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How to buy a £225,000 house with £15,000
It's no secret that it can be really difficult to buy your first home - according to the latest figures published in the UK House Price Index, the average home now costs just under £225,000, or a remarkable £482,000 in London.
Often, it's not just saving for a deposit that locks first-time buyers out of home ownership - but all of the added costs of buying a property, too.
While it might seem like a mammoth task in the current market, getting on to the property ladder isn't impossible. Here's how you can do it with a reasonably small deposit.
The average UK home
Whether you're buying a studio in Burnley or a suite in Belgravia, there's no such thing as an 'average' home - as the data will always be skewed by the lowest-cost areas and the playgrounds of the super rich.
But for argument's sake, Land Registry data shows the average property value in the UK was £223,257 in June.
So, to buy this 'average' home, you'd first need a deposit, and then have enough cash left over to cover the following:
- Stamp duty: £1,965*
- House survey: £580**
- Conveyancing: (including Land Registry fees, searches, transfer fees): £1,550***
Total: £4,095
For the purposes of this article, we've left out more subjective costs such as removal fees (free if you do it yourself, £100 for a man with a van or £1,000 for a full packaging and removal service), and mortgage fees (which can range from nothing to a couple of thousand pounds).
I have no deposit
Consider a 100% mortgage
The risky 100% mortgages that were common before the financial crisis are very much a thing of the past, but there are still ways to buy a house with no deposit.
One option is to secure a guarantor mortgage, where a family member uses their savings or equity to support your application.
- Barclays Family Springboard - A helper puts a 10% deposit in to a 'Helpful Start Account' to secure your mortgage. They get their savings back in three years, with interest, so long as you keep up your payments. Available on homes up to £500,000.
- Nationwide Family Deposit -A family member with an existing Nationwide mortgage (or who is willing to move their mortgage to Nationwide) either increases their borrowing or borrows against their equity.
- Aldermore Family Guarantee - A family member uses their current property to provide security for a 10-year guarantee period.
- Family Building Society - Family Mortgage- The first-time buyer needs a deposit of at least 5% (though this can be gifted). The family member puts up to 25% of the property's value into an account to provide security for the mortgage.
| Deposit required | None, but you'll need help from a family member. You'll also need to ensure you've got enough to cover the additional costs discussed earlier. |
| Purchase limits | Through Barclays, properties up to £500,000 are permitted. If you have the earnings to secure such a big mortgage, you might be best pursuing more traditional options. |
| Suitable for... | First-time buyers with no deposit searching for a low-cost home in a cheaper area |
I have a small deposit
Help to Buy equity loans
The government's Help to Buy equity loan scheme has helped more than 120,000 people on to the ladder.
Help to Buy allows you to buy a new home with a 5% deposit. The government then lends you a further 20%, meaning you only need to get a 75% mortgage.
As property prices are higher in London, buyers there can benefit from a 40% equity loan, double the percentage offered elsewhere in the country.
| Deposit required | 5% - or £11,163 for the average priced home. Add in the additional costs, and you'll be just over the £15,000 target by a couple of hundred pounds |
| Purchase limits | Properties priced up to £600,000 - although you'll need a household income of £100,000 to buy a home at this level. |
| Suitable for... | First-time buyers with small deposits who want to live in a new-build home. |
I can't afford to buy a home outright
Shared ownership schemes
Shared ownership allows you to buy between 25% and 75% of a property from a housing association, and pay rent on the rest.
If you're looking to get a foot on the ladder in a more expensive market, it might be one of the best options available to you.
A note of caution, though -when Which? analysed shared ownership properties within a 20-mile radius of London earlier this year, we found that the combined monthly mortgage and rent repayments would be unaffordable for most young people in the capital.
| Deposit required | 5% - the average London home costs £481,556. A 50% share would cost you £240,778 - meaning a deposit of £12,038. A minimum 25% share (if available) would cost you £120,389 - so you'd need a deposit of just £6,019, leaving plenty of head-space for the additional costs. |
| Eligibility | You'll need to have a household income of less than £80,000 (or £90,000 in London), but you'll need enough to cover your mortgage, rent costs, and service charge. |
| Suitable for... | Buyers with small deposits in expensive areas |
Do I need to worry about an exchange deposit?
When you exchange contracts to buy a house, you'll usually need to pay a 10% deposit to seal the deal.
Of course, if you only have a 5% deposit, this can pose a problem. In this instance, your solicitor will need to reach an agreement to reduce this with the seller.
If you're up-front from the onset, an agreement should be reached. Sales rarely fall through after exchange of contracts, and by having a mortgage agreement in place you should have done enough to prove your financial viability.
Alternatively, on occasion it can be possible to exchange and complete on the same day, thereby removing the need for an exchange deposit.
*Based on calculations using the Which? stamp duty calculator.
** Based on data from the Residential Property Surveyors Association panel
***Based on a quote for a freehold, mortgaged property through Which? Conveyancing