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How To Get A Mortgage On A Low Income

MORTGAGES | 07.06.2022

With the cost of living increasing, so are the number of people considered to be on a low income. Our money just isn’t stretching as far as it used to, so it can be difficult to look towards getting a mortgage. There is also a misconception that a full-time salary is needed to get a mortgage – we are here to tell you differently. So whether you are on a trainee’s salary, working part-time, or supplementing your income with benefits, there could still be several options for you to consider. 

 

Can I get a mortgage with my low income?

Earning a low income can reduce your borrowing power and the chance of mortgage approval, however, some lenders will consider your application, even when earning less than £15,000 a year, depending on your circumstances. Lenders will consider other factors as well as income, but lenders need to be confident that you are able to repay the loan on time and in full. Being on low income can prevent you from being able to meet the desired payments, which will cause lenders to worry about the size of the loan you are applying for and its affordability. For example, if you were to apply for a £400,000 mortgage over 25 years with a 5% deposit, when you're earning £15,000 a year - it is highly unlikely that you would be approved.  However, a mortgage of £100,000, with the same salary and a larger deposit, could be found to be affordable - but this would depend on the lender and your circumstances such as the level of debt you currently have. 

How can I boost my chances of getting a mortgage on a low income?

Firstly, you should check your credit record. If you have a high credit score, but low income, lenders may be more likely to look favourably at your mortgage application, as your credit score shows that despite earning a low income, you are able to manage your money well and repay any debts on time.  Another way to boost your chance of getting a mortgage is by saving up for a sizable deposit. The bigger the deposit you can put down, means the less money you need to borrow from the lender, which then increases the likelihood of you being able to afford the repayments. 

What help is available if I have a low income?

There are several different ways to help you buy a property when on a low income: 

Help To Buy:

Help To Buy is a scheme where the government grants you an equity loan to put towards the cost of a new-build home. A Help To Buy is available with only a 5% deposit - this can be very helpful if you are not able to save up much money, and want a new-build home. 

Right To Buy:

The Right To Buy scheme allows those who live in social housing to buy their council-owned home at a discount, compared to the market value. The discount will often depend on the type of property you live in and how long you have lived there for. However, not all lenders offer mortgages under this scheme, so it’s worth speaking to a mortgage broker to get a clear idea of what your options are.

Shared Ownership: 

Shared ownership is where you buy part of a property from a council, or housing association, and rent the rest - meaning you take out a mortgage on the part of the property that you are purchasing, and then pay a reduced amount of rent on the part you don’t have ownership of. You can also buy the remaining part of the property share later on. 

Guarantor Mortgages: 

A guarantor mortgage is when an individual helps you get on the property ladder by securing the mortgage against their name. A spouse, parent or family member can act as a guarantor, as long as they are UK-based and are already a homeowner. They also must have sufficient savings to secure the mortgage. The guarantor helps to provide the lender with certainty that the amount being borrowed will be returned, even if you have a low income. 

Speak To A Mortgage Broker 

Mortgage brokers are here to help you prepare for your mortgage application, and help you with every step of the process. A mortgage broker will be able to advise you, based on your personal circumstances on how you can proceed with getting a mortgage on a low income.  If you are looking to get a mortgage, but are worried about low income affecting your chances, speak to one of our expert advisors to find out about your options.   
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If you're unsure and need some advice just give us a call, our expert team of advisers are available to help you choose the mortgage that is right for you.

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