Floating assets: What should you know before you take the plunge and buy a house boat?

Living on the water can be an affordable option for first-time buyers.

Emilie-Kate Owen was just another young first-time buyer who couldn't afford a home in London when she stumbled across a solution – a boat. "Until 2006 I was living with friends but then wanted some space on my own. I couldn't afford to buy on my own and thought about shared ownership but the places on offer were pretty intimidating. Then I spoke to a young guy and he said he lived on a boat – suddenly it clicked," says Owen.

Until then she hadn't even stepped on to a boat but Owen went to London's Docklands where, in the shadow of some of Britain's wealthiest bankers, she paid £26,000 for what she calls a "completely knackered barge from Holland".

She borrowed £50,000 from her mother and spent six months modernising the vessel, turning it into a one-bedroom bachelor girl pad and taking it to a condition rather better than it had ever been in before.

"I had the hull re-plated, new electrics installed, a posh kitchen, a dishwasher and a power shower fitted. It's smarter than many London flats," she says.

To make her new home even better, Owen, a public relations executive, secured an annual roll-over mooring lease at Poplar Dock Marina in Canary Wharf, one of the capital's most prestigious addresses. The lease costs her £4,000 a year but her electricity bills are just £200 per year and she has no council tax to pay.

The eight-foot-wide barge is larger than anything she could have bought on her own at twice the price in the same area. There's a bedroom with an adjoining loo, a large 18-foot-long reception and kitchen, a spare room and plenty of outdoor space, too.

But best of all, there is the atmosphere: "The other boat owners make it into something like a village, and one with a diversity you couldn't even imagine. We've got bankers and strippers, young couples with babies and older couples who've downsized from a big home to a boat. There are people who take in lodgers, and residents who lived on boats for decades and couldn't face living on terra firma. It's a fantastic community," she says.

Owen is now moving in with her land-lubber boyfriend so is selling up: "I really am torn. These have been fantastic years and I'd advise anyone to consider living on a boat. I never considered it a serious option as a home until I tried it but it's a perfect option for people today. You don't have to be a hippy to live on a boat. You just have to want to do something different."

But house boats don't just offer a sense of community we often struggle to find on land, but a new way of combating Britain's housing shortage with only one major disadvantage – it's not much use if you suffer from chronic motion sickness.

Houseboats are becoming popular places to live. Industry bodies say there are more than 15,000 boats with permanent residents, although as none are logged with the Land Registry and many are berthed at unofficial moorings, this total may be an under-estimate.

What is more certain is that they offer an alternative lifestyle and, in some cases at least, a lower cost than conventional bricks and mortar homes. But before you board ship here's our guide to living on the water.

What boat do I float?

"Houseboat" is used by the public to describe all floating homes but aficionados say it applies specifically to vessels with structures, like static caravans, atop floating pontoons.

There are four other boat types. A "narrowboat", typically seven feet wide but up to 70 feet long, or a "lighter", a converted goods vessel up to 75ft in length.

A "barge" is a converted commercial vessel up to 12ft wide and 50ft long while a "cruiser" is any former ferry, fishing vessel or lifeboat turned into a home and able to navigate canals.

How much?

Four factors determine price – vessel size, condition, location and mooring.

"A narrowboat with limited living space at the edge of the Grand Union Canal near Brentford with a year's mooring lease is £60,000 to £80,000. But you must reapply and pay annually for the lease," says Russell Day of River Homes, which sells Thames waterside homes and canal boats.

"At the other extreme I've sold a floating Manhattan loft with 2,000 square feet of space, climate control and a 60-year lease in Wandsworth for £1.3m," says Day.

Outside London, prices are less stellar especially in the Midlands, the only British region where the supply of moorings outstrips demand. A new 57ft narrowboat with a mooring near Derby is £59,500 while a 45ft cruiser in Market Harborough, without a mooring, is just £23,950.

The big problem for buyers is funding.

"Mortgages are available and probably easier to obtain than those for bricks and mortar homes. The problem is, they're more expensive," says Rex Warner who lives on the water at Burton on Trent in Staffordshire and chairs the Residential Boat Owners' Association.

Mainstream lenders worry that floating borrowers will, well, sail away. You must get a marine mortgage typically with 30 per cent deposit, interest of 3 per cent to 5 per cent above base rate and just a 15-year repayment term. Unsurprisingly, most buyers pay cash.

Moorings

There are plenty of informal moorings but not many designated as "residential" and eligible for permanent houseboats.

The best have mains water, electricity, pumped drainage, telephone landlines, satellite television, Wi-Fi and even parking spaces. But you pay dearly, especially in southern England. Good moorings near central London cost £1,000 a month while more basic ones on the Thames are £250, and outside the capital £120.

If you want long-term security some moorings have 99-year leases, just like new-built apartments, while others are "rolling" and require annual renewal.

London moorings are hard to come by (British Waterways, which controls them, have hundred of people on its waiting list); those elsewhere are easier to obtain and far cheaper.

Running costs

"Most people think living on a boat is a cheap way of living. It isn't, at least if you look after the boat," says Richard Cazenove, a Birmingham accountant who lived on a canal for three years until 2008.

He paid £2,300 for a survey when he bought the vessel and lists regular outgoings as an owner as £200 a month for the mooring, annual insurance of £2,700, annual council tax of £430 (although some houseboats are exempt) and a one-off £1,700 for the vessel to be lifted out, scrubbed down and repainted – a once-every-five-years job.

"Owners are very green. They pay for services on weight and volume and size so are very conscious of how they live," says Mr Warner. "But in the end a boat is not a house. It's not an investment, it's a chattel and that means it tends to depreciate and not appreciate. That's a key element buyers must remember."

Emilie-Kate Owen's boat is available for £99,000 through Kinleigh Folkard & Hayward (020 7231 3800; Kfh.co.uk)