Mortgage

[Letmeout21]

Would it ever be possible to get a mortgage as a single parent on a low income?
I’ve been looking at lots of help to buy type schemes. I could probably save a 5% deposit and there’s lots of schemes to help with low deposits.
But I’m on a low income with benefit top ups. Although I am comfortable and my rent is currently £700pm so I could afford mortgage payments I don’t think I’ll ever be considered will I?

Have a look at Money Saving Expert's mortgage calculators. They'll give you an idea of if it's viable.

Yes you would - with a good deposit and a job you would

My advice is to save save save, even if you don't think you would ever get a mortgage, because circumstances change and if you haven't saved when/if they do, then no you won't get a mortgage.

We saved for ages thinking our low income would stop us from getting a mortgage. We were the only ones of our friends saving. In practice we actually managed to buy within 3 years - we got into shared ownership. Between us our income increased by about 8k during that time. Then after 5 years of being there we had enough deposit for a standard buy. There were two of us though, so I fully appreciate that it's a harder circumstance.

A friend of mine, single parent, low income managed to buy shared ownership on her own. She had saved for years, but she did it.

Shared ownership can be a good option for those on a low income as you only need a mortgage for part of the price, you would need to research thoroughly as there are issues, you pay rent too, and there has been controversy for some of the schemes. But, it does offer a chance of stability and potential to own fully if you can gradually stair case, for people who will struggle to get a mortgage on their own. It's worth looking into.

Shared ownership is probably a good bet. There are very few benefits that mortgage companies will take into account as they are very pessimistic by nature - they will assume your benefits will stop (for example child benefit ending which of course it does) but will not factor in any consideration for increased pay because you can do more hours when the kids are older.
They will look at around 4.5x your salary, add that to your deposit and you will know roughly what you can afford

Some lenders will consider maintenance payments and benefits as part of your income, not all, but some. Speak to a broker.

Thank you

@user85963842

Shared ownership can be a good option for those on a low income as you only need a mortgage for part of the price, you would need to research thoroughly as there are issues, you pay rent too, and there has been controversy for some of the schemes. But, it does offer a chance of stability and potential to own fully if you can gradually stair case, for people who will struggle to get a mortgage on their own. It's worth looking into.

It's not really fully owning though, as it's almost always leasehold, even if you end up buying the whole house.

@rosiejaune it's owning more than renting is, and that's not true, you can buy the freehold when you have fully staircased (well in the circumstances I've heard of at least, I admit I haven't done it myself) perhaps it's not an option in every circumstance so an important question to ask if exploring the option.

Usually you can't buy the freehold. Though the government is considering changes to the system, so you could get a much longer lease with no ground rent.

Depends on where you live. If you live in an area where starting prices are 200k, probably not. Also depends on your income, you'll generally get 4.5x what your salary is.

You'll need to decide how big of a house you'd need and see how much the average is in your area for that. Then work out what deposit you'd need and if you are likely to get it based on your salary.

Make sure if you go into one of these schemes that you aren't also paying rent on the other part of the house. You really don't want that kind of scheme.

I don't think you'd get a mortgage being on benefits?

You'd have to be careful with saving if you're on universal credit though. And tax credits to some extent.

@rosiejaune I don't know the stats but I know of 3 people who fully staircased and bought the freehold (although in one case it did cause legal issues for the onward sale) these were houses, it would be different for flats I imagine. I absolutely agree if this isn't a common option then it's an important consideration, still think I'd pick a leasehold SO over private rental though, mainly for the security of not being forced to move on.

@Hahaha88 some lenders do accept tax credits and child benefit in affordability checks.

@rosiejaune the freehold is something to look for in a SO property. Ours was freehold given at 100% ownership. Also, ours didn't have a ground rent element in our service charge as it would have been profit to the HA and they weren't allowed to profit from the scheme.

There are plenty of lenders that accept things like child benefit as a source of income.

Yes there are some HAs who will either sell or automatically give you the freehold when you buy 100% of the house - and if the ones you know about were in the same area/same landlord, that wouldn't be surprising if they all had the same policy. But nationally, most shared ownership properties remain leasehold.

There is also a proposal to allow Commonhold. So we will have to see what happens. There are downsides to either of those options though, as they would likely increase the resale value of the property and shut out people who would otherwise have been able to buy it (and potentially no right for the HA to buy it back). So not really in the spirit of increasing social/affordable housing.

I bought a shared ownership property as a single parent, I was working ft low income but received tax credit top up, I had saved a hefty deposit which really helped. If you can save then do so whilst you look for the right scheme / property.

How did you guys manage to save up when you were getting benefits? Any tips

Saved up Very slowly. Never had a holiday etc except those 10 quid jobs from Sun coupons. Didn't get new clothes except for dc, got into charity shops jumble sales etc. Got cash from family for birthdays etc went into the savings. Didn't run a car. Didn't put the heating on often. Basically watched every penny, for almost 10 years. Worth it in the end and one of my best achievements.

Yes you will be considered. Its not impossible. You must keep all your bills up to date on time etc. If you have had a mortgage before that will help. They take in to consideration your universal credit and/or any benifits your on as well as part time or full time employment. Obviously the bigger the deposit the better and I know Barclays look at 4 times your earnings on a 10% deposit. But if you have a 20% deposit you can get 4.9 times of your earnings.

Read carefully about shared ownership before you do anything as it can be hard to sell on once you've bought more % of the property.

I am a single parent with 2 young children. I work part time and receive benefits. I have a mortgage.

Best thing to do is speak to a mortgage advisor who can give you some indication what you might be able to borrow. A consultation should be free. Actually it should all be free with them unless they help you finalise a mortgage.

If you are claiming Universal credit then any savings over 6k will reduce the amount you get each month.