How to get a mortgage on a low income

You can buy a home even if you have a low income. Find out how you can maximise your chances of getting a mortgage.

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Most people believe that if they have a low income, they’re not eligible for a mortgage. But if you’re unemployed, receiving a pension, getting government benefits or have a bad credit rating, you could still get one.

It’s harder to get a mortgage with a low income but it’s not impossible. While there are no specific low-income mortgages, you can increase your chances of mortgage approval by following the tips listed below.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

What is the minimum income for a mortgage?

Mortgage providers have their own criteria for lending. These are usually kept a secret, but don’t let that deter you from applying for a mortgage. When you apply for a home loan, lenders evaluate the amount you can borrow by looking into your ability to repay. The amount of money you have in your bank account is also a factor, as it shows that you can save money despite your household expenses (groceries, utility bills, credit card payments, etc).

Other costs that may come into play are legal or processing fees, property survey fees, maintenance and repair fees. And don’t forget to factor in possible interest rate increases over the total time it will take to repay your mortgage.

The kind of mortgage you are applying for and the terms on which you borrow are also factors. The best way to get the amount you need is to be prepared and to ensure that the mortgage you are aiming for is affordable.

What income sources qualify?

Income is the biggest factor when it comes to mortgages, but many lenders consider different kinds of financial sources when evaluating mortgage applications. Aside from having a job, receiving rental income or regular government payments, lenders also look into allowances such as child support payments, pensions and disability benefits, and other money sources that supplement your income. You will need to submit proof of these income sources with your application form. Read our comprehensive list on which sources of income including benefits and allowances are accepted.

In some instances, lenders will approve applications from people who are not earning actively but have a certain amount of money in the bank. This is usually the case when you’re applying for a mortgage from the same bank with which you have your current and savings accounts, but other lenders may accept this as well. The terms and conditions of each provider vary, so it’s best to compare each and pick the one that will work best for you.

The government guarantee scheme for 95% mortgages

In the March 2021 Budget, Chancellor Rishi Sunak announced a new government mortgage guarantee scheme designed to help homebuyers with a 5% deposit. Under the scheme, first-time buyers, home movers and previous homeowners with a 5% deposit will now have access to 95% loan-to-value (LTV) mortgages, which had disappeared from the market over the first 12 months of the coronavirus pandemic. The scheme works by providing mortgage lenders with a government-backed guarantee for providing such a high LTV mortgage. The scheme will run from April 2021 to December 2022, and is open to people with a deposit of 5% who are looking to buy a main residential home in the UK, worth £600,000 or less. Learn more about the scheme.

Required income documents

Getting all the documents you’ll need for a mortgage application can be a time-consuming process, especially if you have to ask others to provide them. Here’s a list of documents that are usually required:

  • Proof of identity. This can be a valid passport or driver’s licence.
  • Utility bills. These must usually be dated within three months and must be under your name and address.
  • Council tax statement. Latest one available.
  • Bank statements. Physical statements are required if you use these as proof of address as well.
  • Payslips. Most lenders require payslips going back at least three months. However, it can vary depending on the mortgage provider. Online payslips are usually acceptable these days if they include your personal details.
  • Bank statements. Most lenders require statements going back at least three months. Lenders use these to assess your income and outgoings, including the amount of debt you may have from credit cards or other loans.
  • P60. This may be required if you have bonus income.
  • SA302. You will need to provide information going back two or three years if you are self-employed.

Read our guide on which documents are required for a mortgage if you would like to know more information.

Which home ownership schemes are available?

There are plenty of schemes available in the UK to help people with low incomes get onto the housing ladder. Below, we introduce five of the most popular schemes, explain how they work and whether you’re likely to be eligible to apply.

Under the Help To Buy scheme, you can borrow up to 20% of a property’s value from the government as an equity loan. You can apply for a Help To Buy mortgage with a 5% deposit or higher, with the equity loan acting as a top-up for this. You’ll then take out a mortgage on the remaining percentage of the property. For example, if you have a 5% deposit and a 20% equity loan, your mortgage will be worth 75% of the property’s value.

You’ll start paying interest on the equity loan after five years. It will be paid back in full when you sell the house. Help To Buy equity loans are only available on participating new-build properties worth up to £600,000 in England, £300,000 in Wales or £200,000 in Scotland. The maximum loan size is 15% in Scotland, but you can borrow as much as 40% for properties in London.

If you live in social housing, you may be able to buy your property at a significant discount compared to its market value, using the Right To Buy scheme. The discount typically depends on the type of property you live in and how long you’ve lived there. It could be worth up to £108,000 for London properties or £80,900 across the rest of the UK.

It’s available for people renting a council property, plus some housing association tenants. To be eligible, you’ll typically need to have lived in the property for at least three years.

There are a lot of variables. What’s more, not all lenders offer mortgages to those buying under this scheme. As such, it’s worth approaching a mortgage broker to get a clear view of your options.

Many lenders will approve lower-income applicants who add a guarantor to their mortgage. A guarantor is an individual who agrees to be liable for covering the applicant’s debts should they fall behind on mortgage repayments.

Shared ownership allows you to “part buy, part rent” properties from a housing association. Under this scheme, you can buy a share of the property worth between 25% and 75%. You’ll then pay rent to the housing association on the remaining share.

You can buy additional shares in the property whenever this is affordable for you. This is called “staircasing”. The house will be revalued each time you do this.

To be eligible for shared ownership, your household will need to earn less than £80,000 a year (or £90,000 in London). You’ll also need a deposit worth at least 5% of your share.

Not all lenders offer mortgages for shared ownership properties, so it’s worth using a mortgage adviser to find the best deal for you.

You can apply for a mortgage jointly with up to three other people. If you do, lenders will consider your income jointly, meaning you may be able to borrow more.

However, your creditworthiness will also be considered jointly. If your co-purchaser has a bad credit score, it could harm the chances of your application being approved.

If your co-purchaser stops making mortgage repayments, you’ll be equally responsible for the debt. Also, you won’t be able to sell the property unless all owners agree to do so.

There are two types of joint ownership: joint tenants and tenants in common. With the former, your share of the property passes onto the co-owner(s) when you die. With the latter, you can leave your share to anyone in your will.

Below is a snapshot of the schemes offered by some of the UK’s major mortgage lenders (correct as of 17 January 2019).

ProviderMortgagesCompare
Aldermore Bank5% deposit mortgage, Help To Buy equity loan, Joint mortgage.Compare with broker
BarclaysHelp To Buy equity loan, Shared Ownership mortgage, Family Springboard mortgage, Joint mortgage.Compare with broker
HalifaxFamily Boost mortgage, Help To Buy equity loan, Right to Buy, Joint mortgage.Compare with broker
Lloyds BankHelp To Buy equity loan, Lend A Hand mortgage, Joint mortgage.Compare with broker
Nationwide5% deposit mortgage, Help To Buy equity loan, Shared Ownership mortgage, Right To Buy, Joint mortgage.Compare with broker
Natwest5% deposit mortgage, Help To Buy equity loan, Joint mortgage.Compare with broker
Royal Bank of Scotland5% deposit mortgage, Help To Buy equity loan, Joint mortgage.Compare with broker
Santander5% deposit mortgage, Help To Buy equity loan, Shared Ownership mortgage, Joint mortgage.Compare with broker

Tips when applying for a mortgage on a low income

You can increase the chances of being approved for a mortgage, even on a low income. Here are a few options to think about:

  • Joint application. Consider applying for a mortgage with your partner. This combines two different income sources, raising your capability to repay the mortgage. It also takes into consideration the financial history of both borrowers, so be sure you both have good credit histories. It’s important to note that before you apply for a mortgage, you should come to a legal agreement first as to how the property is to be divided in case anything happens.
  • Borrow less. The lower the amount you apply for, the bigger the chance of it being approved. This is because it’s less of a risk to the lender and the lower mortgage size means lower repayments that are more likely to fit within your budget.
  • Lessen existing liabilities. Lenders not only look at your income but also at your other financial activities. The fewer liabilities or less outgoing cash flow you have, the more of your income you can comfortably devote to mortgage repayments.
  • Larger deposit. Low-income earners can get a better chance of approval if they have a decent amount of money saved up for the deposit. A larger deposit allows you to borrow less money, which means that your repayments will be lower and a low income can suffice. It also shows the lender that you have financial discipline and you can pay back your loan on time.

Can I get a mortgage on the minimum wage and how much can I borrow?

There’s nothing preventing minimum-wage workers from being approved for a mortgage. The amount you can borrow will depend on your annual salary. Some lenders will allow you to borrow up to five times this amount, although you could borrow more when using one of the government’s first-time buyer schemes.

Can I get a mortgage if I am on a zero-hours contract?

Mortgage lenders traditionally look for certainty of income when assessing the affordability of your mortgage. This has historically left zero-hours contract workers out in the cold.

However, some lenders are beginning to change their eligibility criteria to throw a lifeline to these workers.

How many times my salary can I borrow?

Typically, a mortgage lender will allow you to borrow between four and fives times your annual salary. However, this multiplier depends on a number of factors, including your credit score, deposit size and employment circumstances.

Can I get a buy-to-let mortgage on a low income?

Some lenders will approve buy-to-let mortgages for applicants with no income, as you’ll be using your rental income from the property to pay off the mortgage. However, you may need to demonstrate a history of successfully managing buy-to-let properties in order to be granted a deal like this. Our buy-to-let mortgage guide explains more.

How to get a mortgage on a low income: A check list

1. Start saving for a deposit.
2. Make sure your finances are in order and you’re spending sensibly, as lenders will look at recent bank statements.
3. Work out what income your have coming in – including wages, benefits and other income sources.
4. Consider whether you want to buy jointly with someone else or perhaps want to look into a guarantor mortgage, plus check out any house buying schemes open to you (e.g. shared ownership).
5. Compare current mortgage rates and approach a mortgage broker or a mortgage lender about securing a suitable home loan.

The bottom line

It is possible to get a mortgage on a low income – and things like government benefits and pension payments also count. Lenders typically lend between four and five times of a borrower’s (or joint borrowers’) income, so it’s important to look at your finances and work out would size home loan you could realistically qualify for before searching for properties. Don’t forget to check out the various home ownership schemes available too, such as shared ownership, in case these open up other options to you. A mortgage broker could also help you explore the mortgage market and find mortgage products that may be suitable for you.

“It’s been a mixed picture for the UK housing market since the coronavirus pandemic hit,” says Michelle Stevens, Finder’s deputy editor for mortgages. “On one hand, Bank of England figures show that in the last quarter of 2020 the value of new mortgage commitments was at its highest level since 2007, due to pent-up demand to buy properties. But on the other hand, 95% mortgages all but disappeared from the lending market in 2020. However, the government’s new mortgage guarantee scheme should see the availability of 95% mortgages start to rise again in 2021.”
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