How To Get On The UK Property Ladder
The property ladder is a metaphor for the path to homeownership in the United Kingdom. It explains the idea that as you buy and pay off your mortgage, you build up equity in your home and then can use this to help you purchase bigger and better homes on the market. It can feel like a daunting task, with the house prices in London especially high and risk-averse mortgage companies reluctant to lend to anyone without a sizeable deposit. But, with planning, research and know-how, you can climb the UK property ladder and one day own a home of your own.
In 2016, those in England who managed to get onto the property ladder paid, on average, over PS198,000 for their first property. In London, that figure is even higher at over PS423,000.
For most, buying their first home will be the first step up the property ladder. For many, the next move up will be to a family home – usually with three or more bedrooms and more outside space for children. This is often the home that they stay in until either their children move out or retirement is approaching. It’s common for second-steppers to downsize to a smaller property when they need to, which can be beneficial as it releases equity from their ‘forever’ home that they could then use to boost their pension pot.
There are a number of different ways to help someone get on the property ladder, including giving financial gifts or helping them with their deposit and mortgage payments. However, it is worth bearing in mind that this can have a significant impact on your own retirement finances, so it’s important to think through the options carefully.
For those with a steady income who find it difficult to save for a deposit, shared ownership may be the answer. Through this scheme, you can own a percentage of the home (usually between 25-75%) and rent the rest. Many developers offer mortgages on shared ownership properties, which can make the dream of owning your own property much more achievable.
It’s not uncommon for those with a good amount of equity in their property to decide to assist their children in buying their first home. This can be done by gifting a lump sum or even taking on the mortgage themselves with their child as co-borrower. However, it’s vital to understand the impact this can have on your own retirement finances, so it’s always wise to seek independent advice before making any such decisions.
It’s also not unusual for those who have made it to the top of the property ladder to buy a new ‘forever’ home as they enter retirement. This is often a larger property with plenty of space for grandchildren and more outdoor space, but it can be hard to find a suitable home in the right location for their needs. As a result, some are choosing to improve their current home rather than move and find somewhere new.
