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Get a Low- or No-Deposit Loan,[link widoczny dla zalogowanych]
Buying a house is a big commitment. And for small income earners or young adults just making their way in the world, the thought of finding the right property, raising a home deposit,[link widoczny dla zalogowanych], securing the right loan and going through home buying legal procedures can be very daunting indeed.
So how do first time home buyers with low income start the process of buying their dream homes? True, there are many first time home buyer loans they can apply for but there are a few other things they should consider as well.
Prospective young first time home buyers can also stay longer with their parents to quickly raise a house deposit. However, it’s important not to take advantage of the parents’ generosity. Help by paying some kind of rent and contribute in daily household chores.
Start Raising Money for a Home Deposit
Obviously, if money is an issue, the best solution is to aim for a smaller or cheaper house. In fact,[link widoczny dla zalogowanych], many first time home buyers purchase more affordable units or apartments and later use the equity they’ve built up to borrow money to buy bigger and nicer homes in better suburbs.
Buy a Smaller or Cheaper House
Here are some suggestions for low income earners or those with small home deposits to buy residential property.
First time home buyers who haven’t accumulated ample home deposits don’t need to despair. They can still try to get low- or no-deposit loans, provided that they are in permanent employment and have a decent income. A no-deposit loan is essentially a 100% loan on the property while a low-deposit loan typically requires a minimum deposit of 3% to 5% of the purchase price.
It is possible for low income earners to buy houses. Start by saving for a home deposit as early as possible. They can also buy smaller and cheaper properties first or make joint purchases with friends or relatives. Those with no home deposits but with steady and sound income can get low- or no-deposit loans to purchase their first homes.
While these loans help people buy houses earlier, they are also extremely expensive loans. Interest rates are higher and borrowers will have to take out a lenders mortgage insurance in case they default on their repayment. In the long run,[link widoczny dla zalogowanych], those with low- or no-deposit loans end up paying much more than home buyers with a home deposit of at least 20% of the purchase price.
A single person with a low income can also opt to make a joint purchase – buy a property with friends or relatives. It can, however, get complicated because of the multiple parties involved. One party may want to sell the property or become unable to make his portion of the monthly loan repayment. That’s why those planning to make a joint purchase should make sure their legal documents and contract are drawn up carefully.
Found this article useful? Read also Buying a House as an Investment and Understanding Property Investments.
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The earlier money is put aside for a home deposit, the more funds will be available by the time house hunting begins. Open a high interest savings account for this purpose. Fixed term deposits, online savings accounts and cash management trusts are secure and pay good interest rates. Those planning to buy a house five years or more down the road can also invest their savings in managed funds and shares. Although riskier, investments in shares and managed funds will certainly yield higher returns in a longer time frame.
Read on
Buying a House With No Deposit
Low Interest First Time Home Buyer Mortgages
Property Ownership a New Year Resolution
Make a Joint Purchase With Others
Derkley, Karin. [i]Buying & Selling Y