How hard is it to get a mortgage in London? Find out here.
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As many people know, housing prices in London can be significantly higher than other parts of the UK, but the good news is that the expert brokers we work with are whole of market and work with all lenders, not just a few – so they should be able to find you the best deal.
In this article we’ll try to answer as many of your questions about London mortgages as we can, such as –
- Can I get a mortgage for a house in London?
- How to go about getting a mortgage in London
- Can I afford a mortgage in London?
- How much can I borrow for a mortgage in London?
- How much do you need to earn to get a mortgage in London?
- How much deposit do I need for a mortgage in London?
- What is the average deposit for a home in London?
- Is there help for first time buyers for a mortgage in London?
- Is there a key-workers mortgage scheme in London?
- Where can I find the best mortgage interest rates in London?
- What other options are there if I can’t afford a house mortgage in London?
- Can you get interest only mortgages in London?
- Are bad credit mortgages in London possible
- Is there a mortgage calculator for London?
- FAQ’s – London Mortgages
- Why you should speak to a whole-of-market broker
- Talk to a London mortgage expert today
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Can I get a mortgage for a house in London?
The short answer is yes.
What sort of house you can get depends on many factors including –
- Your income
- How much deposit you have
- Your credit history
- The Loan to Value (LTV)
- Your age
Talk to one of the brokers we work with, they are whole of market and can assess your circumstances and give you the right advice about the best mortgage for London a property.
How to go about getting a mortgage in London
We would recommend you start with a specialist broker who is whole of market, like the ones we work with. This means they have access to, and a good working relationship with, all lenders, not just a few, which greatly increases you chance of finding the best mortgage for your needs and circumstances.
If you go directly to a high street lender, you have to remember that their broker is working for them, not you. The deals they can offer are also limited to that particular bank so you could be missing out on a better rate from someone else.
Make an enquiry to speak with one of the expert brokers we work with.
Can I afford a mortgage in London?
London is expensive. The average price of a property is fluctuating all the time, so you should get the most up to date advice. But at the time of writing, and according to the Office for National Statistics, the average price for a home in London was £472, 230.
Although prices have seen a decline in recent times, house prices in the capital are still the highest in the country. To put that into perspective, the average house price in Birmingham is £209,500 (at the time of writing), so almost half that of London.
The average price by property type is –
- Detached £658,500
- Semi-Detached £580,900
- Terraced £495,000
Remember, these are average prices and what you’ll be asked to pay can vary enormously depending on the area you’re looking at.
Can I afford a mortgage on a flat in London?
If you want to buy a flat in London, the mortgage will be high as the average flat in the UK capital costs £421,500 at the time of writing.
To get an idea of whether that would be affordable to you, consult the next section…
How much can I borrow for a mortgage in London?
All lenders are different and have set criteria to how much they will lend based on multiples of your income. Most will lend up to 4.5 times your income, some will lend 5 times your salary and there are a few who will go to 6 times your salary.
Below is an example of how much you could conceivably borrow based on multiples of your salary.
|Income||4x Income||5x Income||6x Income|
As you can see, even at 6 times income, the amount loaned often falls short of the average price of a house in London.
The good news is that if you’re a couple, you can combine your incomes and the average price is just that, the average price, so lower priced properties are available.
How much do you need to earn to get a mortgage in London?
The average salary in London is £35,300, which would make it quite difficult to secure a high enough mortgage to buy a home.
As mentioned above, if you are a couple and both earning the average salary, then you can combine your incomes and the prospects of home ownership look a lot brighter.
It becomes much more difficult for low income earners, especially essential service workers such as teachers, nurses and police recruits.
Even with ‘London Weighting’ a new police officer earns a little over £22,000 a year, while a healthcare assistant earns less than £18,000 pa.
Fortunately, there are schemes to help essential services workers get on the property ladder. We’ll go into detail on that later in the article, or why not have a chat to one of the expert advisors we work with to see if you qualify?
How much deposit do I need for a mortgage in London?
All lenders are different and ask for different levels of deposit. Essentially a deposit is an amount of money that you contribute toward the purchase a property and is the ‘equity’ you own in it (with the rest of the property bought using a mortgage).
The amount of deposit you have affects the Loan to Value (LTV) ratio and lenders have different criteria when it comes to LTV, especially if you’ve had bad credit in the past.
To put it simply, the loan to value ratio illustrates how much of your home you own outright. Suppose you’ve put down a £10,000 deposit on a £100,000 property, the deposit is 10% and the LTV is the remaining 90%. The mortgage is secured against the latter percentage.
This chart demonstrates how deposits can affect the Loan to Value. The lower the LTV, the more likely lenders are to offer a mortgage and (usually) the better interest rate they will offer.
|Purchase Price||Deposit||Mortgage||Loan to Value (LTV)|
The above table is for comparative purposes only. You should talk to your lender or broker for the most up-to-date information for your circumstances.
What is the minimum mortgage deposit in London?
Most lenders have minimum deposit requirements, and the lowest you’re likely to find is 5%.
There will be a wider choice of borrowers on offer if you have 10% at your disposal, and the rates will obviously be more attractive if you can put down 25% or more, which is why it may be in your interest to put down the maximum amount you’re able to afford.
There are a few providers who may still offer 100% mortgages in London, under specific circumstances, such as when parents or family members provide cash or equity as a fail-safe, or when a 95% mortgage in London is supplemented by a 5% unsecured loan.
What is the average deposit for a home in London?
An average deposit in London of 20% is now more than £80,000.
This means that first time buyers are having to save for 8 years to raise that sort of deposit, for those on lower incomes it could take much longer.
Those on £30,000 pa or less will struggle, but there are options open to you including having a family member ‘gift’ you the deposit.
If you already own a home, it is possible to use equity release or a second mortgage to raise the deposit.
You can find out about deposits and effective ways of raising one.
Can I get a mortgage without a deposit in London?
While lenders who cater for borrowers who have no deposit are rare these days, they do exist, and they may offer you a mortgage under the following circumstances –
Guarantor and family deposit mortgages
If you have little or no deposit, select lenders might offer you a mortgage if you have a relative or friend who is willing to provide another form of security.
To secure the loan, your relative/friend must agree to do one of the following…
- Put their own home up as security: The lender would have a charge on the friend/relative’s home and may even be able to repossess it, depending on how far behind you will with your monthly payments.
- Secure the loan against savings: They could also place a lump sum into a savings account with the provider as an alternative. They won’t be able to draw money from it until the borrower has paid a certain amount off their mortgage, but the savings will accrue interest over time.
This type of mortgage is known as a family deposit or springboard mortgage with some lenders, and there are a number of them who may consider offering them. Some require the borrower to put in a smaller deposit in cash, others have no requirement.
You can talk to one of the advisors we work with who are experts when it comes to giving the right advice on deposits.
Is there help for first time buyers for a mortgage in London?
There are a number of schemes to help first time buyers in London.
These include –
The other question is ‘how much deposit do I need for a mortgage as a first time buyer?’ The answer is a little complicated as it depends on your circumstances such as deposit, credit rating and affordability. Fortunately there are a number of schemes that will help you with deposits.
Help to Buy mortgages in London
This is designed to help first time buyers, or those with an existing home, buy a ‘new build’ home. The asking price can be no more than £600,000 and for those living in London, you can borrow up to 40% of the purchase price interest free for the first five years. All you need is 5% deposit. Find out more here.
Right to Buy mortgages in London
If you’ve been renting your house from the council for three or more years, you may be eligible for ‘right to buy’ and purchase the property at a substantial discount, often as much as 75% of market value.
Shared Ownership mortgages in London
This is a way of getting on the property ladder by buying a share of a home from the landlord. These are usually council or housing associations – you buy a share or the property and pay rent on the remaining percentage. You can then later choose to buy a greater share of the property, right up to full ownership, if the landlord permits this, through a process called stair-casing.
Homes for Londoners
This scheme is aimed at low or moderate income earners and allows you to part buy and part rent a property, usually a new build. To see if you’re eligible. Talk to one of the expert advisors we work with today.
If you’re finding it difficult to get onto the property ladder, we can provide the right advice through one of the London mortgage brokers we work with. They are experts when it comes to first time buyers or go here for more information.
Is there a key workers mortgage scheme in London?
Yes. Because for many key workers including police, nurses and firefighters, owning their own home is difficult, and many have been driven out of the market by high prices and wage caps.
In London, a key worker faces the impossible task of paying 17 times their salary for a house. An income multiple that no lender would even consider.
Thankfully there is a way for key workers to own their own homes.
Most are outlined in the section above, but we also have more information in our key worker mortgages guide
Are there mortgages for teachers in London?
Teachers fall into the ‘key worker’ bracket so the above details apply. If you’re looking for more information, consult our article on mortgages for teachers.
Where can I find the best mortgage interest rates in London?
London mortgage rates are contingent on a whole series of factors. All lenders are different and have varying criteria when working out the interest rate that they will offer.
These criteria include –
- How much deposit you have
- Your income & affordability
- Your credit rating
- Whether the property is standard construction
- Your age
To get the best rates you should have a clean credit history, the highest deposit you can afford and demonstrate that your finances are under control. A specialist lender might be required if the mortgage is due to run into your retirement years, as some providers have upper age limits.
It all depends on your circumstances, and as all lenders are different, you can expect to find different interest rates.
You could go online or contact every lender in the marketplace, but this would be massively time consuming and could leave marks on your credit rating.
The best option to get the best deal is to contact a broker and have them do all the leg work for you.
If they’re ‘whole of market’ like the expert brokers we work with, then they will have access to all lenders, rather than just a select few, and will have a working relationship with those lenders. This will not only ensure you get the best deal, but they may have access to deals not available to the general public.
Do brokers charge fees?
Yes, this is often the case, but they could save you thousands by finding a better interest rate or deal than you could on your own.
The brokers we work only charge a fee when they have successfully found a mortgage for you. In fact they have found mortgages for over 82,000 people, even those with bad credit and are consistently rated 5 stars on Feefo.
What other options are there if I can’t afford a house mortgage in London?
There are a number of other options open to you. If you have some close friends or family, this could be a way to get on the property ladder.
Getting a London house mortgage with friends and family
This is a great way of getting on the property ladder in London. A joint mortgage allows you to pool your incomes, with some lenders allowing up to four incomes, which greatly increases the pool of homes your can choose from. Make sure that these are people who you are able to get along with in the long term. Read more about bad credit mortgages.
Getting a joint mortgage with parents
Parent/child joint mortgages are quite common, but if you’d like to buy with your parents as joint tenants or tenants in common, affordability and age will be the key issues. While your parents may have the income to afford the mortgage at present, if they’re approaching retirement age you may run into some problems.
Some parents are willing to take out a second mortgage to cover the deposit for a mortgage on a London property. This may have to take the form of a gifted deposit if you are already have affordability issues.
You can find out more about gifted deposits.
Joint Borrower Sole Proprietor mortgages in London
A relatively new concept in the mortgage market which more and more lenders are opening their doors to is buying a house on a Joint Borrower Sole Proprietor basis.
What does this mean?
It essentially means that two people obtain a mortgage for a property, usually a parent and child, but only one of them owns the property. This can particularly help those on a lower income obtain a mortgage on a London property as the child can take advantage of their parents’ income to increase their borrowing capacity. A property which ordinarily wouldn’t have been attainable could now be within reach.
By utilising this scheme also, First Time Buyers can still use their recently added stamp duty exemption since most parents are already homeowners and therefore wouldn’t qualify themselves.
Family offset mortgages in London
An offset family mortgage means your parents or close family member (some lenders allow friends too) can use their savings to help you get onto the property ladder without having to actually give you the cash.
The money is put into an account linked to your mortgage and this amount is then deducted from the full mortgage amount – making your mortgage repayments cheaper.
The upside is that they will get their money back at a later date and some lenders will allow interest to be earned on the savings.
Guarantor mortgage loans in London
Another option is a guarantor mortgage.
With a guarantor mortgage, a parent or family member essentially guarantees your mortgage debt. This means if you were to miss a repayment your guarantor would be responsible for covering the deficit.
The lender will then take into account the guarantor’s income, debt, and savings, just like with any other applicant, however, the guarantor will not be named on the property deeds (as would be the case if you took out a joint mortgage with your parents.)
Guarantor mortgages are a good option for borrowers whose income is not high enough to meet a mortgage lender’s criteria for the amount they want to borrow.
Can you get interest only mortgages in London?
While very a good option for Buy to Let, interest only mortgages are less popular for residential properties these days.
That is not to say they are impossible to get, but lenders will insist on seeing a pretty strong exit strategy that proves that you can pay the principal debt at the end of the mortgage term.
Here are some links to articles covering Residential Interest Only Mortgages and Buy to Let Interest only Mortgages – they go into the pros and cons of interest only in some depth and if you’re still a little unsure, why not have a chat with one of the expert ‘interest only’ advisors we work with?
Are bad credit mortgages in London possible?
Yes. When it comes to bad credit, every lender is different in what they will and will not accept.
Some will never approve someone with credit issues, and others are happy to consider someone with recent and severe problems – in the right circumstances.
Time is the great healer when it comes to bad credit issues and it can depend on how long ago the incident took place, the severity of the issue and what the resolution was. Read more about bad credit mortgages.
The advisors we work with have an excellent relationship with all the bad credit lenders so get in touch and they can tell you what mortgage is possible for you.
Is there a mortgage calculator for London?
Each lender is different and uses their own criteria and calculators to decide whether to offer a mortgage and how much.
There are online calculators, but be aware that because everyone has circumstances that are unique, they can only give you a rough guide to the type of mortgage you could expect.
For a more accurate picture, talk to one of the brokers we work with. They are experts when it comes to mortgage costs in London, and being whole of market, they may be able to find the cheapest mortgage rates for London.
How do I get a London remortgage?
You should start by seeking whole-of-market advice. Londoners remortgage for all kinds of reasons – some need to borrow more while others are simply looking for more favourable rates elsewhere.
Whatever your reason for refinancing, you’ll want to make sure you end up with the best deal that you qualify for, and the London remortgage brokers we work with can make sure that’s the case by introducing you to the lender best equipped to offer favourable rates to a customer with your needs and circumstances.
FAQs – London home mortgages
Do I need a mortgage solicitor in London?
Not necessarily, a good solicitor will be able to handle your purchase from anywhere in the country.
Can I get a second charge mortgage in London?
Yes. Often called a second mortgage it allows you to release equity from your home. You effectively have two mortgages on your home and you can use the money for any legal purpose.
Can I get a London expat mortgage?
Yes. Whether you’re coming back into the country or want an investment while you’re away you can find everything in our Expat Mortgages guide.
Can I get a private mortgage London?
If you can find an individual or company to offer a private mortgage, then yes. It is simply a loan or arrangement made by someone who is not a traditional mortgage lender. It could be a relation, friend, business or employer.
Some of the brokers we work with have access to private mortgage lenders so make an enquiry to find out what your options are today.
Can a contractor get a mortgage In London?
Is a London mortgage for non-residents possible?
Many lenders are happy to offer mortgages for non-UK residents as long as all the correct VISA documents are in place.
Is a self build mortgage in London available?
Yes. The Greater London Authority is actively encouraging self-build properties in the London area.
Can I find large mortgage loans in London?
Yes. The price of property in London means that large mortgages by high worth individuals are quite common.
Are off plan mortgages in London a good idea?
There are pros and cons to buying off-plan. If the value of the property goes up between the time you purchase and its completion, you stand to make a healthy profit. By the same token, a property could fall in value (or have an over-inflated price) just as easily and London property prices have seen a decline. This is why some lenders are reluctant to offer off the plan mortgages.
Where can I find an international mortgage broker who covers London?
By making an enquiry – the advisors we work with have access to international mortgage lenders with specialist knowledge of the London market, and arrange London mortgages for expats and foreign nationals every day.
The international mortgages brokers we work with have successfully arranged mortgages for borrowers who are from, or reside in, countries including…
- And many more
Why you should speak to a whole-of-market London broker
We’ve helped over 82,000 people find the right mortgage, even for buyers who have been declined a mortgage or have bad credit history.
In fact, our customers consistently rate us 5 stars on Feefo, mainly due to our high levels of service, but also because we offer offers a 5-star service with access to expert brokers who are:
- Whole of market.
- Can offer bespoke advice to customers buying in London.
- Have a working relationship with all lenders, including those who offer London mortgages
- Already know the lenders to go to for London mortgages as they successfully arrange home loans in the UK capital every day.
- Are OMA Accredited advisors.
- Have completed a 12 module LIBF accredited training course.
Talk to a London mortgage expert today
If you require more information call Online Mortgage Advisor on 0800 304 7880 or make an enquiry.
Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee, and there’s no obligation or marks on your credit rating.