Low Income

Can I get a mortgage on a low income?

If you're on a low income, you may be concerned that you won't be able to get a mortgage. The good news is that even though it might be more of a challenge, getting a mortgage on a low income is not impossible.

Your best chances of approval will come with using an experienced mortgage broker. Not only will they be able to recommend the most suitable lenders and boost your chances of approval, but they'll also be able to help you get the best rates.

At Teito, our team of experts have helped many people on a low income just like you to get the best deal possible on their new mortgage. As a whole of market broker, we work with more than 100 lenders, including those who specialise in low-income mortgages. If you're ready to get started, complete our simple online form today, we promise to make your mortgage journey as straightforward and stress-free as possible!

How much do I need to earn to get a mortgage?

Affordability criteria vary from lender to lender, so there is not one single answer to this question.

When you make your application for a mortgage, lenders will assess the amount you're looking to borrow along with your ability to make repayments. The type of mortgage you're applying for will make a difference, as well as your credit rating and expenses. 

Suppose you're able to demonstrate that you can cover your outgoings comfortably and continue to make mortgage repayments. In that case, there is no reason why your low income should deter you from applying

What types of income are allowed?

While your income from employment is the most commonly recognised, there are many other sources of income that can be taken into account. You may find that not all lenders accept non-standard sources of income; this is where your broker can help. 

Income sources that may be considered include:

• Rental income
• Pension payments
• Child support payments
• Disability benefits
• Certain other types of benefit

Note that you'll need to submit evidence of these income sources to lenders.

There are a select number of lenders who are not currently earning but have a certain amount of money in the bank. Typically this option is only available when you have a savings and current account with the mortgage provider. 

What proof of income do I need?

Depending on your circumstances, you may need to provide the following documents to prove your identity and income. 

• Proof of identity
• Utility bills
• The most recent council tax statement. 
• Bank statements
• Payslips
• Bank statements
• P60
• SA302

What government schemes are available for low income mortgages?

There are several government schemes available for those on a low income designed to facilitate homeownership. You may find that you are eligible for at least one of these schemes. 

Help to Buy Equity Loan Scheme

This is one of the most popular schemes in the UK to encourage homeownership.

Under the Help to Buy Equity Loan Scheme, you contribute 5% of the property price as a deposit and the government loans you up to 20%. The remainder is mortgaged. You will not pay any interest on the loan for the first five years, and you pay back the loan in full when you sell the home. To be eligible for the scheme, you must be buying a new build property which is participating in the scheme, worth up to £600,000 in England, £300,000 in Wales and £200,000 in Scotland. Read more on the Help to Buy Equity loan scheme here. 

Right to Buy scheme

The Right to Buy scheme allows people living in social housing to buy their home at a discounted price.

The amount of discount you may be entitled to depends on how long you've lived there and the type of property. There are a number of qualifying factors to consider; the main one is that you need to have lived in the property for a minimum of three years. The scheme is available for people who have rented a council property as well as some housing association tenants. Not all lenders will allow you to buy under the scheme; your broker can advise on this. 

Shared Ownership Scheme

The Shared Ownership scheme allows you to own a portion of your home and pay rent on the remainder.

Initially, you can purchase a share of the property between 25% to 75% and pay rent to the housing association on the remaining share. Over time, you can buy more of a percentage of the property, up to 100%. This is known as 'staircasing' and is performed incrementally. To be eligible, you must earn less than £80,000 (less than £90,000 if you live in London) and must have a deposit of at least 5% of the purchase price. Again, not all lenders will permit you to participate in the scheme, and your broker can help with this. 
 

Will buying with others improve my chances?

Yes, if you are getting a mortgage with others, this may mean that you can borrow more.

While buying with one other person on a joint mortgage is most common, some lenders will consider an application from three or even four people.

There are a few caveats to consider. 

• If your co-buyer has bad credit, this will also impact on your own credit record. 
• If your co-buyer fails to make mortgage repayments, you will still be equally responsible for the debt. 
• You can either be joint tenants or tenants in common. If you are in a joint tenants arrangement and one of you dies, the ownership will pass to the other tenant. With tenants in common arrangements, you can nominate someone to take over your share in a will. 

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

It may be possible to get a buy to let mortgage even if you are on a low income.

Although for a buy to let mortgage you are generally expected to have a salary of at least £25,000, there are a few specialist lenders with no minimum income requirements. You will need to demonstrate that the rental income from the property will comfortably cover the mortgage repayments, and most lenders will expect you to have some experience as a landlord. 

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Can I get a mortgage on a zero-hours contract?

As zero-hour contracts become more common, lenders are starting to adapt their eligibility requirements. Please read our article on zero-hour contract mortgages here to learn more. 

How much can I borrow on a low income?

Generally speaking, mortgage lenders will permit you to borrow between 4 to 5 times your salary. Several factors can impact on this calculation, such as your credit history and deposit amount. 

How can I boost my chances of approval on a low income?

Your best chance of mortgage approval is by using a competent mortgage broker. To get started, complete our simple online form today.