New figures have revealed that first-time buyers in the UK are putting down the largest deposits in a decade.
The average deposit has reached £41,099 – just under a fifth of the average house price (18%) – up from £27,059 in 2009.
If you want to get onto the property ladder, saving up your deposit is one of your biggest challenges.
Russell Galley from lender Halifax, says: "While increasing numbers of first-time buyers is good news for the housing market and they are not far off the peak of the last boom which was just under 190,000 in 2006 – it’s saving enough to get a foot in the door that’s still the biggest blocker."
We recently looked at some ways to save up to find your house purchase. But what if you don't have a deposit? Several lenders offer schemes that allow you to buy without a 5% deposit or more, so we look at how you can get a mortgage without a deposit.
Halifax Family Boost Mortgage
This month, Halifax has launched a new 'Family Boost Mortgage' to help first-time buyers get on the housing ladder without a deposit.
Instead of saving for a deposit, savings from parents or other family members can be used, as long as they are at least 10% of the amount you want to borrow. The family member will have to contribute this amount as security, and this counts as the 'deposit'.
The three-year mortgage is fixed at 2.99% with no fee, while the deposit savings are held at a fixed rate of 2.5% for the same period.
At the end of the three years, provided that the all the mortgage payments have been made, the savings and interest will be returned to the person who provided the savings (your family member).
Only those named on the mortgage have legal rights over the property, irrespective of who provided the 'deposit'.
Halifax say: "As part of our commitment to lending £30 billion to first-time buyers by 2020, we are offering families a way to help give the next generation the boost that they need to get on to the property ladder, while providing competitive rates to both buyer and supporter."
Lloyds Lend a Hand scheme
The Lloyds Lend a Hand scheme is similar to the Halifax scheme in that a family member will need to lend you 10% of the purchase price and vouch for it on paper.
Your family member must have enough savings in a current account (for example, £20,000 for a £200,000 mortgage) and, once you have found a property, they will have to set up a savings account with Lloyds Bank and deposit the cash.
This cash is then held as a 'deposit' and, like the Halifax scheme, the family member will earn 2.5% interest per annum on their savings, payable at the end of three years.
The scheme is available on mortgages of up to £500,000 over a maximum period of 30 years.
There are two important factors you should bear in mind:
- The mortgage is not portable, meaning you can't take it with you if you move within three years
- If you miss a payment, the bank can take the amount owed from the 10% invested by your family member.
Barclays Family Springboard
One of the original 'no deposit' mortgages designed for families, the Barclays Family Springboard again requires a family member to contribute a 10% 'deposit' by lodging the cash in a Barclays account.
Under the Barclays scheme the 10% security will need to be committed into a Helpful Start account for five years, and the family member receives their money back, with interest, at the end of the five years.
There is a maximum loan of £500,000, and Barclays are currently offering a five-year fixed rate at 2.95% with no fee.
Aldermore Family Guarantee
Under the Aldermore Family Guarantee scheme, you can borrow up to 100% of the property purchase price or valuation. Your monthly mortgage repayments will be based on the full amount that you borrow, and you must have enough income to support the monthly repayments.
If you use this scheme, a guarantee will be required from a parent, stepparent or grandparent for the amount of the mortgage above 75% loan-to-value. This guarantee is secured by a charge on the guarantor's residential property, with the amount of the guarantee capped at the original agreed amount.
The advantage of this scheme is that a family member doesn't need to provide a cash deposit as they can simply use the equity in their property.
In addition, the maximum guarantee period will be 10 years, at which point it will expire (and the charge against the guarantors property will be released) unless demand has been made under it and moneys remain outstanding, in which case it will expire when outstanding money is paid in full.
The guarantee can be repaid at any time by payment of an amount equivalent to the maximum guarantee. Payments of more than the maximum amount of guarantee will incur any applicable early repayment charges.