With property prices having risen at a record rate over the last ten years, many first time buyers are left feeling that their goal of owning a home is completely out of their reach.
However, despite the high price of homes across the UK, it is still possible for first time buyers and others with a low income to obtain a mortgage and buy a property.
We’ve listed some tips for those on a low income to get a mortgage:
Buy in an affordable location
If you are only earning a low income, you are unlikely to afford a property in London or any other affluent area where the prices of property have rocketed over recent years. There are cheap properties around if you look in the right places. Cheap properties don’t always equal the most unsavoury areas – locations that are a little bit out of the way, or have less amenities than others will typically have lower property values. However many of these areas are often up and coming with redevelopments making them popular residential locations in the future, potentially boosting the value of your home.
Save for a deposit
This is always going to be difficult on a low income, particularly if you are currently paying rent and having to cover a multitude of other expenses. However if you can be disciplined enough, and be a little more frugal with your spending, then putting away even a small amount each month will build up over time to enable you to put down a deposit. A large deposit will typically give you a better chance of getting a good mortgage deal, however you may still be able to get a deal if you are only able to save the minimum amount required. Look for the savings accounts that offer the highest rates of interest or if you are a first time buyer you may be eligible for a Help to Buy ISA.
Look for a high LTV mortgage
If a low income is going to leave you struggling to save, then try and look for a lender that is offering 90 or 95% mortgages. This will reduce the amount of deposit that you need. There are fewer 95% mortgages around since the credit crunch hit but they do still exist. You may pay a higher rate of interest than other deals, but if you are able to afford the repayments then this could be one way of getting on the property ladder with a low income.
Consider a joint mortgage
A joint mortgage is a practical solution to the problem of getting a mortgage on a low income. By combining finances with someone else, this allows you to share the cost of a mortgage with someone else. This doesn’t necessarily have to be a spouse or a partner, it could be another family member or friend. Joining forces with another person will give you more buying power, enabling you to access a larger loan, or to offer a larger deposit.
Seek help from the bank of mum and dad
Parents are there to support you in a number of ways, and some may be generous enough to help you out with a financial contribution to your first home. A lump sum could be a starting point for a deposit, or it may be that they could offer some financial security by offering to be a guarantor for your mortgage.
Across the UK, there are schemes and housing associations that offer support for those on a low income who are wanting to get on the property ladder. These are known as shared ownership schemes or ‘part rent part buy’. Typically you take a mortgage out for up to 75% of the property and the remaining percentage remains the property of the housing association, on which you pay rent.
Use a mortgage broker
There are mortgages available for buyers with a low income, but it’s not always easy to find them on the high street. A whole of market mortgage broker will search the hundreds of mortgage products available – some exclusive to them – and be able to match you to deals that suit your circumstances, such as ones that only require a small deposit. Using their expert knowledge, they’ll be able to find a mortgage that you’re likely to be accepted for to save you any unnecessary heartache.
The above post is intended to be informative but does not constitute advice – financial, legal or otherwise. Any opinions given are the author’s own and do not necessarily reflect the views of SO Media.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE