We’re specialists in ensuring our clients have the right mortgage for their circumstances. And even when faced with difficult or unusual circumstances, our friendly, experienced team pull out all the stops to do everything we can to get our clients their dream home.
Here is a selection of case studies which demonstrate where we’ve helped our clients in particularly difficult circumstances
If your income is below the national average (which currently sits at around £31,772 per year), then buying a house and taking on a mortgage which may run for the next 25 years or more, may feel like a pretty daunting financial commitment. Having a low income can make getting a mortgage large enough to buy a reasonable property a challenge. But it certainly isn’t impossible and it doesn’t have to be scary!
The level of your annual income is one of the most important factors in your mortgage application. It’s a major driver for a lender in their assessment of the mortgage they might be comfortable in offering to you. Lenders will look at your income because this is ultimately what will be used to repay what you’ve borrowed and meet your monthly mortgage repayments.
If you have a low income it doesn’t necessarily mean you’ll struggle to find a lender who’ll offer you an affordable mortgage. By using an experienced mortgage broker or adviser you will have the best chance of finding the right mortgage for you.
Firstly, let’s explain a little about how lenders generally assess mortgage applications. Whilst it’s true that most lenders will assess each mortgage application on a case-by-case basis, most of them will also have a set of basic lending criteria that they will apply as an initial assessment of a borrower’s affordability and suitability. This often includes an income multiplier. This helps to determine the maximum level of lending that they are willing to advance to an applicant.
Alongside your income, a lender will also want to look at your outgoings. This includes things like bills, food and travel costs. Lenders may also want to try to ‘futureproof’ your application. They do this by considering how you’d manage if interest rates were to rise or if you were to have a change in personal circumstances, such as starting a family for instance. Would you still be able to meet the monthly mortgage repayments?
In addition to the above, mortgage lenders will also consider:
Don’t feel discouraged by the lack of size of your income when looking for a mortgage. There are a number of options available to those on a low income which might help you secure the property you are after. Let’s look at a few of those options now.
Arguably, the easiest way to get a higher mortgage offer when you are on a low income is to apply for a joint mortgage with somebody else. This could be a partner, friend or a family member. Remember, however, that buying a house and taking out a mortgage is a legal contract and a long-term commitment. Consider very carefully who you enter into a joint mortgage with.
A joint mortgage allows you to borrow money jointly with another person. This means you not only share living costs, making the mortgage more affordable, but it means that there are two incomes coming into the household from a mortgage assessment point of view. This means that you will be able to borrow more. When you purchase a property with someone else, you will be joint owners with a legal claim to the ownership of the property. You will also both be liable for the entire mortgage and its monthly repayments.
With a joint mortgage application, lenders will take into consideration both applicants’ incomes in their income multiplier. So, let’s say that you both earn £18,000. The level of mortgage will be based on a joint income of £36,000. Using a 4.5x income multiplier, this could generate a mortgage up to £162,000. Combining incomes not only helps make the cost of owning a house more affordable and therefore helps you get accepted, but it could also secure you a much larger mortgage offer.
Find out more – ‘How do joint mortgages work?’
Easier said than done, we know. If you are on a low income, how are you meant to put down a large deposit? Well, perhaps you have inherited enough money to be able to do this. Perhaps you are lucky enough to have some help from your parents. In fact, The Bank of Mum & Dad is up there amongst the most common ways that first-time buyers raise a house deposit.
Whilst it’s possible to use cash from a loan to put towards your deposit, our advice would be to use this option wisely. It’s important to be sure you’re able to afford the loan payments together with your mortgage repayments and other outgoings. You should also be mindful that the mortgage lender will take the loan into account when considering your affordability for the mortgage.
Maybe combining your savings with someone else and applying for a joint mortgage will help achieve the strongest application.
Your deposit will form a percentage of the purchase price of the property that you are buying. You will then need a mortgage to cover the remainder of the purchase price.
Let us explain; if the property you want to buy is £180,000 and you put down a deposit of £18,000, your deposit will be 10% of the property value, meaning you’ll need a mortgage for the 90% which would be £162,000.
Ultimately, a larger deposit should bring your mortgage borrowing and therefore your monthly repayments down. A deposit of between 10-20% is considered a good-sized deposit. 20%+ is considered to be a large deposit and will unlock better mortgage deals with lower interest rates.
Find out more – ‘What is the minimum deposit on a mortgage?’ & ‘How to save for a house deposit’
Alongside your income details, your personal credit score is another major factor that lenders will take into consideration when assessing your mortgage application. It could influence the type and size of any deals they may offer you. Looking into your credit history is one of the ways in which a lender will gain information on how reliable you have been at paying back loans and borrowing in the past.
If you have borrowed money in the past and kept up with repayments, then you’re likely to have a good credit history. Having ‘good’ credit is a sign that a creditor can trust you. This will generally work in your favour. On the other hand, ‘bad’ credit could signal a history of missing or late repayments. This will serve as a warning to potential lenders. Bad credit coupled with a low income is likely to make it much more difficult to get accepted for the mortgage you want.
It’s good practice to find out your credit score ahead of applying for a mortgage. That way, you’ll have a good picture of how a lender is likely to view you as a potential customer. Find out more on the Experian website.
If you have never borrowed money previously and therefore do not have a credit history, then this can also present a challenge. It gives lenders nothing to go on. Therefore, they can’t be sure whether you are a responsible borrower or not. As a consequence, they are likely to take a cautious approach to your application.
Prior to applying for a mortgage, it’s a good idea to build up some level of good credit history. Perhaps take out a credit card with a small limit and use it fairly regularly. Ensure that you keep on top of repayments and ideally repay the balance in full each month. This will demonstrate that you are financially responsible and will help to build a positive credit score or improve a previously poor credit score.
Find out more – ‘How does bad credit affect a mortgage?’
If you know someone who is willing to be a mortgage guarantor for you, then this could be a helping hand in getting a mortgage on a low income. A mortgage guarantor is usually a parent or close family member who takes on some of the mortgage risk by acting as a safety net for your borrowing.
A mortgage guarantor must meet the eligibility criteria of the lender. They must also have sufficient disposable income available to cover your monthly mortgage commitment and/or have cash savings or equity in property available to offer as security in case you default.
Essentially, a mortgage guarantor may provide comfort to a lender. If you are unable to make the mortgage repayments, there is someone else that they can rely on to make these for you. Just be aware that not all lenders accept guarantor mortgages. And of course, being a mortgage guarantor is no small matter. It’s a big commitment and a legal tie.
Find out more – ‘What is a mortgage guarantor?’
It’s no secret that getting on the property ladder can be difficult – especially for those on a low income. The good news is that there is help out there for those who would like to utilise it. The government run a number of schemes that make purchasing a home that little bit easier.
Let’s first talk about Help to Buy. Exclusive to first-time buyers, when using this scheme you are given an equity loan from the government to put towards the cost of a new build home (up to 20% of the property price). As a result, you will only need to provide a 5% cash deposit, which means lower upfront costs. There is no interest to pay on your equity loan for the first five years and you are likely to qualify for a wider range of mortgage deals with cheaper rates as your mortgage borrowing is likely to be sub 80% of the property value and therefore less of a risk to the lender.
It’s important to note that you will be limited by the price cap in your region. This means that you can only use the scheme to purchase a home costing no more than the specified property price cap in your region. This is in place to ensure that the scheme reaches the people who need it most. You can view the property price caps in your region here. This scheme will end in December so submissions will only be accepted up to the end of October.
The shared ownership scheme is the most popular of the government schemes designed to help people get on the property ladder. When you utilise the shared ownership scheme, you purchase a share of a property. The remaining proportion is retained by a Housing Association which then charges you monthly rent. It’s essentially a cross between buying and renting.
By purchasing a share of a property (typically between 30-50%), your deposit and your mortgage borrowing (and therefore repayments) will be much smaller than if you had purchased 100% of the property. Additionally, the rent you’ll be charged is typically less than the rate charged on the traditional rental market. It’s important to note that because you won’t own 100% of the property, you may encounter a few restrictions when it comes to some home improvements. Essentially, you are a tenant when you live in a shared ownership property. This could mean that in the very worst of cases, you might even be evicted if you fail to pay the rent, for instance.
Over time, you can follow the process of ‘staircasing’. This allows you to purchase further shares in the property and, eventually perhaps, reach 100% ownership. If you reach 100% ownership, you will no longer pay rent to the Housing Association.
Staircasing can be an expensive process, however. This is because you will need to get your house valued each time you do it. This incurs a valuation fee. You will have some legal expenses to pay as you’ll need to involve a solicitor. You may also incur some mortgage fees each time you rearrange your mortgage.
Find out more – ‘Is there a minimum income for shared ownership?’ & ‘Shared ownership – how does staircasing work?’
A fairly new government-backed scheme, the Mortgage Guarantee Scheme is also known as the 5% mortgage scheme. It allows first-time buyers, home movers and previous homeowners to get a 95% loan-to-value mortgage. This means that you will only need to put down a 5% deposit on a property.
Ordinarily, the majority of lenders require a minimum of 10% for a house deposit. With the Covid-19 pandemic and the cost of living making raising deposits much harder for people all around the country, this scheme has been temporarily introduced to offer the opportunity to purchase a property with a much smaller deposit. This scheme is running until December 31st 2022 and is only available amongst participating lenders.
Lastly, if you are looking to get a mortgage on a low income, we would strongly advise you to use a mortgage adviser and broker to help you navigate the mortgage market. At Mortgage Light, we’ve helped people with all kinds of different financial situations secure the mortgage that they need.
Using a mortgage adviser and broker also significantly decreases your chances of getting rejected by a lender. No one likes getting rejected, but having a mortgage application rejected could actually set you back in the long run.
This is because each mortgage application will leave a hard search on your credit report. Having multiple hard searches in a short space of time can be an indication that you are relying on credit, having financial issues or your application has been rejected by other lenders. This could well be a red flag for any mortgage lender that you apply to. It signals that you may be a high-risk applicant.
Rest assured it is possible to get a mortgage on a low income. However, it may require a little forethought and planning. It’s all about finding the most suitable lenders and making your application the most attractive it can be.
Of course, this can be tricky to do alone. The Mortgage Light team are on hand to help you when you are ready to start exploring this exciting next milestone in your life! Our advisers are just a phone call away with plenty of friendly advice to offer. Give us a call on 01908 597655 or contact us via our website.
Yes, in most cases you can fully own a shared ownership property. You do this through a process called ‘staircasing’ which involves purchasing additional shares in your property over time, usually in batches of 10% or larger. You can do this gradually until you reach 100% full ownership.
In this article, we’re going to explain a little more about purchasing 100% of a shared ownership property and any limitations you may come across on your staircasing journey.
In many cases, your initial purchase of a shared ownership property will be somewhere between a minimum of 25% and a maximum of 75% of the property’s agreed market value. These maximum and minimum limitations may vary between different Housing Associations and properties.
How large a share you purchase will ultimately depend on what you can realistically afford, and a good mortgage advisor and broker, such as us here at Mortgage Light, will be able to help you work this out after conducting a financial assessment.
Find out more – ‘How much of a deposit do you need for shared ownership?’
It is usually the case that you can only begin staircasing after you have owned a share of the property for an agreed minimum fixed period of time. If this applies, it will be detailed in your lease contract. Once this initial restricted period is up, you are free to make an application to purchase further shares in your property and go through the staircasing process.
Before changes were made to staircasing in September 2011, you could only make three applications to buy more shares in your home. Today, however, you are usually free to staircase as often as you’d like to. But be aware that staircasing can be an expensive and lengthy process. Therefore, you may not want to go through it too many times. It’s generally advisable to save up and staircase less often, but purchase larger chunks on each occasion.
Find out more – ‘Shared ownership – how does staircasing work?’
When you finally staircase up to 100% ownership, you no longer share the property with your Housing Association and you become the outright owner. You therefore no longer need to pay any rent. Instead, you will solely be paying towards repayment of your mortgage. As a result, it is likely that your mortgage borrowing will have increased to fund the larger share of the property that you own. Once you achieve 100% ownership of your property, should you want to sell and move on, then in most cases you can do so through the open market without the involvement of the Housing Association.
Sometimes, the terms of the shared ownership lease will not allow you to staircase up to full 100% ownership. However, this is fairly uncommon. Such a restriction may be imposed because the property has been adapted. The restrictions are put in place to ensure that these properties stay within the shared ownership market and don’t later get sold into the general open market.
Always check the details of your lease to see if you will be restricted on the maximum share of the property that you can staircase to. Restrictions will differ from provider to provider and the Housing Association should provide a summary of these to you if you are interested in purchasing. Your solicitor should also outline the full lease terms to you during the legal process of your purchase before you complete.
Do you dream of owning your shared ownership property? Speak to us here at Mortgage Light. We have guided so many people just like you to 100% ownership and helped them with every step of staircasing.
Get in touch today to speak to our shared ownership specialists via our website or call 01988 597655.
It’s quite normal for house prices to go up as well as down. This is due to changes in market conditions and shared ownership properties are no different in this regard. Property prices will be impacted by various factors. These include changes in the supply and demand for housing in an area. This is often caused by changes to local transport links or employment opportunities. They are also affected by larger influences such as the nation’s economy and the cost of borrowing.
If your shared ownership property increases in value, then you will benefit from some of that increase. In this article, we explain a little more about house price changes and how these impact shared ownership properties. [Read more…]
If you need a little helping hand getting onto the property ladder, you may be considering making use of the shared ownership scheme. The scheme has been around since the 1970s. Today, the shared ownership market is well established and is really quite strong. Mainstream lenders such as Nationwide, Halifax, Santander and many more all offer shared ownership mortgages, making the scheme more accessible than ever.
So, how do shared ownership mortgages work? In this article, we explain all you need to know about a shared ownership mortgage. [Read more…]
So, you’ve decided to begin planning your first step onto the property ladder. For many, the largest obstacle you will face is saving up enough cash for a house deposit. A house deposit is usually required by most mortgage lenders as your initial contribution towards the cost of your property purchase. For a first time buyer, saving for a house deposit can be particularly difficult – especially if you are currently paying out a large part of your income in rent for your existing accommodation.
Before you begin saving for your house deposit, it’s a good idea to have an idea of roughly how much you’ll need to save and the options available to you if you are struggling to reach this goal. Here is a guide and some tips on how to save for a house deposit. [Read more…]
Most homeowners with a mortgage will consider remortgaging at some point – just as you might regularly compare the market to secure the best deal for your car or home insurance.
Remortgaging your house is essentially the process of switching your mortgage from one mortgage deal to another. The new deal that you choose may be with your existing lender, referred to as a ‘product transfer’. Alternatively, it might be a new deal with an entirely different lender.
In most cases, the idea of remortgaging is to shop around and ensure that you have the best mortgage product available to you. But what’s the process and how do you get started? In this article, we will explain how to remortgage your house. [Read more…]
One of the first steps after deciding you’d like to purchase a house is to begin saving up for your house deposit. Your deposit is usually the most expensive part of getting a mortgage.
Typically, you need to put down a deposit of at least 5% of a property’s value. With the average UK house price sitting at around £265,000 as of August 2021, the minimum deposit amount that you would need for the average house in the UK is £13,250 – 5% of £265,000.
In this article, we are going to explain a little more about the minimum deposit on a mortgage, how to save for one and what to do if you don’t have one. [Read more…]
Getting on the property ladder can feel like an enormous feat for a first-time buyer. Often, the biggest obstacle facing first-time buyers is raising a large enough deposit to purchase a property.
Luckily, there is support out there for those that are struggling to overcome this – such as the shared ownership scheme. If you aren’t sure how the shared ownership scheme works or if it is a good idea for first-time buyers, we’re here to explain. [Read more…]
Good news – there is no set minimum income requirement for the shared ownership scheme. Each home available under the scheme will have its own valuation. This will determine the minimum income required to both rent and purchase a share of that property.
The shared ownership scheme was introduced to make homeownership more accessible for those who may be struggling to raise a full deposit, or do not have enough income for a full mortgage. In this article, we are going to answer some of the common questions asked. [Read more…]
Purchasing property can sometimes be a difficult ride, even for those with a seemingly strong financial record. It can be especially difficult for those burdened with a poor credit history for whatever reason. Don’t let a bad credit history put you off trying to buy a property, however. Mortgages of all kinds can still be sourced, provided you adopt the right approach.
Bad credit is far from uncommon. People in the UK owed £1,742.1 billion at the end of June 2021. Inevitably, some percentage of this will have fallen into arrears, or be in default to some degree. [Read more…]
Shared ownership is designed to make getting on the property ladder more affordable for those who need it. With shared ownership, the amount of deposit you will need to get together in order to purchase a shared ownership property is considerably lower than the deposit you would need to purchase a property outright on the open market.
This is because the deposit you will need to provide is based on the value of the share of the property that you are purchasing, rather than the market value of the whole property. Whilst the deposit required for a shared ownership purchase will vary from property to property, it is typically between 5-10% of the value of the share being purchased. [Read more…]
If you are a first-time buyer, the process of purchasing a home can feel daunting. Purchasing a property is likely to be one of the biggest financial decisions you will ever make, so it’s important to get it right.
We’ve put together a handy step-by-step guide to buying your first home – from saving for your deposit to getting the keys and moving in. We hope it will help you get an idea of the process you will need to go through from start to finish. [Read more…]
Since its introduction back in the 1970s, the shared ownership scheme has become incredibly popular. The scheme has seen some changes along the way, the latest coming into effect in April 2021. Today it remains one of the most popular options for affordably buying a home.
If you are interested in purchasing a property using the shared ownership scheme, then there is a process you will need to follow. In this article, we will outline this process; from who to initially contact, through to collecting the keys and moving in.
Once you begin looking for a mortgage, you’ll come to realise that there are many different types of mortgages out there on the market. It can quickly become confusing. However, there are essentially two main types of mortgages: fixed-rate and variable-rate mortgages.
In this guide, we are going to explain how each of these mortgage types work. We will also cover other common types of mortgage and some specialist mortgages that you may come across.
If you have a shared ownership property, you will encounter some restrictions if and when you want to sell it on. If, however, you have staircased to 100% ownership, then these restrictions may not apply to you, as you are generally considered the sole owner of the property. It’s important to check the details of your lease to see if this is the case for you.
If you do not own 100% of the property, however, then there is a process you must follow when it comes to selling up. This process will be detailed within your lease, but here’s a guide to what you can expect when selling your shared ownership property.
If you have bought a share of your home using the shared ownership scheme, the process of ‘staircasing’ enables you to gradually own a greater proportion of the property by purchasing additional shares. The more of the property you own, the less rent you will pay to your Housing Association. If you eventually staircase up to 100% ownership, you will own the property outright. You will no longer need to pay any further rent.
Generally, you can’t begin staircasing until you have owned your share of the property for an agreed fixed period of time. This initial restricted period will be detailed in your lease. It’s also important to check the terms of your lease. Getting up to 100% ownership is not always possible. Some housing providers limit the share of the property you can staircase up to.
A shared ownership mortgage is the borrowing you take out to help you purchase the share of a property that you purchase using the shared ownership scheme – usually between 25 – 75%. The mortgage covers the share that you own, and the Housing Association owns the remaining share, which you will pay below-market-value rent on.
A shared ownership mortgage is only required on the percentage of the property that you purchase, the amount borrowed is often much lower compared to purchasing a property outright.
The Shared Ownership scheme has been around now since the 1970s. It’s a very popular way for those on low incomes or with low deposits to get onto the housing ladder. Shared Ownership has been described as a cross between homeownership and renting – but how does it actually work? [Read more…]
If you would like to buy a property outright but you can’t raise a mortgage large enough to complete the purchase, then you might consider making use of the Shared Ownership scheme. The Shared Ownership scheme is designed to make buying a house more accessible for people on a lower income or who have low deposits- but is it a good idea? [Read more…]
Siobhan Holbrook, Director at Mortgage Light
You might have heard the recent news that the shared ownership model is changing. Previously, buyers of shared ownership homes had to purchase a share of at least 25% but now, they can purchase a share of just 10% – making shared ownership even more affordable to more buyers. In addition, buyers can now increase their share by 1% at a time, making ‘staircasing’ easier for many. [Read more…]
The Shared Ownership scheme was introduced in the 1970s to help low income and first-time buyers get onto the property ladder. Today, it’s the most popular option for more affordably buying a home, and there are more than 200,000 Shared Ownership properties in the U.K. Even though the scheme is popular, there are many people who don’t realise that Shared Ownership is an option for them. So, how does it work and who is eligible? [Read more…]
The Shared Ownership scheme has been around for as long as the 1970s, so it’s likely that you’ve heard it mentioned in one context or another. Until you come to buy a property however, you may not have known exactly what it is. [Read more…]
Amy Barrows (26), a recruitment consultant, has been a two-time customer of Mortgage Light in the past five years. In 2016, the team helped Amy onto the property ladder using Shared Ownership and four years later, Amy was ready to climb onto the next rung – again with Mortgage Light’s help. [Read more…]
Getting on the property ladder isn’t always easy. For many people, putting down a 10-15% deposit on a home can simply be out of reach. That’s why there are government schemes available to assist people in becoming homeowners. One of the most popular schemes is Shared Ownership.
[Read more…]
Like many first-time buyers, Aimee Brown and her partner Lauren Howard didn’t consider themselves experts on purchasing a home when they started their property hunt this year. By the time they’d picked up the keys however, they felt like professionals…and their purchase couldn’t have gone more smoothly. [Read more…]
Having a less-than-perfect credit history does not mean you can’t get a mortgage to buy your dream home. If you or your partner have had arrears, defaults, County Court Judgements(CCJs), Debt Management Plans or have been made bankrupt in the past 6 years, there are still mortgage options available - even if a lender has turned you away in the past, it still may be possible for you to obtain an ‘adverse credit mortgage’ or ‘bad credit mortgage’.
The good news is that the UK mortgage market is vast and there are deals out there for all kinds of borrowers - from those with clean credit to customers whose record is less than perfect. Here at Mortgage Light we are able to research the whole of the market to find the deal that is right for you and this can even be done with without the need for a hard credit search - so relax...we are here to help as your bad credit mortgage advisors!
Bad credit mortgages follow the same principle as any other mortgage, however they are designed specifically to help people with a history of poor credit get on the property ladder – this includes those who are employed and self-employed and with both high and low incomes.
With these types of mortgages, it usually means that you may have to pay a slightly higher interest rate than you would get with some of the other high street lenders, as the lenders who specialise in these mortgages will deem you to be a higher risk.
If you keep up repayments on a poor credit mortgage, your credit rating should improve, and this could enable you to move to a standard mortgage at a lower rate after a few years. By talking to us we can help guide you through the process step by step, and advise of the best course of action to get you on the property ladder.
For the answer to these and many more contact us today! Let us take your worries away as your bad credit mortgage advisors.
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