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Mortgage help for single parents

Everything you need to know about the mortgage help available for single parents

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By Pete Mugleston   Mortgage Advisor

Last updated: 6th February 2019 *

“Can I get help paying my mortgage as a single parent?” Yes, you can.

Getting a foot onto the property ladder can be tough at the best of times, but if you’re looking to take out a mortgage as a single parent, the process can be even more challenging.

The good news is that, in the UK there are several programmes offering single parents help with getting a mortgage. This article will tell you everything you need to know about them, how to get them and whether alternatives are available.

The following topics are covered below…

  • Single Parent Mortgages
  • Factors Affecting Eligibility for a Single Parent Mortgage
  • Income
  • Affordability
  • Additional Income
  • Adverse Credit Issues
  • What Single Parent Mortgage Assistance Schemes are Available?
  • Government Help to Buy Equity Loan
  • Government Help to Buy Equity Loan London
  • Government Shared Ownership Scheme
  • Low Deposit Mortgages
  • Guarantor Mortgages
  • Family Gifted Deposits
  • Personal Loans

Mortgages for Single Parents

Being a single parent is not easy. It can be financially challenging, and it often means that you’re unable to take on full-time employment. While the prospect of being a single parent with a mortgage to pay may seem impossible, this is not necessarily the case.

Finding a provider willing to lend money to single parents may prove difficult due to the additional risk involved, but there are lenders out there who can help.

While realistically you will be looked at more favourably if you were buying a property as a couple, the main obstacle usually surrounds the typically lower income of a single parent.

What Factors Influence Getting a Mortgage as a Single Parent?

Lenders take a number of variables into account when assessing the eligibility of single parents, including…

Income

Low or no income from employment can significantly reduce the amount you can borrow for a mortgage.

The majority of providers are only willing to loan you three to four times your annual income - although there are a handful of lenders stretch to five or six times.

However, this will vary based on the number of dependents you have; essentially, the more you have, the more this impacts your affordability and how much a prospective lender is willing to offer you.

Affordability

As well as the limitations surrounding income, a related concept is affordability. For example, while your income may be low, if your monthly outgoings aren’t too high you may be looked at more favourably by a larger range of providers.

Lenders assess your affordability by looking at your debt to income ratio. This gives them insight into your income versus all of your outgoings, which allows them to assess whether you can realistically afford to repay the loan you’ve applied for over the agreed period. This moves us on to...

Additional Sources of Income

As we’ve established, in order for a mortgage application to be considered you need to be able to demonstrate to the lender that you are capable of paying off the loan.

While your income may be low (or even non-existent if you’re unemployed), there may be other sources of income you’re receiving which lenders will take into account.

So, what else is factored in when assessing a mortgage application for a single mum or dad? The main forms are child benefits, tax credits and maintenance fees that you receive from your ex-partner. There may also be other sources of income, such as universal credit, which will be added to the equation.

For example, if your income is £10,000 a year from a part-time job, based on a bank lending you the “standard” three to four times the amount of your annual salary, you could be eligible to borrow between £30,000 - £40,000 for a mortgage (although this will vary by lender, and will also be looked at alongside other factors).

However, if you add up the total of the benefits you receive, this could raise the amount you’re able to borrow. If all your benefits amount to, say, £10,000 annually, this plus your £10,000 salary from work will be treated as an annual income of £20,000, which theoretically raises the amount a mortgage provider is willing to lend you.

Of course, your lender will also take your outgoings into consideration as mentioned before; for example, your average monthly expenditure, including any loans you’re currently paying off, how much is spent on childcare, etc.

How Does Adverse Credit Affect Mortgage Loans for Single Parents?

As with any mortgage application, poor credit history is not looked at favourably by lenders. Mortgage providers take adverse credit issues seriously because if a borrower has fallen into financial difficulty in the past, the higher risk they are.

Theoretically, they are more likely to experience similar issues in the future. Ultimately though, it comes down to how recent and how severe the bad credit issues are.

If you have any of the above on your file, don’t be disheartened. There are specialist lenders who cater for customers with adverse credit, and some of them may offer deals to single parents too. Get in touch and the whole-of-market advisors we work with will help you find the lender offering the best deals for borrowers who fall into both niches.

For more info on this visit our bad credit mortgage pages here.

Single Parent Mortgage Help in the UK: What Options are Available?

In the UK we’re fortunate enough to benefit from several schemes (government-funded or otherwise) that can give you a leg up onto the property ladder. So, to all you single parents seeking help with your mortgage payments - read onto find out which options might be available to you.

Government Help to Buy Equity Loan

The government has several schemes available to help those who are finding things tough financially - a good option for a single mother or father struggling to save for a deposit. The equity loan scheme allows you to buy a home with as little as 5% deposit saved. Alongside your savings, the government will provide you with a loan of up to 20% of the property’s value to be used towards a deposit.

This means that you are only be required to save a 5% deposit to be eligible for the scheme, giving you a far more attractive deposit of 25%, with a 75% mortgage making up the rest (although you can of course pay more out of your own pocket, if possible).

London Help to Buy Equity Loan

Considering the high cost of properties in certain areas of the UK, the government has increased the upper limit of the equity loan scheme from 20% to 40% for those looking to buy within Greater London.

Again, you’ll need to contribute at least 5% of the property price as a deposit, and the Government will loan you up to 40% of the property value. As above, you would then take out a maximum mortgage of 55% to cover the rest.

Government Shared Ownership Scheme

Shared Ownership is another government scheme available to first time buyers or lower income households. Shared Ownership allows you to buy a share (usually between 25% - 75%) of a resale or new build home.

Alongside this you will pay reduced rent on the remaining share of the property, although later down the line you will have the option to buy a larger share if you can afford to. Bear in mind though, that these types of properties are always leasehold.

When it comes to Shared Ownership mortgages, most lenders will require you to have saved a minimum of 5% deposit. However, there are a handful of providers that will offer 100% mortgages on Shared Ownerships, meaning you may not be required to save anything at all - provided you can prove you can afford the repayments.

Low Deposit Mortgages

Although you tend to be looked at more favourably if you have a deposit of 15% or more in savings, there are a few lenders out there who will accept a 5% deposit on a standard mortgage.

So, if you’re unwilling to “invest” in a government scheme, there are still options available if you’ve only got a small deposit together. But remember, in general the larger your deposit, the more competitive rates you’ll have access to (saving you money in the long term).

Guarantor Mortgages

A guarantor mortgage is when someone you know uses their own savings or a personal asset (typically their own home) as a deposit on your behalf. This makes them responsible for your repayments if you’re unable to do so, meaning that there is the possibility that your guarantor could have their property repossessed if you start defaulting on your repayments.

To be accepted as a guarantor, the individual will need to own their own home, or own a certain amount of equity in the property (this figure will vary by lender). They will also need a good credit record and proof that their income can cover your repayments on top of their own outgoings if necessary.

If you have little or no deposit together, and are certain that you will be financially capable of keeping up with your mortgage repayments, this can be a good way to get a foot onto the ladder because many lenders will allow you to borrow up to 100% of a property’s value.

Family Gifted Deposits

Many parents like to help their kids out financially by contributing some or all of a deposit for their child’s own home. A family gifted deposit is a good option if you’re struggling to save up a lump sum for a deposit, but are confident in your ability to afford the repayments in the future.

Direct family such as parents, siblings and grandparents are usually accepted without question by most lenders, but most can be a lot more wary about gifts from more distant family.

If you’re fortunate enough to be in a position to be offered a deposit in the form of a gift from a close family member, this can be a simple and effective way of getting onto the ladder even if you have zero deposit saved yourself (other factors considered).

However, if you are able to make your own contribution to the deposit on top of the gift you will be looked at more favourably by lenders.

Personal Loans

If you’re considering taking out a loan in order to qualify for an even larger one (AKA a mortgage deposit), this triggers warning signs to many lenders, and many will not consider you.

This is partly due to the impact it has on your affordability - whether you can realistically afford to repay a loan and a mortgage at the same time. But the most significant issue is that you have not personally invested any of your own savings towards the deposit, and as such you’re considered higher risk.

That said, scraping a deposit together as a single mum or dad can be very challenging, and if a loan is your only option there are a couple of lenders that will consider you (in the right circumstances).

If you can provide evidence to suggest you will be able to afford both the mortgage repayments alongside the loan and your other outgoings, you may stand a chance.

It may be possible to do this with 5% loan and 95% mortgage, 10% loan and 90% mortgage, or even 15% loan and 85% mortgage. However, it’s important to note that larger loans are less common, as the maximum amount you can borrow on a personal loan is £25,000, and the maximum term is usually 7 years, making repayments considerably higher than if they were over the full term of the mortgage.

Speak to a Single Parent Mortgage Expert Today

If you’re wondering whether you can get help with your mortgage as a single parent, call Online Mortgage Advisor on 0800 304 7880 or make an enquiry here.

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.

Updated: 6th February 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.