Alternative mortgage options for first-time buyers

The Momentum UK Team 19 December 2013

If you’re a virgin homebuyer, there are plenty of ways you may be able to get your clogs in the door of the housing market without signing up for a traditional mortgage.


Independent charity Empty Homes are selling homes in deprived areas for as little as £1, provided the buyer agrees to both live in and do-up the property. It may be unlikely that you’ll be one of the lucky few to be successful if you apply for one of these homes, but it could be worth signing up to be considered if you meet the eligibility criteria - and you’re sure you can meet the cost and terms of the agreement.

Help to Buy

Thirty-four percent of first-time buyers are confused by this new government subsidised scheme according to a survey by the property website Rightmove. Despite this, it may still be a viable option for those that can decode the small print. Strict credit checks mean that many applicants will be left disappointed, but if your application is approved then this could be a useful option if you don’t have the cash for a larger deposit.

Restricted-area mortgages

Hyper-local mortgages in places like Cambridge, where the lender knows the place like the back of their hand, are highly competitive. Some of these loyal, smaller lenders offer as much as 95% mortgages to local folk.


Staircasing, also called ‘shared appreciation’, involves buying a portion of a property and renting the remainder. Over time, you are given the opportunity to buy a larger percentage of the property. You can usually increase your share three times before reaching 100% ownership. It’s important to know the rules for your particular home, as some leases restrict potential ownership segments to 90%, and when you increase the section you own, you can incur a fee. The government runs a shared ownership scheme for first-time buyers on new-build houses, and there’s also an Older People’s Shared Ownership scheme for those over 55.

Buying with friends and relatives

If you’re single but still want to club together with some people you know to buy a house, this could be the perfect way to afford somewhere that would be outside of your individual price range. It can also be a great way to be able to scrape together a larger deposit as you can pool resources between you. Disputes can be a problem though, so it’s important you make sure the contract is legally watertight. You’ll have to make the decision whether you’ll be joint-owners or tenants-in-common, and it’s worth noting that joint mortgages can cover up to four people.

Mortgage with guarantor

Someone in a stable financial position, often a parent, vouches for the buyer. As long as you keep up with your repayments, they won’t have to spend a penny. The upside is that you’ll probably be able to borrow more than you would have qualified for otherwise. Equally, ‘Bank of Mum & Dad’ might be willing to help you scrape some money together for the deposit.

Buying your council house with Right to Buy

If you’re living as a tenant in a council house, then you might be eligible to buy your home with a discount under the Right to Buy scheme. Although the size of the discount will vary depending on a whole host of factors, including how long you’ve lived there, you could get as much as 70% off the market value.

Think outside the box

Rather than just looking at alternative mortgage options, if you’re open minded about where you want to live, it might be worth looking at alternative homes. Have you considered self-build or even following in the footsteps of Rosie and Jim and get your own houseboat? There are so-called ‘marine mortgages’ that can help you with a boat purchase and once you own your boat outright, you could start saving up for a larger deposit for a more traditional, non-floating property. Of course these types of options are not for everyone but knowing what’s available can up your chances of finding a way to get onto the property ladder.

It may also be worth considering alternative methods of buying your house, such as property auctions that can see properties going at competitive prices, although it’s important to tread very carefully if you’re new to the process and do your homework. Make sure you know exactly what you’re getting into so you don’t end up with a lemon.