Now, less than 30% of millennials in the UK own their own home.

Why? Because the cost of buying a home continues to increase at a faster rate than wages do. As identified by Investopedia, student debt and tight lending criteria are two other problems making it virtually impossible for millennials who wish to buy, not rent.

There is some good financial news for this generation: it has been said that millennials will enjoy the largest inheritance boom of any post-war peer group. Does that mean inheritance is the only realistic way for them to own property?

Read on to learn more about inheritance and four other methods young people could use to finally buy their own place.

Inherit a home

Parental wealth has always had an impact on future homeownership. A recent study by Urban Institute has found that if your parents own their home, your likelihood of following in their footsteps increases by 9%.

Perhaps, then, generational analysis falls short of explaining the decline in homeownership. The Guardian argues instead that the fault lines are “between millennials who stand to inherit assets and those who don’t,” thanks to four decades of property inflation.

It’s true that an inheritance boom is predicted for millennials, but it will arrive too late and be spread too unequally to rectify the problem of millennial house ownership, according to Show House.

So what about those who are not on track to receive a substantial inheritance? Here are four alternative routes to homeownership for young people.

1. Start saving

Research performed by the Office of National Statistics reveals that more than half of 22-29-year-olds had no money saved in a savings account during 2014-2016. This was an increase compared to previous years.

Martin & Co has the following advice for millennials who want to boost their bank account so they can buy a home.

  • Move back home for an extended period to save money on rent and bills.
  • If you must privately rent, share a house rather than renting a property on your own.
  • Be prepared to sacrifice some everyday luxuries like café-bought coffee or takeaway food.

2. Consider Right to Buy

As Waldrons explains, Right to Buy schemes allow council and housing association tenants to buy the house they have been living in – usually at a significant discount. This discount could reach up to an unbelievable 70% of the property’s value.

Since Globest ranks affordability as the top obstacle for aspiring millennial homeowners to overcome, this discount could be what’s needed to give young people a step up and onto the property ladder.

3. Explore Shared Ownership

The Shared Ownership scheme enables you to buy a share of up to 75% of a property and pay rent on the rest. You may not own the house outright, but you’ll still be on the property ladder as an owner-occupier.

This is a more accessible option for those unable to save for large deposits. Mortgages are also easier to obtain via Shared Ownership, even when you’re on a lower salary. Also, monthly payments made under this scheme are likely to be less than paying private rent.

4. Reduce your expectations

If property ownership is your dream, you may have to compromise to achieve it; for example, by moving out of the city and into the suburbs. Urban Jungle recently discovered that 55% of 18–34-year-olds living in the capital are already considering living elsewhere.

Correspondingly, Hamptons estate agents has shared that first-time buyers now make up over a third of households buying outside of London. This figure is up by 29% from 2019, potentially due to an increase in remote working which gives young employees greater choice when it comes to home locations.

 

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A Guide To Part Buy Part Rent
Part Rent Part Buy is a scheme you can use with Home Reach where you buy a share of your chosen newly built home and pay a monthly rent on the part you don’t buy. Find your part buy part rent house today!

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