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When you apply for a mortgage the most important consideration for the lender is the size of your income. After all, the more money you have coming in each month, the more confident the lender will be that you can afford to repay the loan.
Unfortunately, it does mean that if you have a low income you will find it harder to get a mortgage. However, it doesn’t mean it is impossible.
Find out how to get a mortgage on a low income with our guide.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a loan or any other debt secured on it
What is the minimum income I need for a mortgage?
How much income you need to qualify for a mortgage will ultimately depend on the amount you need to borrow.
As a guide, banks and building societies will typically lend a maximum of 4.5 times your annual income, or your joint income if you are buying with someone else.
This means that if your total income is £25,000, the maximum amount you will be able to borrow is £112,500. Or put the other way, to borrow £150,000 you would need earnings of £33,333 a year.
Some people will be able to borrow up to and in excess of 5.5 times their salary, but these deals are typically reserved for ‘professionals’, such as lawyers, doctors or dentists, who will quickly see their incomes rise. Higher earners may also qualify for higher income multiples.
While specific “NHS mortgages” don’t exist, certain lenders offer mortgages with features that may help NHS workers who perhaps start off on low pay, or have complicated pay structures. Similarly, you won’t find specific mortgages for teachers, but there are some lenders that offer mortgage terms designed to help education professionals. If you don’t have a permanent job, or perhaps work on a fixed-term or zero-hour contract, certain lenders also offer fixed-term contract mortgages.
It is also worth bearing in mind that income doesn’t just mean your salary or earnings. Lenders will also take into account income from other sources. For example, pension income, child maintenance and overtime payments may be taken into account.
Income multiples are not the only consideration lenders make before deciding whether or not to grant you a loan. Lenders will make an assessment of your overall affordability, so they will also ask you about your monthly outgoings – how much you spend on food, regular bills, travel, socialising and so on. This will give them a better idea of how much you can realistically afford to repay each month.
In order to ensure you will be able to afford repayments in the future, lenders will also conduct ‘stress tests’ to establish how you will cope if interest rates rise or your circumstances change – for example, if you lose your job or can’t work because you become ill.
A number of lenders offer online calculators that can give you an idea of roughly how much you can expect to borrow.
How can I boost my chances of getting a mortgage on a low income?
First, check your credit record. If you have a low income but a high credit score, lenders may be more willing to look favourably on your application. This is because your credit score confirms that, despite not earning huge amounts, you manage your money well and repay debts on time.
The bigger the deposit you are able to put down, the less money you will need to borrow. Borrowing at lower loan-to-values (LTVs) also means you may qualify for lower interest rates, reducing repayments further.
If you have a low income, you may struggle to raise a sizeable deposit. Some first-time buyers may be able to rely on help from parents or other family members, either by way of a gifted deposit or loan. Alternatively, some lenders offer family-assisted mortgages that enable family members to put down their savings or property as security.
What other support is available if I have a low income?
There are a number of schemes that can help low-income borrowers get a mortgage.
- Shared Ownership: This allows you to purchase part of a property and pay rent on the remainder. Schemes are available to first-time buyers with household earnings below £80,000 (or £90,000 in London), as well as those who have previously owned property but can no longer afford to get back on the ladder.
- Right to Buy: This scheme enables tenants of council properties to purchase their home at a discount.
- Help to Buy Equity Loan Scheme is no longer available in England but will run until March 2025 in Wales. This gives buyers access to an equity loan to help them purchase a new-build property with a minimum 5% deposit. Although this scheme doesn’t increase your income, it does reduce the amount you need to borrow.
How to save for a house on a low income
It can be hard saving for a home and building a deposit if you are on a low income. Try to minimise your expenditure as much as you can – this means focusing only on essential spending and minimising bills wherever possible.
It is also worth taking advantage of government support to help you build a deposit. The Lifetime ISA pays savers aged from 18 to 40 a 25% bonus on savings toward a first home or retirement. This means if you can manage to pay in the maximum of £4,000 a year, you will receive a top-up worth £1,000.
The mortgage guarantee scheme, launched in April 2021, may also help those who haven’t been able to raise a large deposit. The government initiative encourages lenders to offer 95% LTV mortgages to borrowers who only have a 5% deposit by covering lenders’ losses if a borrower gets into financial difficulty.
Can I get a mortgage without a job?
When a lender assesses your application it will need to check that you can afford your monthly repayments and will ask you to verify your monthly income. If you cannot prove that you have sufficient income – between yourself and anyone you are buying with – you will not be able to get a mortgage. As a result, getting a mortgage without a job can be difficult, though other forms of income, including benefits, can help.
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