Look out for deals that can unlock door for first-timers

Will 2010 be a good year for first-time buyers? Sharon Dale reports on the problems and prospects facing those trying to find their first home in these tough economic times.

First-time buyers forge the first link in the property chain, so their struggle to get a foothold on the ladder impacts on us all.

"I worry about first-time buyers," says estate agent Andrew Winter, of Blundells, Sheffield.

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"They underpin the market, but you now have students coming out of university with debt and struggling to find jobs and, on top of that, to secure a mortgage these days you often have to have a large deposit.

"A lot of support has come from parents, the bank of mum and dad, but pretty soon that will dry up. Once that has happened I wonder where first- time buyers are going to come from."

Last year, lenders were demanding a 20 per cent deposit which meant that a down-payment of 16,000 was needed on a Yorkshire home costing 80,000.

So it's not surprising that the average age of the first-time buyer is 31, and the average for those who buy without financial backing from relatives has risen from 33 to 37.

But the first weeks of 2010 have brought a glimmer of hope

for those who want a home of their own.

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Financial adviser Brian Newton, of Leeds-based Bluesky Financial Solutions, says: "It has been a very difficult time with lenders competing to mess people about and make their lives a misery. They were demanding high deposits and offering a deal one day then withdrawing it the next.

"Now I'm seeing a degree of stability, rates are getting slightly better, deals are coming on rather than being taken off, and lenders are starting to compete."

But Brian, who also advises shopping around for a mortgage via a whole market independent financial adviser, warns borrowers to look at the small print and not to overstretch themselves.

"There's a lot of confusing marketing and there are strings attached to some deals with tie-ins, high arrangement fees, legal and valuation fees. You also have to take into account that interest rates are likely to rise."

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He also suggests buying with friends or with help from parents to increase the deposit and secure the best rate of interest.

"With a 90 per cent mortgage you will pay 4.9 per cent interest, and with a 75 per cent mortgage you only pay 2.9. That's a significant difference."

Kevin Hollinrake, of Hunters estate agents, agrees but adds that most first-timers he sees buy alone.

"In the mid-1980s I'd see young couples in their 20s buying together, but now people are buying for the first time in their 30s and many want to buy alone."

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But if you can save a deposit, then 2010 could be a good year.

"Property is more affordable than in 2007, interest rates are low and the banks are lending again," says Kevin.

"But it's only good as long as you take a medium-to-long-term view. Historically, property prices have doubled every 10 years, but at the moment you can't buy and then sell at a profit after a couple of years."

Another way onto the ladder is through a shared equity or shared ownership deal on a new-build property, and there's a wealth of choice at the moment.

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Buyers need a mortgage and usually a deposit for their share of the property (typically 75 per cent), but they must ensure that the developer's asking price is not over-inflated.

Some developers offer their own packages, while others are allied to the Government's Homebuy Direct scheme. The latter is available only to households whose income is 60,000 or less and its funds are limited.

Ambulance technician Blake Regan, 24, bought a two-bedroom apartment in Bradford's Valley Garden through a shared equity deal with Miller Homes.

It cost him 56,000 for a 70 per cent share with the 30 per cent equity loan repayable after 25 years or when he sells the apartment.

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He says: "As far as I was concerned, I would be living with my parents for some years to come, but, when I called to find out more about shared equity I thought it was too good to be true. I never believed

owning my own property was going to be so easy and certainly not any cheaper than renting.

"I didn't have to put down a deposit and I can afford the monthly mortgage re-payments."

Blake adds: "I knew this was the best time to buy. Iif I hadn't taken advantage of property prices being so low and the equity help out there, I would still be living at home with my parents until I qualified as a paramedic."

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For those who are still searching, Russell Manning, of Manning Stainton estate agents, says: "My advice to first-time buyers is buy for the long term and do not buy something and expect to sell tomorrow at a profit.

"Buy a property as a home and make sure you can afford the repayments. Don't take on more than you can afford. That is the lesson of the last few years."

David Bexon, managing director of SmartNew Homes.com, says: "While housing stock will remain in short supply this year, there is a greater range of options available for first-time buyers."

Shared ownership is often available on housing association property and enables you to buy a smaller share of a home. However, rent is usually charged on the percentage of the property owned by the association.

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Assettrust Housing, which specialises in shared ownership housing, is offering buyers the chance to part-own a new one-bedroom apartment from as little as 9,369, by buying a 12.5 per cent share in it.

David Orchin, sales and marketing director at Assettrust Housing explains: "By purchasing a cash share of 12.5 per cent, the buyer can either decide to remain mortgage-free, or when rates become less punitive, staircase up and buy a larger share in their property."

This offer applies to Assettrust Housing's Wakefield development at Woodlands Quarter. Prices start from 74,950 for a one-bedroom apartment but with a cash share of 12.5 per cent, the purchaser can move into their new home from 9,369. Monthly outgoings would include service charge and rent on the remaining balance of the property, and would cost 240.

For further information about Woodlands Quarter, Assettrust Housing or shared ownership, contact 0845 373 2436 or visit www.assettrusthousing.com.

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n A chance to win a home for a fiver is being offered at the Greenhouse development in Leeds.

Win My First House is offering the chance for someone to win a one-bedroom apartment, worth more than 110k, in the eco-friendly Greenhouse development in Beeston, Leeds.

Tickets cost 5 and the winner will also be entitled to a furniture pack worth 12,500 and a sports car worth

16,500

Win My First House is donating 100k generated from the initial ticket sales to Virtue Youth, a not-for-profit organisation.

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For more information, visit www.winmyfirsthouse.com. The winner will be drawn in December 2010.

Useful tips for first-time buyers

Halve the burden by buying with a friend but make sure you really

want to live with them. You could try renting together first. Also, make sure you get a good conveyancer as there are legal implications.

If you can't afford to buy in the area you want look to the edges of it. If Ilkley is too pricey, try nearby Silsden, which is 20 per cent cheaper.

Look at new homes for shared ownership and equity deals.

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Shared equity deals vary but on many there is no interest or "rent" payable on the equity loan for the first five years.

The loan is repayable after a specified period, eg 10 years or when you sell the property.

The Government Homebuy Direct shared equity scheme is available to households earning 60,000 or less a year.

For general information on Homebuy Direct, visit www.direct.gov.uk.

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Do your homework and shop around for a mortgage. Try whole market independent financial advisers with impeccable pedigrees. They have access to more deals and will spot any pitfalls and hidden charges.

Don't overstretch yourself especially as interest rates are likely to rise slightly.

Approach the bank of mum and dad. Putting their savings in property may prove to be a good investment for them.

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