If you are a low-income earner and are looking for a mortgage, you may be feeling a little overwhelmed. It can be difficult to find a lender that will offer you a mortgage when your income is not very high. However, there are lenders out there who will work with you!
In this blog post, we will discuss high deposit low-income mortgages and how they can help you get into the home of your dreams. Keep reading to learn more!
Advantages Of A High Deposit Mortgage
A high-deposit low-income mortgage is a great option for those who are looking to buy a home but may not have the highest income. It is normally considered being a mortgage where the deposit is above 25%. This type of mortgage is available from a number of different lenders and can be a great option for those who are looking to get on the property ladder. It is at the opposite end to a ‘minimum deposit mortgage’, which is usually considered at 5% of the property value.
One of the main benefits of a high deposit low-income mortgage is that it can help you to get a lower interest rate. This is because the lender will see that you have a higher deposit and they will view you as being less risky. This can save you money in the long run. This can be beneficial because you can negotiate a lower interest rate. You can also have lower timescales for repayment.
How Much Is A High Deposit Mortgage?
A second benefit to being in a position to offer 25% deposit is that fewer lenders are likely to reject your application. Why would they? You are considered a much safer bet. This could make the difference between getting a mortgage or not.
Not many borrowers can raise a 50% deposit but if you are able to do that it can benefit you still further. It is usual practice to offer the best mortgage rates when a lender offers 50% property value. The risk to the lender with this amount of collateral is minimal.
If you think that a high deposit low-income mortgage is right for you, then do some research and speak to a few different lenders. This way, you can compare rates.
What Might My Repayments Look Like?
Look at the table below based on a 3% interest rate and borrowing on a property of value £200,000.
|Deposit amount (GBP)
|Mortgage amount required (GBP)
|Monthly repayments (3% interest rate)
Factors Considered When Approving A Mortgage
As we have discussed in this article, high deposits lower the risk to lenders and therefore terms are likely to be favourable. Please remember however that this is not the only factor examined. Whilst making life easier, all the problems do not instantly go away.
There are a few things that you will need to keep in mind:
First, you often still need to have a good credit score. The need for a credit score is not based just on the total amount borrowed but in order to assess the risk for the lender. In part, the risk is mitigated as the property acts as collateral and your larger deposit helps secure that.
Lenders will still need a degree of convincing that you are in a position to repay the terms, just because you are borrowing proportionally less than traditionally. Lenders will still be looking at your credit history when they are determining whether or not to approve you for a loan.
Ideally, you will need to have a steady income when borrowing any sum. Lenders have a duty to confirm that borrowers are in a position to repay.
The history of a good consistent salary, which is unlikely to change, is supportive for your application. Lenders are however aware that people change jobs and are self-employed. Such factors may not mean a ‘no’.
Younger ages allow for more time in order to fulfil your obligation to repay. Health risks unfortunately rise with age. These are factors that mortgage lenders will consider.
The Property In Question
Traditional bricks and glass properties are the preferred types for mortgage lenders. Timber frames and properties with novel features, such as thatched roofs bring higher risks and therefore less favourable mortgage rates.
A high salary doesn’t necessarily mean that you can cover repayments if large proportions of that salary are committed. The maths is fairly simple. Is what you are likely to have left reasonably likely to be able to cover the mortgage repayments?
If you are ready to look for a high deposit low income mortgage, there are a few things that you can do to get started. First, you can talk to your bank or credit union. They may have programs that can help you get a mortgage with a lower interest rate. Additionally, you can look online for lenders who specialise in high deposit low-income mortgages. This is a great way to compare rates and find the best deal for you.
Next Steps – Getting Your Mortgage
If you are ready to look for a high deposit low income mortgage, there are a few things that you can do to get started. First, you can talk to your bank or credit union. They may have programs that can help you get a mortgage with a lower interest rate. Additionally, you can look online for lenders who specialize in high deposit low-income mortgages. This is a great way to compare rates and find the best deal for you.
When you have found a lender, you will need to fill out an application. Be sure to include all of your financial information, such as your income, debts, and assets. The lender will use this information to determine if you are a good candidate for a high deposit low income mortgage.
If you are approved, the next step is to get pre-approved for the loan. This means that the lender has agreed to give you the loan based on the information in your application. Once you are pre-approved, you can start shopping for a home within your price range.
Getting a high deposit low-income mortgage is possible with some research and careful planning. By following these steps, you can increase your chances of getting approved for the loan you need.
This article summarises the benefits of a high deposit mortgage which is usually most suitable for those with high capital and who may have less monthly cash they wish to commit. The high deposit increases the likelihood or approval and therefore opens more lenders to you the borrower. This means more competition for them and therefore more favourable rates.
Just remember, even though you are borrowing less, you are still borrowing and the same rules apply. The lender is duty-bound to confirm you are in a position to make repayments.