[*Ten ways to beat the credit crunch * (https://www.sundayherald.com/business/businessnews/display.var.2174616.0.0.phpHere)
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**1: Beg a deposit **More first-time buyers are turning to their parents for help with a deposit. Scott Brown of Warners, the estate agents, says: “The number of first-time buyers who are helped by their parents has risen to about 75% and it is now the accepted norm. Salaries are failing to rise at the same rate as house prices, so even professionals on good incomes can struggle to obtain finance.”
**2: Buy with your parents **If you can’t afford a mortgage on your own, you might be able to persuade your parents to take on joint ownership. If so, they should take legal and tax advice. It is usually best to draw up a “tenants in common” agreement showing exactly who owns what.
However, if your parents are on the deeds, they could be subject to capital gains tax when the property is sold. There are also implications for inheritance tax.
**3: Ask your parents to be guarantors **Let’s say you earn £25,000 a year and want to buy a property for £110,000 with a £10,000 deposit. The lender might lend you three-and-a-half times salary, or about £87,500, leaving you with a £12,500 shortfall. But if your parents act as guarantors, the lender would probably grant you the full mortgage, as long as you could offer some proof that you would be able to take over the full responsibility in a few years.
It would also expect the parents’ income to cover both your mortgage and their own. So if they had a mortgage of £250,000, they would have to be able to cover both loans, or a total of £360,000. In other words, they would need to earn about £100,000 a year.
Parents should understand they are obliged as guarantors to pick up the bill if you default on the mortgage payments. But their names are not on the title deeds, so there are no tax implications.
The First Start deal from Bank of Ireland and Bristol & West works a little differently. The loan application is treated as a joint application with the parents’ income as the main source. Richard Morea of L&C Mortgages, a broker, says: “It’s a bit like joint ownership, so you can boost your buying power. However, the property is held only in the name of the child, so it has the advantages of the guarantor loans.”
Bank of Ireland last week withdrew seven of its eight First Start options. It is now offering a five-year fix at 6.19%, and you can borrow up to 100% of the property price.
**4: Join forces with friends **If your parents can’t or won’t help out, you could club together with friends or siblings. Most lenders allow up to four borrowers on one mortgage, but they typically take into account only two incomes.
A handful of lenders are more flexible. Britannia, for example, will lend up to three times each income. Visit www.sharetobuy.com for details.
If you are buying with friends or relatives it is absolutely essential to draw up a legal agreement so there are no conflicts over mortgage payments or any profits when the property is sold. You should also clarify what will happen if someone wants to move out or sell up.
**5: Extend the term of the loan **Most people take out a mortgage for 20 or 25 years, but if you are young you might consider extending the term of the loan to cut the payments. For example, if you have a £100,000 mortgage over 20 years at 5.5%, your monthly repayments would be £687.89. If you extended the term to 25 years, you would pay £614.09 a month, or £567.79 over 30 years. But with longer loans you will probably pay more in total interest over the full term.
**6: Take an interest-only mortgage **You can cut your monthly payments if you pay off only the interest each month and none of the capital. For example, the monthly payments on a £100,000 loan at 5.5% over 25 years would be £458.33 interest-only, instead of £614.09. But it can be risky. If you don’t find another way to pay off the capital debt at the end of the term, you would have to sell the property.
**7: Seek government help **The Scottish government runs a Low-cost Initiative for First Time Buyers (Lift), a shared equity scheme. A first-time buyer would pay between 60% and 80% of the purchase price and the rest would be held by a registered social landlord, often a housing association. More details at www.communitiesscotland.gov.uk.
**8: Lower your sights **Why not buy your first property in a cheaper area? Forget Edinburgh and head for Cumnock or Lochgelly, where the typical house price is £111,269 or £118,838. Or maybe you could squeeze into a one-bedroom flat instead a two-bedroom.
**9: Play the waiting game **Should you wait for house prices to come down? It’s a strategy, but it could prove risky. If property inflation continues to rise, you could end up having to pay more for your dream home.
**10: Go abroad **Nearly half of first-time buyers would buy abroad to get on the property ladder, according to research from fair investment.co.uk. "First-time buyers are being driven to sunnier climes as a result of the credit crisis,"said James Caldwell, director at Fairinvestment.co.uk. “Overseas they can sometimes find cheaper property and a lower cost of living, which could make buying their first home more affordable while they continue a high quality of life.”
