Mortgages for Young People

Whatever your financial situation, there’s no doubt that getting a mortgage as a young, would-be buyer is a milestone achievement.

We receive many calls from young people who are ready to take out a mortgage and need guidance on how to get the best deal.

The mortgage experts we work with have enjoyed helping hundreds of young people nationwide secure their first home.

Experts know that, despite mortgage affordability or age restrictions, when negotiating a good mortgage, you have one massive advantage – time is on your side!

What is the minimum age for a mortgage in the UK?

Legally, the minimum age that you can purchase and own property is 18, and this minimum age restriction applies to mortgages, too, as it does to any formal borrowing.

In practice, lenders are able to set their own limits – a common minimum age for residential mortgages in the UK is 18, but for buy-to-let mortgages, it’s more often 21 or even 25 in some cases.

How to get a young person’s mortgage

Getting a mortgage in your teens or early twenties can feel like an impossible dream, but it needn’t be if you’ve done your homework and have the right support.

Here are three things to do before you apply for your young person’s mortgage:

Get a mortgage broker

Mainly, people wrongly assume you only need a mortgage broker if you’re wealthy or looking for a million-pound mortgage. Still, a broker is a valuable part of the application process whether you’re researching a high-net-worth mortgage or buying your first one-bedroom flat.

A broker with experience in mortgages for young people will already have a good understanding of the lenders and products that might be right for you and can save you a lot of research time and money, as they can compare rates across the whole market.

Make an online enquiry, and we can assess your situation and match you with the right broker.

Maximise your deposit

One of the main reasons that more young people aren’t getting on the property ladder is the lack of a deposit. Most mortgages require a minimum deposit of 10%, and with average house prices in the UK creeping towards £300,000, that’s a lot of cash to find when you’re young.

While some people benefit from an inheritance to put towards a purchase, there may be other avenues that you could explore. Perhaps a family member has been paying into a savings account for you, ready for when you start a family, or maybe your parents have money set aside for a future wedding.

If buying a house is your priority, it’s worth discussing whether you can access these savings as a gift for a deposit instead.

Build up your credit history

A common issue with mortgages for young people is a lack of credit history. Because you have to be 18 to have loans, credit cards or other formal borrowing, you won’t have had the opportunity in your late teens to build up a history that shows you as a responsible borrower.

If you’re keen to buy a house young, take steps as soon as you turn 18 to build up your credit history. Making sure you’re on the electoral roll, having direct debits in your name that you pay on time every month, having a phone contract, taking out a credit card and paying the balance in full every month can all leave a positive credit footprint.

Government schemes you could use

If you’re keen to buy a house at 18, 19 or in your early 20s, you’ll need to understand the market and what government mortgage schemes might be available to help young people buy a property.

The schemes below are aimed at all first-time buyers but may be particularly useful for young people buying their first homes, as they are all designed to make getting on the property ladder more affordable.

Shared ownership

One way to buy your first home without a huge mortgage or a large deposit is to go for shared ownership. When you buy via the shared ownership scheme, you buy just a proportion of a property—normally between 25% and 75% initially—and pay rent on the remainder.

You can increase your share over time through a process known as staircasing.

Help to Buy equity loan

If a deposit is your main concern, you might benefit from the government’s Help To Buy equity loan scheme.

The scheme is open to first-time buyers and new-build properties only. It allows you to put down as little as 5% and to borrow between 5% and 20% (40% in London) as a government loan to supplement your deposit.

You don’t pay interest for the first five years, but then you’ll be charged 1.75% for one year, which increases by +2 % yearly, according to the Consumer Price Index.

Lifetime ISA

The Lifetime ISA (LISA) has replaced the Help To Buy ISA and offers young people aged 18-39 the chance to save for a deposit on their first home or retirement.

You can save up to £4,000 a year, and the government will add a 25% bonus each year, so it’s a great way to make your deposit go further if you’re prepared to put in a few years of savings before getting a mortgage.

Other available support

In addition to government mortgage schemes for young people, there are some specific mortgage products aimed at younger borrowers who might not otherwise be able to afford to take that first step.

Guarantor mortgages are one such option. With a guarantor mortgage, a parent or other close family member agrees to guarantee your mortgage using their own property or savings as security in place of a deposit. Keep in mind that the guarantor is at risk should you ever fail to make your mortgage repayments.

A family springboard mortgage, sometimes known as a family deposit mortgage or just a family mortgage, is one type of guarantor mortgage. With a family springboard mortgage, you’ll need a family member who is prepared to have an amount of their own savings held in an account for a set period of time, often 3-5 years, while you start to pay off your mortgage. At the end of the term, the savings are released with interest.

Terms for these sorts of family mortgages will vary between lenders, so if you’re interested, speak to your broker about which might suit you best.

Which lenders offer mortgages for young professionals?

Many lenders will offer preferential rates and terms for specific professions, such as doctors, nurses, teachers, or legal professionals, and some may even have specific products available. Certain professions are classed as lower risk, which can translate into lower deposit requirements or better interest rates.

This is where speaking with a broker first, before approaching any lenders yourself, can be a shrewd move. They will be able to identify the right lenders and also make you aware of exclusive deals that may not yet be available to the wider public.

Can you be approved if you have bad credit?

One measure that lenders use to evaluate your suitability for a mortgage is your credit history. Lenders check your credit history for red flags, such as missed or late payments, and use this information to assess whether you’re likely to default on your mortgage.

While getting a bad credit mortgage is possible, it’s often on the condition of having a bigger deposit, which may be a struggle for younger borrowers. If you’re worried that bad credit may affect your chances of approval, talk to your broker about specialist lenders who are prepared to take more risk.

Get matched with a broker experienced in young-person mortgages

Although you’ll be bucking the trend by getting a mortgage in your teens or early twenties, that doesn’t mean it’s impossible with the right planning and support. Knowing which lenders to approach and what information they’ll need is key, so having a broker who specialises in mortgages for young people can give you a valuable head start.

Call us on 0330 818 7026 or make a quick online enquiry now. We’ll review your situation and arrange an initial chat with the broker, which we feel will give you the best bespoke support. Our broker matching service is free of charge, and without obligation, so you’ve got nothing to lose.