One of the biggest barriers to getting onto the property ladder is taking out a mortgage. Mortgages are loans that are paid back, with interest, over time. While they can be incredibly helpful for home-buyers, mortgages also come with a number of drawbacks that leave many people unsure as to whether or not the loan is right for them.
Luckily, there are a number of alternative options for prospective homeowners. So, whether you’re struggling to be accepted for a mortgage or if taking one out simply isn’t right for you, here are 4 great alternatives!
Shared ownership
If you are struggling to be accepted onto a traditional mortgage, you may want to consider applying for a shared ownership loan.
The process of applying for a shared ownership is very similar to that of a traditional mortgage; however, it is often much easier to be accepted as an applicant. When you take out a shared ownership loan, you will only own a fraction of the property. However, many lenders offer the chance to climb your way to full ownership overtime.
Shared ownership loans often require a much smaller deposit. This can make it easiest to afford a home. As well as this, some people are able to afford to buy a property out-right under shared ownership due to the much smaller asking price.
Those who take out shared ownership will have to pay some rent on the part of the property that they do not own. However, overtime you are able to claim full ownership and move to a full mortgage.
If you cannot afford a full mortgage, shared ownership may be the best option for you!
Renting
If you don’t want to commit to a mortgage, renting may be the best choice for you! Renting is popular with people who plan to move around so don’t want to take out a long term mortgage. It is also a great option for those who cannot afford a downpayment and need a quick solution to finding a home.
When you rent a property, you don’t have any ownership. Instead, you make monthly payments to a landlord who is responsible for the upkeep for the property.
Renting takes away responsibility of maintaining the home and paying back a mortgage over time. Typically, rental contracts will last for shorter periods of time, with some lasting as little as one year! However, renting does not offer any return on investment. With that being said, renting is an excellent option for anyone who cannot afford a house deposit or plans to move to an area in the near future.
Small deposit mortgages
One of the biggest barriers to getting a mortgage is saving up a large deposit. The best offers may ask for a deposit of up to 25% of the property asking price! For low income earners, first time buyers or families, this could take years to save.
Fortunately, it is possible to find a mortgage lender that offers contracts for small deposits. In fact, some ask for as little as 3%, making it easy to save up and buy your first home. While small deposit mortgages are still a type of mortgage, they are much more affordable than traditional mortgage options.
However lenders may charge higher interest rates on what you borrow. Similarly, lenders will ask for excellent credit history to prove your creditworthiness when applying with a small deposit.
Which alternative is right for you?
The above three are just a few examples of the alternative mortgage options that are available.
If you want to have full ownership of a property and invest your money, a small deposit mortgage may be the best option for you. Shared ownership is also a great choice for those who cannot afford a full mortgage but want to eventually own their own home. However, if you do not want to commit long-term to a property, you may want to consider renting.
Before making your final decision, do your research and way up the pros and cons of each option. Making any kind of property investment is a big financial decision and is one that shouldn’t be rushed into!
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