Low income is a relative term, so perhaps you’re wondering whether you are on a low income or not. As it’s possible to get a mortgage with a low income, labelling yourself is not necessary. But according to the GOV.UK, houses in the UK on low income live on less than 60% of the median income.
Some lenders have a minimum income requirement, which tends to be around £20-£25k, however, the majority of lenders are more concerned with whether you can afford the loan than the size of your salary.
Yes, you can. Some high street lenders have no minimum income requirements, meaning you can qualify for a mortgage no matter how much money you have coming in each month.
Having a lower income will reduce your borrowing power though. So be prepared that you may not be able to borrow as much as you want or need to without some form of assistance. This could be through the use of a home ownership scheme, or from helpful relatives.
An important thing to note is that income isn’t always restricted to earnings. Most lenders will gladly accept other forms of income, such as pensions, child maintenance payments and benefits.
Most applicants need a minimum deposit of 5% of the total value of the property for a 95% LTV mortgage. Lenders offer better interest rates and potentially larger loans to those with a bigger deposit, so saving as much as possible will certainly benefit those on a low income.
That said, saving a deposit on a low income can be difficult. There are a few options available if you’re unable to save much:
Guarantor mortgages – allow you to borrow up to 100% of the cost of the property, assuming your guarantor is able to pass the lender’s affordability checks
A gifted deposit – you can accept a gifted deposit from most family members, so long as you can provide evidence of its origin
A Lifetime ISA – if you’re under 40, this government scheme tops up your own savings by an additional 25% each year, helping you grow them more quickly
Yes, most lenders allow people to supplement their mortgage income with some forms of benefits. But it’s less straightforward if you rely on benefits exclusively.
A number of the larger high street lenders such as Halifax, Nationwide and TSB will consider applicants that receive benefits, so long as ongoing payments can be proven.
Not all lenders accept all types of benefits, so it’s important to opt for a lender that is willing to consider the type of benefits that you receive.
The shared ownership scheme helps those unable to borrow enough to buy a home outright, to buy a share in a home instead. This can be as little as 10% to as much as 75% of the home initially.
Ownership is increased through a process known as staircasing, which allows you to buy more of the property in chunks as small as 1% extra at a time. Some terms restrict you from owning the property 100%, so it’s best to seek advice from a qualified broker if this is your aim.
The first homes scheme was introduced in 2022 and provides first-time buyers with the opportunity to buy a home at a significant discount on the market value (30-50%).
All first time home buyers with a household income below £80,000 (£90,000 in Greater London) are eligible. Key workers and those with personal links to the geographical area of homes within the scheme will be prioritised.
The home will need to have been purpose built for the scheme, and the idea is that it is only sold on to other people eligible for the scheme, keeping a pool of affordable homes available to first-time buyers indefinitely.
Right to Buy
The Right to Buy scheme offers council tenants in England a significant discount to help them buy their rented home. The level of discount is based on the current market value of your home, minus 35-70%, depending on how long you’ve been a tenant.
Right to Acquire
The right to acquire scheme is similar to the Right to Buy, however, it’s exclusively for housing association tenants in England. The discount offered in this case is set at between £9,000 - £16,000, depending on the value of your rented home.
The Home Builders Federation introduced the first non-government led home ownership scheme in 2022, which is known as the Deposit Unlock scheme.
This provides the opportunity for anyone (not necessarily a first-time buyer) to purchase a new build home with just a 5% deposit. To date, a number of home building companies are participating in the scheme, and a handful of lenders have signed up to it.
The Help to Buy mortgages scheme is no longer open for residents in England, Scotland and Northern Ireland. However the scheme is still available in Wales, and you can find further details here.
The shared ownership scheme helps those unable to borrow enough to buy a home outright, to buy a share in a home instead. This can be as little as 10% to as much as 75% of the home initially.
Ownership is increased through a process known as staircasing, which allows you to buy more of the property in chunks as small as 1% extra at a time. Some terms restrict you from owning the property 100%, so it’s best to seek advice from a qualified broker if this is your aim.
The first homes scheme was introduced in 2022 and provides first-time buyers with the opportunity to buy a home at a significant discount on the market value (30-50%).
All first time home buyers with a household income below £80,000 (£90,000 in Greater London) are eligible. Key workers and those with personal links to the geographical area of homes within the scheme will be prioritised.
The home will need to have been purpose built for the scheme, and the idea is that it is only sold on to other people eligible for the scheme, keeping a pool of affordable homes available to first-time buyers indefinitely.
Right to Buy
The Right to Buy scheme offers council tenants in England a significant discount to help them buy their rented home. The level of discount is based on the current market value of your home, minus 35-70%, depending on how long you’ve been a tenant.
Right to Acquire
The right to acquire scheme is similar to the Right to Buy, however, it’s exclusively for housing association tenants in England. The discount offered in this case is set at between £9,000 - £16,000, depending on the value of your rented home.
The Home Builders Federation introduced the first non-government led home ownership scheme in 2022, which is known as the Deposit Unlock scheme.
This provides the opportunity for anyone (not necessarily a first-time buyer) to purchase a new build home with just a 5% deposit. To date, a number of home building companies are participating in the scheme, and a handful of lenders have signed up to it.
The Help to Buy mortgages scheme is no longer open for residents in England, Scotland and Northern Ireland. However the scheme is still available in Wales, and you can find further details here.
Not all lenders are willing to consider all forms of income types, but there are certainly some willing to consider most or all of the below examples:
Salary from employment or self-employed income
Overtime, bonuses, commission and earnings from a second job, however, some lenders will only count 25-50% of this type of income
Most benefits, so long as they are regular and ongoing
Child maintenance payments
State and private pensions
Some investments
Mortgage subsidy income payment protection
Yes, if you’re able to comfortably afford loan repayments with income from other sources, then most lenders will consider your application, depending on your individual circumstances.
That said, the majority of lenders will prefer that you are working if you can, unless you have very substantial savings or assets.
A good credit record will always improve your chances of being offered a mortgage, and this is even more relevant if you’re on a low income.
There are specialist bad credit lenders that are able to help people that have had certain credit issues in the past, such as CCJs and even IVAs in some circumstances. However, you will typically need to see a broker to access this type of lender. Lenders also charge higher interest rates in these circumstances.
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