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Mortgage on a Single Income

Independent guidance securing a mortgage with a single income - and how you can strengthen your UK mortgage application.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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Can You Get Mortgage On A Single Income?

While finding a property you can afford, and getting approved for a mortgage can be a challenge for many people, doing the same on a single income can feel more difficult!

This isn't an unusual scenario though, with many families reliant on one income, or single people looking to get onto the property ladder.

Here we'll explain how to find a single income mortgage, and what sort of criteria will impact the affordability calculations.

What is a Single Income Mortgage?

There isn't any difference between the mortgage products available to single and joint applicants, so a single income mortgage simply means that one person is applying, or that the application is dependent on the income of one person.

That might be because one partner works, because the applicant is a single person, or because one individual is buying a property alone.

How Much Can A Single Person Borrow For A Mortgage UK?

Figuring out how much a single person can borrow for a mortgage stirs up quite the curiosity. Lenders assess your income and credit score to decide on the maximum loan amount they're willing to offer you.

Factors that Determine Maximum Borrowing Amounts

Lenders look at your income to decide how much mortgage you can handle on a single salary. They usually apply a formula, multiplying your annual earnings by a set number, often around 4 to 5 times in the UK, to gauge the maximum they'll lend.

This approach helps ensure that borrowers don't take on more debt than they can afford based on their salary.

Your credit score also plays a crucial role in determining how much you can borrow for a mortgage. A high credit score indicates to lenders that you are a low-risk borrower, which might increase the amount they're willing to lend.

On the other hand, if your credit history shows missed mortgage repayments or debts, lenders may offer smaller mortgages or require higher interest rates.

Income Requirements

To qualify for a mortgage on a single income, borrowers must meet certain income requirements set by lenders. These institutions often use a multiple of your annual salary to decide how much you can borrow.

Generally, this ranges between three to five times your annual income. For instance, if you earn $40k annually in the UK, you might be eligible for a mortgage amounting up to $120k to $200k. You can check this information by using a mortgage affordability calculator.

This calculation helps ensure borrowers don't take on more debt than they can handle.

Applicants must demonstrate stable and sufficient income when applying solo for a mortgage. Banks examine your salary slips, tax returns, and employment history to verify consistent earnings over time.

They aim to assess whether you have the financial stability needed to make regular mortgage monthly repayments without defaulting. So maintaining steady employment and possibly seeking ways to increase your income could enhance your loan eligibility significantly.

Credit Score Considerations

Mortgage Lenders closely examine your credit score before deciding how much mortgage a single person can get. A good credit score suggests you manage debts well, making you a less risky borrower.

This could mean qualifying for larger mortgages with better rates. On the other hand, a lower score might limit how much you can borrow and increase your interest rates.

Improving your credit score takes time but pays off when applying for a mortgage on a single income. Pay bills on time, reduce existing debt, and avoid opening new credit accounts before seeking a mortgage.

With careful planning, even single applicants find suitable mortgages to fit their financial situation. Next up: exploring the types of mortgages available for single-income applicants.

Types of Mortgages Available for Single Income Applicants

Exploring different mortgage options opens up opportunities for single-income applicants. From government-backed schemes to joint mortgages, choices exist to fit various financial situations.

Right to Buy Scheme

The Right to Buy Scheme allows eligible singles or families to purchase their council home at a discounted price. This scheme is particularly appealing for single-income mortgage applicants who wish to own a home but find the market prices challenging.

Discounts can vary based on location, type of property, and length of tenancy, making it easier for individuals on a single income to step onto the property ladder. Also, most lenders may offer higher income multiples to higher-earning applicants.

Applying for this scheme involves checking eligibility requirements such as having a secure tenancy and ensuring the property is your only or main home. Once approved, you can look into how much mortgage you can get on your salary in the UK.

The discount offered through Right to Buy could significantly reduce the amount needed from a mortgage broker, making homeownership more accessible for those with lower incomes or savings.

Joint Mortgages

A joint mortgage offers a solution for those looking to get onto the property ladder through combined financial strength. Applying with someone else, such as a partner, friend, or family member, allows you to pool your income together.

This often results in qualifying for a higher loan amount than if applying on a single income. The credit scores of both applicants play a crucial role in approval decisions and interest rates offered by the mortgage lender.

This approach not only boosts the borrowing capacity but also divides the responsibility of mortgage payments between the co-owners. It's vital that all parties involved understand their commitment as they will be jointly liable for the mortgage debt.

Sharing the financial burden can make property ownership more attainable and less stressful for individuals earning a single income or those who may not meet the high loan requirements on their own.

Buy-to-Let Mortgages

Moving from joint mortgages, buy-to-let mortgages offer a unique opportunity for single income applicants interested in investing in the property market. These loans are specifically for purchasing properties to rent out to others.

Unlike traditional home loans, specialist lenders focus on potential rental income rather than just the applicant's salary. This approach can significantly affect how much mortgage a single person can get.

To qualify, investors need to demonstrate that expected rental income will cover the existing mortgage payments by a certain percentage, usually around 125-145%. Credit score considerations also play a crucial role in approval decisions. You can calculate the percentage accurately by using a mortgage calculator.

By choosing buy-to-let options, individuals on a single income have a pathway to enter the real estate investment sphere, leveraging their ability to generate additional revenue through property leasing.

Overcoming Challenges in Single Income Mortgages

Finding solutions for single person mortgages may seem tough, but many options exist to help you secure your home loan.

Low Deposit Options

Getting a mortgage on a single income often means saving up for a big deposit can be tough. Thankfully, there are low deposit options available that make it easier for single income applicants to buy their dream home.

  1. Government Backed Schemes: Many governments offer support schemes aimed at helping first-time buyers and single income households step onto the property ladder with smaller deposits. In the UK, schemes like Help to Buy allow you to purchase a home with just a 5% deposit.
  2. Guarantor Mortgages: This option involves having a family member or close friend act as a guarantor on your mortgage. They promise to cover the payments if you can’t, which can help you secure a mortgage with a lower deposit.
  3. Shared Ownership: With shared ownership, you buy a portion of your home and pay rent on the rest. It's an excellent way for single earners to own property without saving for a large down payment.
  4. High Loan-to-Value (LTV) Mortgages: Some lenders offer mortgages that cover 90% or even 95% of the home’s value. This means you only need to put down 5-10% as your deposit. The lenders may offer borrowers a higher income multiple in return for a lower LTV.
  5. Professional Mortgages: Certain professionals, like doctors or lawyers that are self employed might qualify for special mortgage deals due to their stable income trajectories. These deals sometimes include lower deposit requirements.
  6. Family Offset Mortgages: Family members place savings in an account linked to their mortgage; the amount saved offsets against your loan amount, reducing the LTV ratio and potentially enabling more favorable terms with smaller deposits.

Each of these options provides pathways for individuals on single incomes to approach homeownership with more confidence and less financial strain upfront. Start exploring these avenues early in your home-buying journey to identify which one aligns best with your circumstances and goals.

Support and Schemes for First-Time Buyers

Buying a home on a single income might seem challenging, but various supports and schemes are in place to help first-time buyers. These programs aim to make homeownership more accessible and affordable for those venturing into the market alone. Here's a closer look at some of these options:

  1. Government Grants: Some regions offer grants specifically for first-time homebuyers, helping cover part of the down payment or closing costs. Applicants must typically meet certain income and lender criteria.
  2. Low-Interest Loan Programs: These loans come with reduced interest rates to make monthly payments more manageable for first-time buyers on a single income.
  3. Shared Ownership Schemes: This option allows you to buy a portion of your home while renting the rest, making it possible to own property without buying 100% from the start.
  4. Right to Buy: If you're renting a home from the council or a housing association, the Right to Buy scheme lets you buy your home at a discounted rate.
  5. Stamp Duty Relief: First-time buyers may qualify for reduced or eliminated stamp duty costs, significantly lowering the upfront expenses of purchasing a home.
  6. ISA Accounts for Home Buyers: Some countries offer Individual Savings Accounts (ISAs) that boost your savings through government bonuses when used towards purchasing your first home.
  7. Help to Buy Equity Loans: With this scheme, the government lends you up to 20% (40% in London) of the cost of a newly built home, so you only need a 5% cash deposit and a 75% mortgage to make up the rest.
  8. Mortgage Guarantees: Certain programs provide mortgage loan guarantees that encourage lenders to offer mortgages with lower deposits, which can be especially helpful for single earners struggling to save enough for down payments.
  9. Credit Counseling Services: Free or low-cost counseling services can help you improve your credit score and manage debt before applying for a mortgage, making you more attractive to lenders.

Exploring these options can open doors to homeownership that might appear closed at first glance. Each program has specific requirements and benefits, so it's crucial to research and apply early in your home-buying journey.

Dealing with Bad Credit

Dealing with bad credit history can make securing a single-person mortgage challenging. Yet, there are actionable steps you can take to improve your chances.

  1. Check your credit report for errors: Obtain a copy of your credit report and look for any mistakes. Incorrect information may lower your score, so it's crucial to dispute errors with the credit bureaus to get a mortgage.
  2. Pay down existing debt: Lowering your overall debt improves your debt-to-income ratio, making you more attractive to high street lenders. Focus on paying off high-interest debts first to increase mortgage affordability.
  3. Make all payments on time: Your payment history significantly impacts your credit score. Ensure you pay all bills, including utilities and credit cards, on time every month.
  4. Consider a co-signer: A co-signer with good credit can help boost your mortgage application's strength. This option involves someone else taking partial responsibility for the loan if you default.
  5. Save for a larger deposit: A bigger down payment reduces the lender’s risk and can offset bad credit by showing financial responsibility and saving ability.
  6. Explore government schemes: Look into programs designed to help those with lower credit scores buy homes. These often have less stringent requirements than traditional mortgages.
  7. Seek professional advice: Mortgage brokers deal with various lenders and understand which ones are more likely to accept applications from people with bad credit.
  8. Stay patient and persistent: Improving your credit score takes time but is vital for securing favorable mortgage terms in the future.

Taking these steps does not guarantee mortgage approval but significantly increases the likelihood of obtaining a home loan despite having bad credit.

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What is the Difference Between a Joint Mortgage and a Single Income Mortgage?

Neither is better than the other; although the amount you can borrow will depend on how much you earn.

Joint applications consider both people's income when working out affordability. If you are buying a home with somebody else, it makes sense to apply together since you'll be approved for a higher mortgage value.

How Hard is it to get a Mortgage on One Income?

It can be more difficult to get a single income mortgage since the amount you will be deemed to be able to afford will typically be lower - depending on what sort of earnings you have.

There can be other challenges, such as having a small deposit or having an adverse credit history, making the application more difficult if you are also only reliant on one wage.

However, plenty of specialist lenders and schemes are designed to help you get a foot onto the property ladder. Therefore, even if one lender has turned you down, there is no reason an experienced broker won't be able to find you a great mortgage deal.

What Mortgage Can I Get With Only One Salary?

The amount you can borrow really depends on what you earn. It might be that your maximum mortgage offer is more than sufficient to buy the property you have in mind.

It also depends on the lender, since they all use a different calculation, based on a multiple of your annual earnings.

For example, if you earn £30,000 a year, a mainstream lender will tend to offer up to four times your salary so that you could borrow up to £120,000. Other lenders have different income multiples, so it is vital to consult an independent broker who can match your borrowing needs with the right lender.

You'll also need to consider any other debts you have and your living costs since lenders will also assess your outgoings to make sure you can afford the repayments.

How Do UK Mortgage Lenders Assess Single Applicant Affordability?

Lenders have a responsibility only to lend an amount that they believe the applicant can afford to repay, hence the importance of affordability assessments.

While an online mortgage calculator can be useful to get an indication of what you can borrow, and how much it will cost per month, it's essential to understand which mortgage products offer the best deal, and how the costs might change over time - such as if interest rates increase.

A typical income multiple is only ever an estimate. Some lenders will offer up to four or 4.5 times income, whereas others can go as high as six times your salary if you meet all their other criteria.

Factors such as your credit history will also come into play.

What are the Eligibility Criteria for a Single Income Mortgage?

The exact assessments depend on the lender and its internal policies, but a UK mortgage provider will consider the following factors:

  • Your income - if you are in PAYE employment that includes 100% of your salary. Lenders take different attitudes to variable pay such as overtime, bonuses and commissions. Some will include 50% of that income in calculating your average annual income, and others will include all of it.
  • Self-employment can make the application more complicated, as you'll typically need to provide three years of accounts or tax returns. Again, the assessment depends on the lender, as some will accept just one year of trading figures. They will use different bases to estimate your average earnings - some will include net profit drawn from the company. Others will rely on your tax returns.
  • Your outgoings - things like debt, credit cards and living costs usually need to be calculated, backed up with bank statements. The lender needs to see that you will be able to keep up with the mortgage repayments alongside your other regular expenses.
  • Stress testing - lenders also use a stress test, which means checking that if the costs change - usually due to interest rises - or your circumstances change, you will still be able to afford the mortgage.

Can I Apply for a Mortgage By Myself?

You certainly can - there is no requirement to have two or more applicants for any mortgage. Many families have one worker, and many people buy property by themselves.

If you are a joint applicant with one partner who is in work, and the other is considering returning to the workforce at some point, this can strengthen your application.

Do Lenders Credit Check all Mortgage Applicants Even if Only one has an Income?

Indeed they do - even if the affordability relies on one salary, the lender will need to verify the financial standing of every applicant named on the paperwork.

If one applicant does not earn a salary but has a clean credit record, this adds value to the application's reliability.

Can I Use a Guarantor to Get a Mortgage on a Single Salary?

Many single salary mortgage applicants use a parent as a guarantor, especially if they are a first-time buyer.

Guarantors don't necessarily have to be parents, but this is the most common scenario.

In essence, the guarantor backs up your application and gives the lender assurance that somebody will step in to pay back the debt if you fall behind with your repayments.

Most of the time, the guarantor offers savings or property as security, which acts as a type of debenture against your loan, with any claim to that asset withdrawn when the mortgage repayments reach a particular stage.

What is a Sole Proprietor Joint Mortgage?

There is an alternative mortgage called a joint mortgage, sole proprietor product. That is similar to a guarantor mortgage but means that the supporting applicant puts their name on the mortgage, but isn't planning to live in the property.

For example, a parent might act as a joint applicant to help a child get a mortgage, without intending to live there.

In this scenario, the guarantor doesn't own a home share, although that can be agreed through a trust deed.

What Deposit is required for a Mortgage on One Income?

The higher the deposit, the lower the lender's risk and the more likely your application is to be approved. Therefore, the better the deposit, the stronger the application.

Although most UK lenders will look for around 10% as a minimum, there isn't a fixed minimum. Mortgage deposits can be as low as 5% and as high as 20% to qualify, so this also depends on the lender and what they will accept.

Can I Get a Single Applicant Mortgage with an Adverse Credit History?

Having a bad credit rating is always a challenge; however, specialist bad credit lenders can help even in more severe circumstances.

Likewise, a minor credit issue may be small enough or have occurred long enough ago that a lender will choose to disregard this.

Business loan broker work with lenders who will consider applications against a single salary even when the below scenarios exist on your credit file:

  • Late payments or defaults
  • CCJs
  • Mortgage arrears
  • DMPs or IVAs
  • Bankruptcy or repossession

Specialist Support with Single Income Mortgages

If you're ready to buy a property and would like help finding the best mortgage deals on the market, or have been turned down elsewhere and need expert help, get in touch.

The Revolution team is a whole-of-market, independent broker who helps clients find the right borrowing products. Give us a call on 0330 304 3040, or drop us an email to [email protected] to arrange a good time to talk!

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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