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Low-income mortgages

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 6, 2023

Fact Checked By:
David Nicholson - Finance Editor

Low income mortgages

Today, a common misconception is that you must be a millionaire to climb the ladder to property ownership but fortunately, this is not true, and low-income mortgages are very popular. While a high salary is a good thing when applying for a mortgage loan, some products cater to low-income people in many different situations.

This article will cover everything you need to know regarding a mortgage on a low-income, mortgage guarantee schemes and other mortgage deals. It also covers how to get a mortgage with minimum wage and we answer the most common questions from low-income customers who apply for the mortgage market.

If you would prefer to have mortgage advice from a mortgage broker, simply click the link below. We have a few mortgage providers lending various loans and will ensure to find you the best mortgage deal.

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What if I have a low income and want to get a mortgage?

A mortgage on a low income is a popular request and luckily most UK mortgage lenders will work with you if you can prove you can make the mortgage repayments. Your monthly income is not the only factor used to determine affordability, therefore you might be able to get a mortgage with a low income by ticking other boxes on the assessment checklist of the mortgage provider. Ensure you have bank statements and your credit history to hand.

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You may be eligible for a mortgage if you have a low income.

  • Other capital is available to you besides your salary
  • You have a substantial deposit
  • Good credit rating
  • Your outgoings will be minimal
  • You are buying an affordable property

Which other sources of income can you declare?

Your mortgage options with UK lenders will significantly increase if you have additional income sources, and while not all mortgage providers will accept benefits, assets, and freelance work, some might consider them and offer you a better deal. Mortgage brokers have access to more lenders who will help low-income applicants.

Benefits to supplement your wage

You might be eligible for financial assistance if you meet the minimum income requirements. Many people don’t realise that there is help available. They may also be eligible for capital to increase their mortgage affordability. Speak with a mortgage broker to discuss a mortgage on a low income. They have options of a traditional mortgage, equity loan, lower interest rates, guarantor mortgage, first-time buyers, joint mortgage, buy-to-let mortgage and so on. As you can see, there are various options available. The broker will compare low-income mortgages for you.

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As a way to increase affordability, specialist lenders may accept the following benefits: Provided the applicant is not in full-time (low-paid or otherwise) employment or retired,

  • Universal Credit
  • Credit for child tax
  • Credit for working tax
  • Child benefit
  • Disability Living Allowance (DLA).
  • Industrial Injuries Benefit (IIB).
  • Incapacity benefit (IB).
  • Attendance Allowance
  • Pension Credit
  • Maternity Allowance
  • Severe Disablement Allowance
  • Widow’s pension
  • Carer’s allowance

We can help you find a mortgage lender that is more open to people with these income sources. Most lenders on the high street may not be able to help.

Mortgages with high deposits and low-income

Having the largest deposit possible when applying for a low-income mortgage is a good idea. While many factors can impact your eligibility for a mortgage, a large deposit will make it less likely that you will be denied on affordability grounds.

This is why a mortgage provider can lend to someone with a high deposit but low income. The bottom line is that lenders will approve a low-income, high-equity mortgage if you have a larger deposit.

Specific lenders may impose a minimum loan amount for residential mortgages that is between £75000 and £80,000. If you are denied, you will be refused a £40,000 mortgage. However, other providers will offer lower rates than £40,000, and some have no minimum loan amount.

How to increase your deposit

Many potential borrowers are unaware that other sources of capital could be available to increase the amount you can deposit.

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Assets to supplement your income.

Wealth does not always depend on how much you make from your job or the money in your bank account. Select lenders may consider the assets of some people who are looking for a low-income mortgage.

You can use assets to help you afford your housing costs, such as…

  • Investment Properties
  • Stocks, shares, and pension funds
  • Income from trust funds

Investment properties

A mortgage provider will not consider your rental income if you do not have any other properties you can use as equity. The amount you can borrow will depend on whether your rental income is higher than the rental market value.

Stocks, shares, and pension funds:

There are many ways to put your investment holdings into a mortgage application. A private bank can assess your portfolio and give you a portion of it back in the form of a loan. This portion is usually between 50-60%. This is an excellent option for those who want to climb the property ladder and supplement their modest annual income.

Income from trust funds

You can sometimes use the income from a trust you are a beneficiary of, or if you have been left a gift to help you afford a mortgage from some specialist lenders.

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Are you a low-income person who needs mortgage assistance?

Some borrowers end up with low incomes long after they take out a mortgage. You might have lost your job after two years of a mortgage loan. In this case, you may need to work a minimum wage job until you can get a new job.

This situation is where borrowers with high mortgages struggle to make ends meet. However, the good news for those in this position is that assistance may still be available.

If you are locked into a mortgage that you can’t pay, you have many options.

  • You should contact your mortgage lender They may be able to offer temporary payment arrangements, a lengthening of the agreement, or switching to an interest-only plan.
  • Apply to a mortgage rescue program: These are only available in Scotland or Wales. They involve either a housing association, a social landlord, or the government buying your home and renting it out at a lower rate than you are paying your mortgage lender.
  • Support for mortgage interests: This used to be a low-income mortgage grant from the UK, but it is now a repayable loan you have to repay with interest when your home is sold or transferred. These loans are intended to assist those who receive benefits in paying off their mortgage interest or any loans they took for home repairs/home improvement.

Click the link below; we provide low-income assistance if you are denied government support. We are happy to discuss all options with you.

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Credit rating, outgoings, and more

A specialist provider that deals with low-income customers is key to obtaining a low-income mortgage.

If you have good credit ratings and minimal outgoings, you are less likely to be a high-risk borrower than someone with poor credit and high debts.

You can have a variety of factors that affect your eligibility for a mortgage, regardless of whether you are a low-income earner.

Can I get a mortgage if I have a low income and bad credit?

Although it will be more challenging, it is not impossible. We get asked a lot by customers if it is possible to obtain a mortgage even if you have low income or bad credit. If you have both low income and bad credit, your options for mortgage providers will be limited. However, there may still be help available.

Low-income customers with bad credit and those with low incomes are considered niche customers. This means that specialist assistance may be required to find the right mortgage product. Our brokers may be able to connect you to a provider that caters for both. Your chances of getting capital will increase if you meet all the criteria discussed in this section.

For example, a low-income bad credit mortgage loan may be possible if you have assets and other income sources, however, this will depend on how long your adverse credit has been on file and what type it is. Bankruptcy is obviously more severe than a missed payment on a phone bill, for instance.

Contact us if you are looking for a lender that will lend to you despite having a low income or bad credit history. We often work with these situations.

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Talk to an expert broker that specialises in low-income customers today

Although you may find that your mortgage options are limited on the high streets, speaking with a broker across the market could increase your chances of getting the best mortgage deal and getting you on the property ladder. Ultimately the aim of our job is “mortgage approval”.

You are one step closer to a mortgage by clicking the link below. We will help with your mortgage application and introduce you to lenders most suitable to you.

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Is there a minimum wage for a mortgage?

Some mortgage lenders require a minimum income of £20,000 per annum for residential property purchases. Others accept applicants with incomes between £15,000 to £10,000 per annum. A few UK specialist mortgage lenders also do not have a minimum income requirement.

What is the minimum wage for a mortgage?

However, your chances of approval may depend on whether or not you have other sources of capital or assets that can increase your overall income. If you can make a substantial deposit, have an affordable property to buy, or if you have a relative who is willing to lend a hand by providing financial assistance or a guarantor, it might be possible.

What maximum amount can I borrow for a mortgage based on my minimum wage?

A standard 37-hour work week at the UK minimum wage would earn you around £12,500 before taxes and national insurance. Lenders will typically offer applicants a mortgage at 3-4 times their monthly salary. This means that a minimum wage earner can only get products with loan amounts between £40,000 to £50,000.

Good news: If you have a partner, your income can be combined for a joint mortgage, and even though you both earn minimum wage, the loan amount would rise to £100,000.

We’ve already mentioned that some lenders will offer mortgages without a minimum amount. However, this sum is unlikely to be very useful in the UK housing market. It may also limit your ability to sell properties at a low guide price.

As we discussed earlier, it will be a big difference if you have a large deposit, but not everyone is in that situation.

Your average provider will give you a loan amounting to 3-4 times your monthly salary. However, specialist lenders can go up to five times your annual earnings. Other lenders may be willing to lend even more if the circumstances are right.

What minimum income is required to get a mortgage for a buy-to-let property?

Some providers require a minimum income of £25,000-35,000 to buy and let properties. Others have it lower at £20,000. Some specialists do not impose income requirements for those with low incomes.

While most of these agents only deal with landlords with experience, a few may also deal with low-income home buyers who want to buy to let.

This sector’s mortgage providers are more interested in the investment’s feasibility than in your specific wage slip numbers. There may be some chance of capital being approved if you can show that the property you are interested in will generate sufficient rental income. This is usually done by requesting a report from an ARLA-registered letting agent and meeting the lender’s general eligibility criteria.

If you have a mortgage deposit and can prove you can make mortgage repayments, you are in with a good chance. No matter what your situation is, click the link below to begin your mortgage journey and contact us now

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