Written by, Marija Petkova
Updated September, 21, 2022
While low-income earners might not get the same rates and conditions as those raking in thousands of pounds a year, getting a mortgage on a low income is not impossible.
Keep on reading to find out how to get a mortgage on a low income in the UK, as well as learn more about which income sources a lender will accept and the types of assistance available if you are unable to cover the mortgage payments.
In general, you can get a low-income mortgage in the UK if you can prove to the lender that you can repay the loan.
The type of mortgage you are applying for and the amount you want to borrow will also affect the ultimate decision.
the ultimate decision.
According to the government, a couple with no children on an annual income of up to £14,800 (after housing costs) is considered a low-income household.
To learn more about the average wage in the UK, take a look at this article.
Lenders tend to look at more than just your monthly salary and focus on overall affordability instead. To that end, they will check whether you can make monthly mortgage repayments and still manage to cover living costs, like household bills, food, travel and other expenses.
They will also consider your ability to pay off the loan if interest rates were to go up.
Some banks and lenders might reject your application. If this happens, your best option is to consult a specialist mortgage broker who deals with clients unable to get traditional home loans.
Most lenders do not have minimum income requirements for a mortgage in the UK, however, this depends on your chosen loan provider and your personal and financial circumstances.
As long as you have a steady income, a solid deposit and good credit history, you can get a mortgage on a minimum wage.
Can you make ends meet on a minimum wage in London? Find out here.
Some lenders are quite flexible and may approve a mortgage up to 4.5 times your annual salary. This means that if you make £19,760 a year, you could get approved for a £70,000 to £80k mortgage product. The minimum income for a mortgage of £150,000 would be roughly £37,500 per year.
The rates offered by each mortgage provider vary, so it’s best to do a quick comparison and see which ones are best suited to work with you.
Most low-income mortgage lenders (though not all) will look at other income sources in addition to your annual salary. This means that if you have multiple revenue streams, your chances of getting approved for a low-income mortgage will increase significantly.
Your income can include anything that goes into your bank account every month, such as:
Most banks and building societies will also count benefits as income, including but not limited to child support payments, carers allowance, disability living allowance, universal credit, and widow’s pension, provided you continue to receive them regularly throughout the loan term.
You will need to provide the following documentation as proof of income:
Lenders might require more documents, so it’s worth it to check beforehand and speed up the process.
Related reading: How to get a loan on benefits?
Applying for a mortgage can be a daunting task, especially if you’re doing it on a low income.
However, there are some things you can do to increase your chances of getting your low-income mortgage application approved.
Borrowers with minimum wage can still get a mortgage at favourable terms if they have a good credit rating, as this shows the applicant can manage money well, despite earning less.
The bigger the deposit on the property, the less you will need to borrow and thus pay less in interest and monthly repayments. Plus, there is less risk to the lender, making it more likely to get approved.
If you are struggling to raise a deposit, which is very common among low-income earners, you could try a lender that will accept a gifted deposit or a family-assisted mortgage.
Worth noting: If you already bank with a certain lender or have a current or savings account with them, you have more chances of getting approved for a mortgage.
From the lender’s perspective, if you have fewer liabilities or expenses, you will have more to repay your mortgage each month. It also shows that you are responsible with your money and able to make payments on time.
This way, the income of both applicants will be taken into consideration, thus increasing your chances of getting approved for a bigger mortgage.
Worth noting: Make sure that you have a legally-binding agreement regarding the division of property before you apply for a loan. Not all couples live happily ever after.
There are a number of government schemes and support mechanisms designed to provide affordable mortgages for low-income earners.
These are just a few of the mortgage options for low-income earners. It’s best to speak to a mortgage advisor and find out what is the best alternative for you.
Getting a low-income mortgage in the UK is not impossible, just harder. If you make less than the median hourly wage and want to buy a home of your own, it might be best if you start saving for a deposit as soon as possible (it’s worthwhile to look into tax-free savings accounts like a Lifetime ISA or think about making prudent investments).
Try to include other sources of income that could boost your affordability, pay your debts and bills on time and get informed about government schemes designed for low-income homebuyers—all of these will help you get your dream home regardless of how much you earn.
Yes, since most lenders do not have requirements when it comes to the minimum salary for a mortgage. As long as you have a good credit score and other sources of income, a lender will consider your application. The same is true for employees with zero-hours contracts.
Yes, there are several government schemes that can help you get interest-free loans or government-backed mortgages in order to make your mortgage payments more affordable.
Yes, some lenders are willing to let you use the rental income from the buy-to-let property as mortgage payments, but only if you are able to show that you have successfully managed BTL properties in the past.
Yes, although the terms will not be as favourable as someone with a good credit score receives. There are specialist lenders who are willing to work with poor credit applicants, as well as mortgage brokers who might be able to give advice on how to get a mortgage on a low income in the UK to bad credit borrowers.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.