First home buyers have struggled for years to get onto the property ladder, but now with co-ownership there is another way.
Over the years in New Zealand parents have helped their children to buy their first homes, but there are many people that want to buy their first homes and they do not have parents that can help.
You may be in a situation where you do not have a big enough deposit, or you may have some credit issues that stop you getting a bank mortgage. If you have both a smaller deposit of less than 20% plus a credit issue then most banks will not provide the finance required.
But we have seen people in exactly this situation that can get a home using co-ownership.
How It Works
You may have a reason that the banks will not approve a home loan for you.
The most common reasons are;
- Only a small deposit
- Some bad credit on your credit check
- Struggle to ‘prove’ income to satisfy the banks
I you have only a 5% or 10% deposit then the banks are very tough when it comes to approving a home loan. If you have either some bad credit or a problem proving income then you will almost certainly have your mortgage application declined.
With co-ownership we can work around these problems.
You need to have a minimum of 5% deposit, but we can fund the rest with a mortgage to 70% or 80% and co-ownership to fund the rest.
What Is Property Co-Ownership?
Another name for co-ownership is shared ownership.
You may be “almost” in a position to buy a first home but are short on deposit or just outside of bank criteria.
You therefore could wait until you are in a better position, or buy most of a home with a professional business buying the small amount that you cannot afford right now.
So why not buy ‘say’ 80% of the home now and buy the remainder later. You can like in the home like it is 100% yours and enjoy all the benefits of home ownership without feeling the financial pressures that many first home owners struggle with.
Then when you are ready you can purchase the balance of the home from your co-owner.
There Are Professional Options That You Can Use
As mentioned, parents and other family will often help family to buy their first homes, but not everyone has family in a position to help. Even if you do, often getting money from family comes with it’s own problems and pressures too.
Now there are some businesses that have seen the opportunity to help first home buyers fund the shortfall; hence co-ownership is now becoming a good way to help fund property.
Why not just get a second mortgage?
Well first of all second mortgages are generally expensive, and secondly they generally need to be paid off in 5-years. This means that that the repayments can be too high, especially if you need a fairly large second mortgage.
You need to have a high income to be able to able to afford a second mortgage.
What about rent to buy?
There are some people that offer rent to buy agreements, but most of these are not very professional.
Many of the rent to buy schemes are expensive for you as the property buyer, and there is no real guarantee that you will be able to buy the property.
You own the majority!
With any shared type of ownership you should own the majority of the property.
This means that you feel like you have the ownership and also have the biggest benefit when property values increase.
How do Co-Ownership businesses make their money?
Most will charge you a regular fee for providing the equity. In most cases people treat this like interest and it’s not too expensive with one major provider charging just 4.95%
This covers the cost of the money and administration, but where co-ownership businesses really try to make their money is with the property value increases over time.
Don’t Give Up On Your Dreams To Buy A Home
Lot’s of people believe that buying a home is out of reach, and therefore give up on their dream.
The idea of co-ownership is not new, but it is not something that many people have considered.
But it is something that you should consider … it’s a lot better to own ‘say’ 73% of a property than owning nothing at all.
The mortgage advisers at Mortgage Managers are the experts on co-ownership and can help you to understand the concept and to get a loan approved.