Getting on the Property Ladder

Years of rapidly rising house prices have made it increasingly difficult for first-time buyers to get that all-important foot on the property ladder. Here are some tips on how to make that step.

Is Ownership Right For You?

For most people home ownership makes far more sense than renting. Although some financial sacrifice is needed in the early days, in the long run owning is much cheaper as wages and prices rise over time. Home equity can be used to provide income or capital in old age, and there is also the intangible satisfaction that comes from knowing you own the roof above your head.

Still not sure if buying's the best move? Check out To Rent or To Buy?

Raising a Deposit

As housing has become less affordable for first-time buyers many lenders have come up with increasingly creative deals, including 125% and 50-year mortgages and deals for credit-impaired borrowers. The so-called "credit crunch", arising from US lenders getting their fingers burned, means loans are likely to get harder to obtain and makes raising a decent deposit all the more important.

Having a significant sum to put down increases the range of loans available and opens the door to cheaper interest rates as lenders are taking less risk.

Unless you happen to have rich and generous relatives, the only way to raise a deposit is by saving. Work out how much you'd like to raise, and over what timescale. This will determine how much you need to save each week/month.

Shop around for the best interest rates. Web sites such as http://www.thisismoney.co.uk/bestsavingsrates allow you to compare accounts at a glance.  When comparing accounts beware of those that use short-term or one-off bonuses to boost advertised rates as these may drop to something less attractive once the bonus period ends. By all means take advantage of them, but don't forget to re-check rates when the deal's over.

If you're a taxpayer, be sure to maximize your tax-free savings with a Cash ISA. If you're buying with a partner you can each have an ISA to shield up to £7,200 a year from April 2008.

Make a budget - and stick to it. This takes discipline, but the main thing is to keep your plans realistic. We all need to let our hair down once in a while, so make sure your budget provides funds for this.

Check your current expenditure. Is there anything you can cut down on? Maybe you can make lunch instead of buying out, or walk instead of driving or taking the bus. If you're currently renting, can you find cheaper accommodation that might be a bit less luxurious but still adequate?

Get into the habit of making a savings deposit as soon as you get paid rather than waiting to see what's left at the end of the month.