Since the financial crisis, getting a mortgage has been more difficult than ever. This is especially true for those on a low income, as banks are much more reluctant to lend. However, with rent costs, and deposits rising year on year, those with a low income would be much better off if they could buy. Fortunately, there are some options available to you if you are looking to buy property on a low income.
A Large Deposit
The higher the deposit, the better your chances of being accepted for a mortgage. Certainly, from a high-street bank. A higher deposit will also mean you pay less interest. For a lot of us, this is only possible with a large one off payment, an inheritance for example. However, without this, even those on a low income should try and save as much as they can. If you are lucky enough to have a large amount of money saved, don’t assume you can then buy a more expensive house and stick to a 10% deposit, this will just decrease your chance of getting accepted again. Go for a higher percentage deposit for your best chance of acceptance.
Shared ownership gives many people, who otherwise would never be able to, the chance to own their own home. You basically buy, or get a mortgage for, a percentage of the home, and rent the rest. So, you might be paying a mortgage off on 25% and rent on the other 75%. Then when that mortgage is paid, you buy the next 25%, but only pay rent on the remaining 50%. While this option can take a long time to complete, those on a low income have a much greater chance of being accepted for a mortgage on 25% of a house.
Go Off the High-street
High-street banks can be incredibly fussy about who they lend to. They can afford to be. If you are on a low income, and especially if you have a bad credit, look online. If you want to look at bad credit mortgages, its best to avoid the high-street all together, but don’t worry, there are many alternatives.
Help to Buy
Help to buy is a government scheme, to help first time buyers purchase certain new build homes. The purchase price of the house must be no more than £600,000 and you could potentially borrow 20% of the price interest free for 5 years. This scheme is especially useful for those with low deposits, as only 5% is needed to be eligible.
Right to Buy
Right to buy is another government run scheme. It allows council tenants to buy their homes for a reduced price. In most cases, you need to have been a public sector tenant for a minimum of three years to be eligible for this opportunity.
So, don’t worry. Whatever your income, the chance to own your own home is still there. The best thing you can do to start with, is save as much as possible towards a deposit. Then shop around online, or speak to a mortgage advisor.