With house prices continuing to spiral, there is one sector of the house-buying market suffering more than the others. First time buyers face a nightmare situation, they are desperate to make a start on the home-owning ladder, but as fast as they can save for a deposit, even the most modest property has risen again, taking it out of their reach. In addition to this there is the worry that their earnings will be insufficient to raise an adequate mortgage.



Lenders have attempted to help these first timers by extending mortgage terms, offering interest only loans, raising income multiple and generally coming up with special schemes for them. Families have come to the aid of some of these youngsters, by standing as guarantors or raising money on their own family homes, but not all are able to give this sort of assistance.

There is another way in which youngsters may gain a toe-hold, if not a step, on that all-important ladder. This is the potential for buying with friends in the same position. Most of the lenders offering this type of loan will base the calculations for the mortgage on the incomes of the two highest earners. There are other lenders, including HSBC and Britannia Building Society, who will allow four people to pool their resources.

The legal aspect is more complicated than it is with a normal mortgage. It could be that the share needs to be divided into unequal proportions. The advice normally given to clients is to take out a tenants-in-common agreement. This means that each “owner” simply owns a share in the house. In the event of a co-owners death, their share would go to their estate, not to the other owners. This makes each owner responsible for their own share.

One of the added risks in these types of situations is the prospect of one borrower becoming unable to pay their share of the mortgage. That would leave the other person to foot the whole bill or perhaps face repossession. A wise action in these situations is to consider income protection insurance that would provide some cover in the event of one party facing a reduction in earnings.

If the thought of sharing a home with three friends appeals, then it does appear to be a way of getting into, and gaining from, the fast rising property market. Costs of running the home are shared too, but any money made on the final value of the property will have to be shared between the owners.

Another way to tackle the problem may be through buy-to-let. More than half of the buy-to-let lenders are happy to finance first-time buyers. If there are lenders who lend to multiple borrowers, as outlined above, then it's very likely they'd consider lending to up to four individual buy-to-let investors. Lenders normally take rental income as their basis for the amount of money they're prepared to lend, but most will require a 20% deposit. This should be a manageable amount with four buyers pooling their funds.

The buy-to-let option requires some homework. There are rules and regulations which apply to rented property and you need to check the tax implications of such a move.

In order to get into the property market, youngsters and advisers are going to have to get their thinking caps on. Buying a home isn't something that you can try for six months or so and then change your mind. It should be regarded as a fairly long-term move and most mortgages will tie you in for two or more years.

An on-line broker will be most up to date person to know what's going on in the mortgage market-place. They're in an excellent position to explore the possibilities for you, from a wide range of providers. Get on line and find out what's going on.