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Help In Getting A Mortgage On A Small Income

Richard Pettinger

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1. Self Certificate. Getting a self certification mortgage is the most popular option for taking out a mortgage if you on a low income. However in the UK it is worth noting that increasingly mortgage lenders do look into accounts. They may not be as strict as a conventional mortgages; but it will be difficult to justify claiming income far in excess of what you earn. However companies will vary in their strictness in this regard. Some companies actually advertise saying they are not interested in seeing your accounts. However if you do go down the route of self certification there are some things to bear in mind.

  • Don’t take out more than you can afford. It may be tempting to borrow far in excess of your salary, but you have to consider whether this is genuinely affordable. For example if interest rates increased by 1.5% would you still be able to pay the monthly mortgage payments? Your home is at risk of repossession if you don’t meet the monthly repayments
  • A larger deposit will generally make it easier to get a self – cert loan. With a small deposit the interest rate will be correspondingly higher.
  • Don’t bank on rising house prices to be able to remortgage in the future. The events in Japan 1990s and US 2006 show house prices can be vulnerable to falling.
  • 2. Co Buying Mortgages. This is a good scheme if you can get on it. For some public sector workers housing trusts will help you to buy a house. It means you may buy say 60% of the house and the housing trust pays the remaining 40%. The effect is that you will pay a standard mortgage repayment but an additional payment to the housing trust. This enables you to gain a bigger % of the house over time. In the fullness of time it means you can end up owning the whole house.

    3. Reduce Outgoings. For people on low incomes the best hope for getting a mortgage in the UK is not through the standard income multiple but through a test of affordability. Increasingly banks and building societies look at whether the mortgage plan would be affordable. Therefore they look at money coming in and regular monthly expenditures. If you can reduce these monthly outgoings it increases your chance of getting a bigger mortgage. For example if you can pay off your credit card debts you won’t have monthly payments to make. There are probably several areas of expense that you can reduce. Look at things like magazine and TV subscriptions and decide whether you can do without, at least whilst getting a new mortgage.

    4. Search online for the best range of mortgage deals. Don’t be disheartened if the big 5 banks reject you for a mortgage. There are many other options from smaller mortgage companies.

    5. Increase income temporarily. If you are dead set on getting a mortgage you could look into avenues for increasing income at least until you have got your mortgage

    R. Pettinger manages a site about Re mortgages in UK This site includes a guide to different types of mortgages and mortgage quotes.

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