Property: How to break into home ownership without raiding the bank

How do you buy a home of your own when the only savings you have are the contents of your piggy bank? Felicity Cannell goes in search of the best deals.

Despite the recent housing-market revival, the 100 per cent mortgage, a product of the lending frenzy in the late 1980s, is harder now to find. While they are still around, most lenders are unwilling to offer a loan for the full value of a home, lest they find themselves thousands of pounds out of pocket in the event of another house price collapse and defaults by borrowers.

If you have barely enough money to buy the furniture, should you be considering buying the house? Some would argue that given the length of council waiting lists, a shortage of private rental accommodation and the astronomical rents for property available, paying a mortgage, even with all the encumbrances, may seem preferable.

The most popular way to buy a home with very little initial expense is to buy new. The larger house-builders have enough financial security and freedom to offer substantial incentives to tempt buyers. If your piggy bank holds pounds 99 you might just make it.

Barratt Homes started the scheme with a "pounds 250 deposit and move in" offer. That has just been reduced to pounds 99, partly to encourage buyers during the winter months, traditionally the quietest time in the housing market. Buyers put down a reservation fee of pounds 99, move in, and then get up to 20 weeks to save for their deposit, in monthly amounts based on what the mortgage repayments will be.

After 20 weeks or when the deposit is paid, whichever is the sooner, buyers start making mortgage repayments. In certain developments the company will also pay half the deposit, matching monthly savings pound for pound.

This is a scheme particularly suited to those renting a property. "It helps break the Catch 22 situation of having enough monthly income to pay for a mortgage but watching it disappear in rent," says Dave Simpson, of Barratt Homes North.

That was the situation facing Angela and Jannick Charpentier. They now own a three bedroom house in Beckton, east London, bought from Barratt for pounds 97,000, with an initial deposit of pounds 250. Within five months, with no rent or mortgage to pay, the deposit was raised, half from the Charpentiers, half from Barratt.

"It is hard to save for a deposit when you are paying rent, and if it hadn't been for this scheme we would have had to rent again," Mrs Charpentier says. "With help towards our legal and survey costs, in all, the package has saved us about pounds 4,000."

Beazer Homes is another company offering such incentives on around 250 developments across the country, with the added bonus of no deposit to pay.

A first-time buyer can buy a house for an initial pounds 99, the company pays the 5 per cent deposit and the buyer then takes on a 95 per cent mortgage. The deposit is only paid back if the buyer cancels the deal. In certain developments, the company will also pay pounds 500 towards legal fees, which should easily cover straightforward conveyancing.

At its Waterside development near Rugby, Beazer is offering a choice of 5 per cent deposit paid or free curtains and carpets. No contest. Raid the local jumble sales for the curtains and buy a pair of slippers to keep your feet warm on the floorboards and move in.

Both companies stress that these deals are not a case of giving with one hand and taking away with another. Mortgages are arranged through the main high street lenders at standard interest rates.

The downside of buying through any scheme in a new development, be it part-exchange, cashbacks, deposit delayed or waived entirely, has always been that there is no bargaining power. The full asking price must be paid.

But in the current climate of gazumping and properties being snapped up even before construction, these deals are acceptable, as long as an independent valuation agrees with the purchase price.

If you have neither the money for a deposit, nor sufficient income to obtain a mortgage for the full purchase price, a rent/buy scheme may be an option. Do-it-yourself-shared-ownership (Diyso) is operated by housing associations, and is exactly as it sounds.

The buyer finds a property, arranges a mortgage for his share, with the housing association putting up the rest. The buyer's share can be between 25 per cent and 75 per cent with rent paid to the housing association on the remainder. Gradually, further shares can be bought until the property is owned outright.

The advantage of this scheme is that buyers are not confined to new housing estates. As long as the property is considered mortgageable, fit for immediate occupation and structurally sound, any residential property on the open market and within a certain price band can theoretically be purchased. And a habitable home does not mean a new kitchen, fitted carpets and central heating - the basic amenities will do.

Joe and Linda Griffin and their two teenage children left their run-down council estate for a three-bedroom house of their choice in a desirable area of Enfield, north London. The family approached Metropolitan Housing Association, and Mr Griffin, a self-employed plasterer, says: "We were told we could pay half mortgage/half rent for any house we wanted to buy from the open market, so long as it was within our limit of pounds 71,000. It was amazing that it was all so easy to understand and we were impressed with how affordable it was. We went out looking for a house straight away."

Priority is given to council tenants and those on the waiting lists for both council and housing associations, as the remainder of the purchase price is met by local government funding.

Applicants must be able to cover legal and survey fees, but have no need to raise a deposit. They simply need to show that they can sustain monthly payments. Rent levels on the non-owned share are strictly controlled, but there is no other safety net in sharing the property with a housing association. Once you step on the housing ladder, you are subject to all the pitfalls - mortgage rate rises, repossession - that accompany the delights of home ownership.

Diyso information from the Housing Corporation, 0171 393 2000.