Although there is a housing shortage throughout the entire UK, many potential homebuyers are afraid of getting in over their heads financially. Even with government incentives available, the average consumer isn’t aware of all the ways in which they can keep the cost of buying a home within their means. If you are one of those who would love to step up onto the property ladder, it’s time to take your first step. You can own your own home if you understand these important aspects of keeping the cost of homebuying manageable.
This is a government scheme which, unfortunately, too many people have never even heard of! The programme enables first-time homebuyers and/or those who have previously owned a home but can’t afford to buy one again to pay a smaller deposit and smaller mortgage payments because they are purchasing only a percentage of the total home. In other words, by purchasing a percentage of the total property, the down payment would be proportionate to that amount.
An example would be a home that sells for £200,000. If you are required by the lender to make an initial deposit of 20%, you’d need to have £40,000 in hand before even being considered for a home loan. What if you could purchase a part of that home from a Housing Association whilst they held onto the remaining shares? What if you could purchase one-half of the home, your share of the cost being £100,000? You’d now only need to come up with £20,000 and that is doable. At any time, you can purchase the remaining shares but, until then, you’d pay a mortgage based on a £80,000 loan and then you’d pay the Housing Association rent on the other half of the home. Don’t worry, no one is going to live there with you, it’s all about ownership, not occupation.
Your Home NOT a Buy to Let Property
One of the ways in which first-time homebuyers get into a lot of trouble is in thinking that they can use the government incentives and then let the home out to save any rental money over and above the cost of the mortgage repayment instalments. If you read the small print, you will find that government initiatives are in place to help people get into their own home, not to help them become investors.
With that being said, there is a unique way around that which you could utilize if you need that bit of extra income to help you keep up with your payments. Check out sites like Monday To Friday where you can rent out extra space in your home to business professionals seeking a place to stay during the work week. Technically, you won’t be letting out the home, but you will be asking a shared cost from anyone wishing to stay in that extra room. In theory, the sleeping space is there for anyone who commutes large distances to work each week so that they aren’t encumbered by the high cost of a hotel room.
You’d need to be careful when trying to start a B&B because those are considered commercial endeavour, but renting a single room to tenants falls into a grey area, which isn’t strictly forbidden under this scheme. One final thought on this would be how you could quickly own the entire home. If you can keep that extra room occupied, which would net a small, but steady allowable income, use that rental money to continue buying more and more shares in the home. Eventually, you will have the entire deed and that’s when you can rent it out and move up the housing ladder.
Operate a Home-based Business for Tax Write-offs and Deductions
Here is where the taxman can be your best friend! There is little to say that you can’t operate a home-based business from your home. Mortgages may disallow you from buying a property as a ‘buy to let’ home, but there is nothing to say that you can’t work from home. The only time it would be a problem is if you needed to make any structural alterations, but other than that, a home office is usually allowed.
How does this help with the cost? There are several things you can claim when it comes time to file your taxes and if you are using one room, for example, solely for business purposes, that room can be claimed as a deduction. Do you meet with clients in the home who would use the facilities, drink coffee, be served luncheons? It would pay to consult an accountant to see just what you might be able to claim on your taxes.
Whether you are renting a room out to a business person who needs living space close to their job or is operating a business from that extra room, there are ways to monetize the space which will help cover the cost of buying that home. These are just a few of the important things you should know about keeping the cost of buying a home manageable. If you are serious about owning your own piece of the UK, it’s a great place to start!