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Mortgage with low Income

How to get a mortgage, even if you have a low income.

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 5th April 2019* | Published: 27th February 2019

In this day and age, there’s a common misconception that you need to be earning megabucks to get a foot on the property ladder. Although a juicy salary usually helps when you’re applying for a mortgage, products geared towards low earners do exist.

So if you’re seeking information about the mortgage options available to those on modest monthly salaries, read on!

This article provides everything you need to know about low income mortgages, getting a mortgage on minimum wage, and the assistance available to those locked into mortgages their earnings don’t quite cover.

Below the following topics are covered…

Can I get a mortgage with low income?

Here at Online Mortgage Advisor, customers often want to know whether there are mortgages for low income borrowers and low income families, and the answer is yes.

Some mortgage lenders have minimum income requirements

Some lenders impose a minimum income requirement of £20,000 per year on residential properties, but these are in the minority. At other providers the minimum is between £15,000 and £10,000, and there are a few specialist low income mortgage lenders in the UK who have no lowest income requirements for a mortgage whatsoever.

If you’re one of the many asking “can I get a mortgage on low income?” Get in touch and the whole-of-market advisors we work with will connect you to lenders who specialise in customers in a similar financial situation to yourself.

Here’s how to get a mortgage on low income

We’ve already established that there are mortgages for low income earners in the UK, so you might be wondering how this is possible and what your chances of getting one are.

Well, mortgage lenders are less concerned with the numbers on your payslip and more interested in affordability, i.e. your ability to repay the loan. Affordability comes down to more than your monthly salary and ticking the other boxes on the provider’s assessment checklist might help you get a mortgage on low income.

Lenders may take the following factors into account when assessing low income home mortgage loans…

  • Whether you have other sources of income
  • The size of your deposit
  • Your credit rating
  • Your outgoings
  • The property type

More info on these below…

What other income sources can be used to pay a mortgage?

Your low income mortgage options will increase dramatically with some UK lenders if you have other income sources besides your basic wage. Not all providers recognise things like benefits, assets and freelance work on the side, but some providers might take them into account along with your wages and offer you a more favourable deal.

Getting a mortgage using benefits to supplement your wages

If your earnings are modest, there’s a chance you may be entitled to some form of financial support, and significant number of people don’t even realise help is available, or whether this can be used to fund a mortgage.

For many who receive benefit income is that some lenders can consider it in assessing affordability.

Specialist lenders will accept the following benefits as a means of boosting affordability, as long as the applicant is either retired or in full-time employment (low paid or otherwise).

  • Child tax credit
  • Working tax credit
  • Child benefit
  • Disability Living Allowance (DLA)
  • Industrial Injuries Benefit (IIB)
  • Incapacity benefit (IB)
  • Attendance Allowance
  • Pension Credit
  • Maternity Allowance
  • Severe Disablement Allowance
  • Widow's Pension
  • Carer's Allowance

If you’ve been turned down for a deal because a portion of your pay comes from benefits, get in touch and the whole-of-market advisors we work with will help you find the right lender.

Using assets to supplement your income

Wealth doesn’t always come down to the numbers in your bank account or the amount you earn from a conventional job each month. Some of those who are seeking a low income mortgage in the UK may have assets to their name, and select lenders might factor this in.

Assets that can be used in conjunction with income for a mortgage include…

  • Investment properties
  • Stocks, shares and pension funds
  • Trust fund income

Investment properties

If you have one or more rental property that you can draw equity from, your income is less important to a mortgage provider. Your rental income or the rental market value of said properties could be the factor which determines how much you’re able to borrow.

Stocks, shares and pension funds

If you have significant investment holdings to your name, there are ways you can put them to use in a mortgage application without cashing them in. It is possible to have a private bank assess your portfolio and offer you a percentage of the total back in the form of a loan, typically handed out at a rate of 50-60%. This could be an option for anyone hoping to get on the property ladder by supplementing a modest annual income.

Trust fund income

If you have been left or are a beneficiary of a trust that pays you a regular income, then this can, on occasion, be used toward affordability with a few specialist lenders.

Deposit size

When applying for a mortgage, it’s usually advisable to do so with the biggest deposit you can muster. Although other factors impact on eligibility, having a large deposit means you’re less likely to be turned away by a lender on affordability grounds.

With this in mind, it’s possible to find a provider who’s willing to offer a mortgage to somebody with a large deposit and low income. On average, UK lenders will offer you around four times your basic salary.

So, if you’re after a £140,000 property and earn £14,000 per year; but have £100,000 from an acceptable deposit source to put down, there may be providers out there who have no problem loaning you the extra £40,000.

Essentially the higher the deposit you have, the more willing lenders are to approve a low income high equity mortgage, or if you have a less than spotless credit history. It could also affect how many times your salary a lender may lend. Most lend around 4 times your salary, but under the right circumstances and with a large enough deposit. a few lenders may loan 6 times your salary.

There are certain lenders who impose a minimum loan amount on residential mortgages of £75-80,000 and would therefore turn you away for a £40,000 mortgage, but other providers will go even lower than £40,000 and a number of them have no minimum loan amount.

The table below provides an overview of deposit sources and how likely a lender is to accept them in a mortgage application.

Own personal savings / investments Every lender is happy with this, although some are picky and require the proof of your increasing balance over time.
Gift Usually required to be from a family member (parents, grand-parents, siblings, uncles, aunts, step family etc), although in certain circumstances one or two lenders may well accept a gift from someone not related (such as a close family friend or other explainable source). Gifts from a third party are usually NOT acceptable because of the risk of money laundering and fraud. Enhanced due diligence checks will usually take place looking into the source of funds and sometimes ID verification checks on the donor can even be required.
Inheritance Most lenders will accept this without problem.
Sale of property Usually no problem so long as the property proceeds aren’t under charge by someone else. Obviously they must be clear funds at the time of completion.
Sale of other assets Other assets such as cars, boats, valuable memorabilia, artwork, or just about anything legal that is to be sold, should be fine to use as deposit with most lenders. The issue is when there is the suspicion of money laundering, as lenders, advisors, and solicitors have a duty to ensure all funds are from a legitimate source.
Unsecured borrowing Unsecured borrowing means credit cards and personal loans etc. and raising deposit using them will NOT be acceptable with most lenders. One or two are happy with it – including some mainstream lenders.
Bridging finance Bridging finance is very short term borrowing which enables customers who need to buy before they sell, or who are buying on a very short term basis. It’s a pricey arrangement with rates between 1-3% a month! (@ 2% a 100k loan = 2k a month!).
Gambling win Be careful with this. Some lenders may have an issue with this if gambling is a regular occurrence. It has been known for lenders to go through bank statements and deduct regular gambling withdrawals as monthly commitments, deducting this from available income and influencing affordability, even if you regularly win!
Deposit from overseas This is a tricky one for most lenders because it can be really difficult to trace the origin of the cash in order to be satisfied it’s legitimate and not at risk of money laundering. As a result, you may find many lenders declining the application. Some lenders do have a flexible approach and will consider overseas deposits if for instance they are in established bank accounts and the money can be traced from a legitimate source. This is really on a case by case basis so get in touch if you have more questions and want to know which lenders will consider your application.

If you’re planning to use one of the above to apply for a low income high deposit mortgage get in touch and the whole-of-market advisors we work with will help you find a lender who specialises in accommodating borrowers in this situation.

Credit rating, outgoings and more

Finding a specialist provider who deals with low income customers and meeting their eligibility requirements is the key to getting a mortgage with low income.

For example, if you have a clean credit rating and your other outgoings are minimal, you’re less likely to be deemed a high-risk customer than a borrower with bad credit and high outgoings due to things like credit cards and other loans, as well as modest income.

Broadly speaking, a number of other factors can impact on your eligibility for a mortgage whether you’re a low earner or not. You can find more about the general eligibility criteria by clicking here, or better yet, get in touch and the experts we work with will discuss you application and help you find the best lender for someone in your shoes.

Can I get a mortgage with low income AND bad credit

Customers occasionally ask us whether it’s possible to take out a mortgage if they have both low income and bad credit. In truth, the pool of lenders you’re able to choose from will shrink if both of these things are against your name, but help may be available.

There are lenders who specialise in customers with the following…

  • No credit history
  • Low credit score
  • Late payments
  • Missed mortgage payments
  • Defaults
  • CCJ’s
  • IVA’s
  • Debt management Schemes
  • Reposessions
  • Bankruptcy
  • Payday Loans

Both bad credit customers and low earners are considered niches and therefore may require specialist advisors, but the brokers we work with may be able to connect you with one who caters for both, and your chances of securing capital will be higher if you meet the criteria we discussed in the section above.

So for instance, it may be possible to obtain a low income bad credit mortgage loan if you have assets, other sources of income and a massive deposit, although that may depend on how long the adverse credit has been on your file, and what type of adverse credit it is. Obviously a bankruptcy is more serious than a missed phone bill payment, for example.

If you’re looking for a mortgage for low income and bad credit customers, get in touch and the expert advisors we work with will help you find a lender who caters for both niches.

Can I get a mortgage on minimum wage?

Everyone’s definition of low income will be different. For example, the average salary in the UK is £26,500 and some who earn below this figure might consider themselves on a low wage, but we hear from customers whose monthly income isn’t even half of that.

Here at OMA, we’re often asked “is it possible to get a mortgage on minimum wage in the UK?” and the answer to this question might hinge on the factors we’ve discussed above, such as whether the applicant has other sources of income.

How much can I borrow on minimum wage?

Working a standard 37-hour week on the UK minimum wage would give you a salary of around £12,500 before tax and national insurance. The average lender will offer applicants a mortgage of 3-4 times their salary, which means a minimum wage earner is limited to products with a loan amount of between £40,000 and £50,000.

The good news is that if you have a partner, you can combine your income and even if you are both on minimum wage, the loan available would increase to £100,000 or possibly more. Talk to one of the expert advisors we work with to find out how much you could borrow.

As we’ve already touched on, there are providers who are happy to hand out mortgages with no minimum loan amount, but that sum is unlikely to go very far in the UK housing market and may limit you to auction properties with a low guide price.

Obviously it will make a huge difference if you have a large deposit to put down, as discussed earlier in this article, but not everyone is in that position.

While your average mortgage provider will grant you a loan of 3-4 times your salary, it’s also worth mentioning that there are specialist lenders who go up to five times your annual earnings, and other that may go even higher than that, under the right circumstances.

Whether you want a loan that size on minimum wage is another matter entirely, but keep in mind that a lender will only offer you one if you pass their affordability checks.

For more information about how to get a minimum wage mortgage, get in touch and the advisors we work with will help you find a lender who deals with customers on low income.

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

Some mortgage providers have a minimum income requirement of £25,000-35,000 for buy to let properties, while with others it’s lower at £20,000. But the good news for those on low income is that there are specialists out there who impose no income requirements.

A significant number of them only deal with experienced landlords, though a small minority may deal with first time home buyers on low income who have buy to let ambitions.

Mortgage providers in this sector are more concerned with how viable the investment is, and less interested in the specific numbers on your wage slip. If you can prove the property you have your eye on will generate the required amount of rental income (usually done by instructing a report from an ARLA-registered letting agent) and meet the lender’s general eligibility requirements, there may be a chance that capital will be approved.

The following can impact on your eligibility for a buy to let mortgage…

  • Your credit rating (the cleaner, the better, obviously)
  • Your age (some lenders refuse to deal with applicants under 25 or over 75)
  • The property type (unconventional types such as listed buildings may require a specialist lender)
  • How experienced you are as a landlord (the majority of mainstream lenders won’t deal with first time buy to let borrowers)
  • Your employment status (some lenders with minimum income requirements might be reluctant if said income is from unconventional sources, such as self-employment)

Can I get mortgage assistance if I’m on low income?

Some borrowers find themselves on low income long after taking out a mortgage. Perhaps you were made redundant two years into a home loan and have been forced to take a minimum-wage job to tide you over until something else comes along.

Those with low income and a high mortgage tend to struggle to get by, but the good news is that there may be help out there for anyone in this situation.

You have several options if you’re locked into a mortgage you’re struggling to pay.

  • Contact your lender: You should always do this first as they may be able to discuss temporary payment arrangements, lengthening the term of your agreement or switching you to an interest only plan in the short term.
  • Apply for a mortgage rescue scheme: These are now only available in Scotland and Wales, and they involve either a housing association, social landlord or the government purchasing your home and renting it back to you at a more affordable rate than your mortgage lender. Consult the Scottish government’s website or the Welsh government’s website for more information.
  • Support for mortgage interest: This was formerly a low income mortgage grant offered by the UK government, but is now offered as a repayable loan that you must pay back with interest when you sell or transfer ownership of you home. These loans are designed to help those on benefits pay off the interest on their mortgage or loans they may have taken for home repairs/home improvements. Full information is available on the UK government’s website.

If you’re lender has refused to provide low income mortgage help or have been turned down for government support, get in touch as there may be other options available, such as refinancing with a different provider onto more favourable rates. The whole-of-market advisors we work with would be more than happy to discuss every alternative with you.

Speak to an expert on home mortgages for low income borrowers

If you like anything in this article or you’d like to know more, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let the low income mortgage brokers we work with find the lender with the right expertise for your circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 5th April 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Find more about how we help people with different income types

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