Risking It All To Get on the Property Ladder

The problem faced by many first time buyers in today's property market is that house prices have risen to such a degree that it is know almost impossible for the average first time buyer to get unto the property ladder via the traditional mortgage route. Instead, first time buyers have to receive much more help from parents, or alternatively they have to risk years of financial hardship, in order to take their first steps onto the property ladder.

Lenders are aware of the problems that increasing property prices are causing the first time buyer. They are also very aware of the problem that this causes them as mortgage lenders, as a considerable amount of their profit is made through interest paid to them on mortgages. Hence, if first time buyers are being priced out of the market, it leaves these lenders with a major financial problem.

To try and find a solution to the problem, many lenders have come up with progressively more creative ways for the buyer to fund their purchase. Things such as buying with friends, getting lifetime mortgages, interest only mortgages or self certified mortgages are becoming increasingly more popular.

These creative financing methods are at times, resulting in people being able to get far higher mortgages than they were previously able to. Not that long ago it was on heard of for anyone to get a mortgage five times their salary, where as now, it is becoming increasingly more common for buyers to get a mortgage five or six times their salary, by the use of methods such as self certifying themselves for a mortgage, as often no proof of income is required.

Even if you have only been in the country for a few years, if you have built up a good credit rating and are aware of the mortgage deals available and the loopholes within them, it is fairly straightforward for you to obtain some sort of finance.

The question is, is it worth the risk? If we look to history for the answer the reply would be a clear, yes. I have yet to meet many people who bought their property over seven years ago and have managed by hook or by crook to pay their mortgage, who regret their decision to buy. The topic of dinner conversation among these people is often how much equity they think they have accrued in their house. History clearly reveals that even though, as most people know, the property market does go down as well as up, it has normally recovered from the downwards spirals in majestic fashion by, soon after, going through a period of speedy growth.

On the other hand, at the other end of the spectrum we have those who have had their homes repossessed or whose marriages and personal lives have been ruined in some way by the pressure of keeping up with high mortgage costs. If you look at how the dream of getting onto the property ladder has ruined their lives you could be forgiven for never wanting to take the plunge yourself.

One can understand why the first time buyer is left in somewhat of a dilemma debating these two conflicting viewpoints. However, may be this predicament is heightened because we are in fact asking the wrong question. If we changed the question from, would you risk it all to get on the property ladder? To, would you be prepared to do whatever it takes to stay on the property ladder? This might add some clarity.

Those people, who have taken a gamble and obtained mortgages way beyond their means, but have coped and even thrived, tend to be the sort of people that would do anything to pay their mortgage. That could mean getting another job and working over 70 hours a week, it could mean learning another skill altogether and changing careers totally in order to obtain a pay rise, or it could even mean forgoing holidays and regular meals out for a number of months or even years.

The people who don't tend to cope tend to fall into one of two categories, either they weren't prepared to make the sacrifices and do whatever it took to keep up the repayment on their mortgage, or alternatively they were hit by some disaster that they did not recover from. Maybe, they where made redundant or became ill or had an accident that meant their ability to work was affected in someway.

Though, it could be argued that this second group is only a minority because even of those people who lose their job, if they had the single-minded determination to still pay their mortgage, or even to downsize if need be, it would still be achievable for the vast majority of them. So, to make it clear, let us reiterate the core question again.

Would you be prepared to do whatever it takes to stay on the property ladder?

The answer to this simple question may hold the key as to whether any particular individual will be able to hold onto their property or whether they will be forced to join the growing band of people who are facing bankruptcy and their homes being repossessed.

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