How much will I need to earn to get a mortgage alone?

[MushroomTree]

I'm a single parent to one DC and would like to get on the property ladder in the next 2-5 years.

I'll be buying alone in Hampshire/Dorset. I imagine budget will be 200k max.

I'm lucky enough that when the time comes I have money from a family member for one of the "lend a hand" mortgages.

But how much am I going to need to earn per annum to get a mortgage in the first place?

I'm in the middle of retraining and will be changing jobs once this is done so my financial situation will be different when I purchase a property.

@Northernsoullover I was looking at the Martin Lewis website earlier and it looked like the Lifetime ISA was a better deal so I'm considering one of those instead. There's every chance I won't ever manage to buy a property so the Lifetime ISA may be better for me.

The only difference is that it’s less flexible than shared ownership then, and designed by a profit making company, which presumably isn’t regulated, so you need to be careful to make sure the rental element can’t be increased disproportionately (housing associations increase it by less than 3% a year- I know many people who don’t buy further shares because it’s cheaper to rent it than mortgage it)

If you do look at shared ownership buy at least 50% initially. 20% is very low and most shared owner schemes wouldn’t allow such a small share to be purchased nowadays

Wayhome are "seeking approval" from the FCA. I wouldn't touch them with a bargepole, at least until they are regulated.

My first home was shared ownership and it worked really well for me. I didn't staircase but when I sold I had no problem finding a buyer. Mine was not a new build, I'd definitely look out for resales, as they tend to be better value (that applies for shared ownership or a full purchase).

Lots of people have an opinion about SO but most of them have no actual experience of it!

Yeah- I was the same, brought up in poverty and difficult times. As long as she has you and your love that's the main thing.

Regarding the ISA, you need to look at the two different types. Both offer 25% government bonus on money saved, but they have slightly different rules. If you can afford to save up to £200 per month (1200 in first month) the HTB ISA is best as has better interest rate and can be used a couple months after opening. If you can afford more, you can put up to 4000 a year into the LISA, but it has to be open for a year before it can be used to buy a house. Martin Lewis Money Saving Expert has a good page comparing the pros and cons- but if you want to open a Help to Buy ISA you need to get a serious move on as you can only open them until 30th November- as in 13 days. Once open, you have until 2029 to use, or move to a LISA if that's better for you.

I didn't actually have a lot of luck with mortgage advisors, they just said banks wouldn't lend to us because of the criteria. I was even told by LV that Barclays would never give us a mortgage. We got it from Barclays a couple months later. If you apply directly to the bank they can sometimes be more flexible regarding the normal criteria.

Please speak to an independent mortgage adviser. They have access to the whole of the market, and every lender has different affordability criteria.

Lifetime ISA may not be better- as if you have an emergency and need to access your money early you will pay a 25% penalty on the money you take out. It's not just you lose the bonus- if you have 1000 in there you will lose 250. HTB doesn't have that.

@MrsMaiselsMuff I noticed that. I definitely wouldn't be getting involved until they were regulated, if at all.

I'm at the information gathering stage of it all right now.

Once I know all of the options I can decide the way forward.

With the HTB ISA, do I have to save £200/month?

So if not sure you'll ever be able to buy, the LISA would effectively mean your money is locked away until you retire- which I'm guessing is probably a long way off!

I would have been better off with a LISA as the I had a year since opening the ISA, but I didn't know that when I opened it 😂

No, the 200 is upper limit, you can save less if you can't afford it one month.

Im a bit confused by the isa advice- Isn’t Op being gifted a deposit? I thought the issue was earning enough to meet mortgage affordability multiples

@Passthecherrycoke yes and no. If I can get a mortgage then the deposit money is coming from a family member for a lend a hand mortgage.

If I can't get a mortgage then I'm on my own with funding the deposit.

It's a slightly complicated situation so the ISA advice is helpful.

@Kitty878 I'm 28 so yes! But I feel like I should still be sensible and think ahead

I thought it was an offset mortgage rather than a gift? But yes it was regarding affordability, but 25% bonus is always nice. 😂
Tbh I would recommend anyone who's eligible to open a HTB Isa- even if not used to buy a house they give 2.5% interest which you can't currently get on any easy access savings account.

@Kitty878 basically yes. The money needs to come back to the family member fairly quickly so it can't be gifted or loaned to me in the traditional sense as I can't pay it back in the 3 or 5 years a lend a hand mortgage would.

Hi MushroomTree I'm another in favour of shared ownership. The first place me and DH 'bought' was SH. We bought 50% and rented the other half of the flat. There were no problems with the Housing Association, when we had a problem with the bathroom they sorted it out (although it was a new build, so they may have been legally obliged to). We lived there for 2 and a half years then sold our 50% and made a healthy profit. The HA even found the next buyer so there was no effort from us. We were certainly never 'trapped' into anything! We used our profit towards buying our first house with a 'normal' mortgage. Based on our experience we would definitely recommend shared ownership.

I really really can't recommend shared ownership enough. It enabled me to buy a property I would NEVER have got a mortgage for. I eventually after 12 years had 100% mortgage and made 160k. It was a life changer. Who is advising you against it? Pm me if you'd like more details.

Plus it never hurts to have more deposit- especially as bigger deposits get you better rates on the mortgage itself.

So for the first few years you'll be paying mortgage and repaying your relative? Could be tough financially.

Keep an eye on what's on the market. As you've already said, you're happy to do a place up. Times your income by 4 and a half to get the potential mortgage amount, add that to the deposit money and check online. When searching, put your max amount as 10 grand or so more than you can actually pay, as estate agents advise sellers to set the asking price over the actual worth. I got mine for 10k less than listed, but very often you can get 5 to 10% of the listing price off. We weren't able to take on places that needed any sort of work, we're even getting friends in to paint a room, but in the six months or so that we were looking we saw a fair few houses going for bargain prices cos they needed a bit of diy. Hampshire is expensive as I'm sure you know, but even here we saw some places going way less than you might expect. So keep an eye out and you might be moving way sooner than you would have thought possible. Just get the surveyors in to ensure there isn't any actual structural defects under the disrepair.

Thanks for all the advice.

@Kitty878 with a lend a hand mortgage the family member puts the 10% deposit into a fixed term savings account for 3 or 5 years depending on the provider. After that time they get it back with interest. So no I wouldn't be paying back the family member. I wouldn't be able to afford it if I had to do that!

Maybe worth considering Shared Ownership as a secure rental, with any money you make on it an added bonus?

Having spent a year and a half living with my DC in a rental house that was on the market, I can honestly say that the stress of not knowing if and when you are going to be made homeless is absolutely soul destroying. Shared Ownership you would have some security at the very least, and as a single parent you may be high up their priority list

It depends on the size of the deposit too. I am in the process of buying with a 40% deposit and I have been offered £175k on my approx £38k salary.

I don’t understand this ‘trapped’ situation with shared ownership, how are they trapped exactly? surely if you can’t afford to buy more of the SO property (therefore being trapped) there is no way you would ever be able to buy a non shared ownership house which will cost significantly more, I don’t get it? unless I’m missing something glaringly obvious?

If you open a LiSA or the other ISA, I would go down the funds rather than 2.5% interest route until you’re getting close to buying.

Is your family member only willing to go down the ‘lend a hand route’? I think the interest rates on those mortgages are high? Could they lend you the deposit privately?

And last one, aren’t there cheaper properties available? 200k sounds like a lot. Perhaps you could start with a smaller flat etc and gradually upgrade to a 200k property?

I bought alone last year on the Hampshire/Dorset border (pretty sure I know which town you’re thinking of!).

I put down an £18.5k deposit, earn £38.5k and bought a 1 bed house for £185k. I was right at the top end of what I could borrow; as a single borrow, a lot of lenders are a lot more conservative as the risk is not spread between two salaries.

It’s not impossible though and if you’re thinking of the town I live in, the market is super slow right now and the same money will probably get you w 2 bed.

OP - we did shared ownership and it was fantastic.
We had no contact with any "landlord" - it was literally asif we owned the place outright. When we wanted to move on and sell, they did it all for us and after 3 years we took the profit of our share which was 25%. The house had gone up in value by £40k so we put that additional £10k to our deposit.