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Can I buy a house on minimum wage?

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The current minimum wage in the UK for over 21’s is £7.70 (over 25’s £8.21). However, with the rising cost of house prices, what are the prospects for these aspiring low-income homeowners?

First-time buyers can find themselves priced out of the market with the high cost of home ownership. Reports are generally based on people earning the National Living Wage. So what chances do those on minimum wage have of getting onto the property ladder?

How much could I get a mortgage for?

Mortgages nowadays are calculated on affordability rather than simply multiplying your salary. Recent reports show today’s first-time buyer is 30 and puts down a 16% deposit, with an average mortgage of £137,700, borrowing 3.59 times their joint or individual income of £40,704.[1]

Working a 37-hour week on minimum wage would give an annual salary of around £12,500 (before tax and NI).

According to the Council of Mortgage Lenders the average first time buyer borrows an amount which equates to just over three times their salary. Working on this basis, with a salary of £12,500 you may be able to get a mortgage for around £40,000 – £44,000 for a single application.

To see what options are available to you and how much you can afford, start your search today

What would that buy?

There are certain areas that would most definitely be off limits to a buyer with a mortgage of less than £40,000. Even 10 times as much wouldn’t buy you a home in some parts of the UK!

If you do an online property search, you’ll find two and three bedroom properties ranging from around £20,000 to £60,000. Some may be just guide prices with the homes due at auction, but there are plenty on the open market and waiting for offers.

It is possible for someone on a low income to become a property owner, particularly if they are looking to buy in parts of the country that have relatively cheap property values. The North of England, for example Liverpool and Middlesbrough, have been reported as the cheapest areas in the UK to purchase property in 2018. [2]

Will I still need a deposit?

Even though your proposed mortgage amount may seem relatively low compared to that of some people, a lender will still expect you to offer up a deposit of at least 5%. If you can provide a larger deposit, then the amount you can borrow on a mortgage may allow you to purchase a more expensive property.

As well as your deposit don’t forget to take into consideration all other costs associated with a mortgage. Such as mortgage arrangement fees as well as valuation and legal costs.

How do I arrange a mortgage?

Your actual mortgage figure won’t purely be based on your salary. A lender will take into consideration factors including your income, personal debt, credit history and other financial commitments. Only then deciding how much they are willing to lend to you, if anything.

If you are worried about a lender declining you, (multiple declines could have consequences for your credit history) then it may be wise to consult the services of a mortgage broker. Advisers can offer impartial information on what type of mortgage would be suitable for your circumstances. Brokers also suggest mortgage deals which you are likely to be accepted for. This minimises the risk of having your application turned down.

For more information on minimum wage mortgages speak to a mortgage adviser.

The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.





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