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Mortgage with Low Income

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: September 23, 2021

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.

This article shares 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. Plus in our FAQ section, we answer the questions we hear most often from customers with low income who are applying for a mortgage.

Can I get a mortgage with low income?

Yes! These days, mortgage lenders are less concerned with the numbers on your payslip and more interested in your overall 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 mortgage provider’s assessment checklist might help you get a mortgage on low income.

You may be able to get a mortgage on low income if…

  • You have other capital besides your salary
  • You have a large deposit
  • You have a good credit rating
  • Your outgoings are minimal
  • You’re buying an inexpensive property

What other income sources can be declared?

Your 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 mortgage providers might take them into account along with your wages and offer you a more favourable deal.

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. A significant number of people don’t even realise that help is not only available, but also a potential source of capital that can be used to bulk up their mortgage affordability.

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

  • Universal Credit
  • 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 brokers we work with will help you find a mortgage lender who is more accommodating to customers with these sources of income.

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We love helping customers, especially ones that have found it hard to find the right deal elsewhere.

Anya
Dundee
I have been bringing in little more than minimum wage since the pandemic, but I was confident I could get a mortgage to buy my first home because I had a big deposit. I was told this still wasn't enough and needed to be earning more. Luckily, Carla at OMA found a deal with a specialist lender who were willing to accept me. Thank you!
Adam
Runcorn, UK
I was living in my grandma's box room for so long, so I felt crushed when two different banks told me my income was too low to qualify for a mortgage. Andre, the broker, they matched me with went through my income with me and quickly found a lender who would allow me to use my Universal Credit to bulk up my affordability and get approved.

Low income, high deposit mortgages

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

With this in mind, it’s possible to find a mortgage provider who’s willing to lend to somebody with a large deposit and low income. Essentially, the higher the deposit you have, the more willing lenders are to approve a low income high equity mortgage.

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.

How to supplement your deposit

What many would-be borrowers don’t realise is that there may be other sources of capital you could use to bulk up the amount of deposit you’re able to put down.

Below we’ve listed the acceptable mortgage deposit sources and outlined how widely accepted they are by UK mortgage lenders.

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! That said, there are also lenders who offer mortgages based on gambling income.
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 that your application may be declined. 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.

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.

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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 may have assets to their name, and select lenders might factor this in.

Assets that can be used to support your affordability include…

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

Investment properties

If you have one or more rental properties 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.

Can you get mortgage assistance if you’re on low income?

Yes. 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.

Borrowers in this situation with 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 mortgage 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 your mortgage provider has refused to offer low income help or you 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.

Credit rating, outgoings and more

Finding a specialist provider who deals with low income customers and meeting their eligibility criteria 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 read more about mortgage eligibility in our guide to mortgage applications.

Can I get a mortgage with low income AND bad credit?

Yes. It will be more difficult, but by no means impossible. 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 mortgage providers you’re able to choose from will shrink if both of these things are against your name, but help may be available.

Bad credit customers and low earners are considered niches and therefore may need specialist help in finding the right mortgage product. The brokers we work with may be able to connect you with a provider 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 want to borrow and have low income or a history of bad credit, get in touch and the expert advisors we work with will help you find a lender who caters for both niches.

Speak to an expert broker who specialises in customers with low income today

While you might find your mortgage options limited on the high street, by speaking to a whole-of-market broker, your chances of finding the most favourable deal could improve significantly.

We work with brokers who successfully arrange mortgages for people on low income every day and we’d be more than happy to introduce you to one of them for free, and that could mean saving time and money in the long run.

Make an enquiry and we’ll connect you to one of them for a free, no-obligation chat. They will be able to answer all your questions and give you advice about getting a mortgage based on your own specific set of circumstances.

FAQs

Is there a minimum salary for a mortgage?

Some mortgage lenders have a minimum income requirement of £20,000 per year for residential property purchases, while others accept applicants who are earning between £15,000 and £10,000 a year. Moreover, there are even a few specialist mortgage lenders in the UK who have no minimum income requirements whatsoever.

Can I get a mortgage on minimum wage?

Yes, but your chances of approval might hinge on whether you have other sources of capital or assets to bulk up your overall income. It might also be possible if you’re able to put down a large deposit, are buying an inexpensive property or have a family member who’s willing to help you out by acting as a guarantor or providing financial assistance.

How much can I borrow on a mortgage 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.

As we’ve already touched on, there are providers who are happy to offer 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 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 others that may go even higher than that, under the right circumstances.

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

Yes. Some 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 criteria, there may be a chance that capital will be approved.

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the 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 information 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.

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