Low income mortgages

While low deposit mortgages can help you get on the property ladder sooner, a higher deposit could improve your chances of qualifying for a mortgage as you’ll be seen as a lower risk to lenders. A larger deposit reduces your loan-to-value (the percentage of your property’s value that you need to borrow), which could help to make your mortgage payments more affordable and can lead to more competitive interest rates.

Your credit history gives lenders an idea of how you’ve handled debt in the past. If you have a good track record of managing money, you stand a better chance of being accepted for a mortgage. 

Check your credit report for accuracy, focus on paying your bills on time and use credit wisely, to show you’re a reliable borrower.

Lowering your outstanding debts reduces your monthly outgoings, showing lenders you have more capacity to afford your mortgage payments.

Lenders will want to know where your income is going every month. It’s important to showcase good spending habits - particularly in the run-up to applying for a mortgage. If you can avoid those pricey takeaways or cut back on subscriptions, it could be worthwhile doing so.

Buying with someone else can help boost your affordability, as the lender will look at both of your incomes when deciding how much you can borrow.

Looking at properties in a lower price range means you'll need to borrow less, which can increase your chances of approval. You might have to make a few compromises while house hunting but it could help you get on the property ladder sooner.

There are several government schemes and other initiatives out there designed to help make the path to homeownership more affordable, including:

• Shared ownership: buy a share of a property (between 25% and 75%) and pay rent on the rest 

• First Homes scheme: allows eligible first-time buyers to buy a new build home for up to 50% less than its market value

• Rent to Buy: pay rent at a reduced rate so you can save the money you’re not using on rent for a deposit 

• Lifetime ISA: save up to £4,000 a year, and the government adds a 25% bonus (up to £1,000 annually)

• Right to Buy or Right to Acquire: allows tenants to buy their council or housing association home at a discount

• Deposit Unlock scheme: offers the opportunity to buy a new build home with a deposit as low as 5%

A broker can provide tailored advice based on your circumstances. They have access to a wide range of lenders, including those who may be more willing to lend to lower-income applicants. Your broker will even offer advice on the best ways to improve your application to set you up for success.

In the UK, a low-income household is commonly defined as one where the net household income is below 60% of the median income of the UK population. The median disposable household income is £34,800, meaning households earning less than £20,880 could be considered to have a low income. 

Don’t focus too much on stats and averages, though. What really matters is how much you earn and how much you need to buy a property. A mortgage broker will treat you like an individual, and will tailor their advice to suit your personal circumstances. 

Each lender will have their own criteria and attitudes to different income sources when assessing mortgage affordability. Many will accept other forms of income in addition to your employed or self-employed income, such as:

• Bonuses, commission and overtime

• Child maintenance payments

• Benefits

• Rental income

• Pension funds 

• Investment income 

You will almost certainly need to provide evidence of any additional income, to show it is being received regularly. 

If you receive other forms of income, it could be worthwhile consulting a mortgage broker to help compare your options. They know lender criteria inside out, so can recommend the ones most likely to accept your specific income mix.

It can be more challenging to secure a mortgage if you have a low income and a poor credit history. That’s because lenders may view you as a higher-risk applicant. 

However, that doesn’t mean homeownership is impossible. Specialist lenders, also known as sub-prime lenders, cater specifically to those with adverse credit history - though they may charge higher interest rates.

Most lenders will consider applicants who receive certain types of benefits. However, not all lenders accept every type of benefit, and some may have stricter rules if benefits are the sole source of your income.

Benefits that may be accepted by some lenders include:

• Attendance Allowance

• Carer's Allowance

• Child Benefit

• Child Tax Credit

• Disability Living Allowance (DLA)

• Employment and Support Allowance (ESA) 

• Industrial Injuries Benefit

• Maternity Allowance

• Pension Credit

• Personal Independence Payment (PIP)

• Universal Credit 

• Widow's Pension

If your lender accepts your benefits as income, you’ll need to provide clear evidence to prove the regularity and amount of your payments, similar to how you’d prove employment income with payslips.

A mortgage broker’s advice can be invaluable here. They’ll be able to help you identify the most suitable lender for your circumstances.

Yes, it’s possible to get a mortgage if you’re earning minimum wage or even slightly below it. A lower income can impact the amount you’re able to borrow, though, so you may wish to look at ways to bridge the gap between your maximum mortgage amount and the cost of your dream home. For example, you may need to search for more affordable properties or focus on boosting your deposit.

You’ll need to prove your income to show your mortgage lender that you can comfortably afford the repayments. In addition to your personal bank statements, here’s what you’ll usually be asked for:

• For employed income: your most recent payslips. If you get bonuses or overtime, you might need to provide additional payslips to prove these are regular sources of income

• For self-employed income: usually two to three years of your SA302 Tax Calculations and Tax Year Overviews from HMRC

• For benefits: latest award notice for each separate type of benefit you receive

• For child maintenance: a copy of the agreement (court ordered or Child Maintenance Service agreements) and/or bank statements demonstrating regular payments 

• For pensions: your latest annual pension statements or latest payslip from your pension provider 

• For other income: criteria varies, but you’ll likely need to provide proof in the form of official letters or bank statements showing consistent payments