What To Do If You Can't Afford A Mortgage

There’s lots of reasons why many people believe they can’t afford a mortgage, be it a first home or otherwise, when that may not be the case. Perhaps they think their deposit isn’t large enough, they don’t earn a sufficient amount or aren’t aware of various schemes they could qualify for.

If that sounds like you, this guide will demystify some of the biggest misconceptions around affordability whilst providing details on how to get a mortgage and where to seek expert guidance.

What to do if you believe you can’t afford a mortgage

Say you’d like to buy a home but don’t think you can afford it, the first thing to do is check that assumption is right. For example, did you know:

• Some lenders go beyond lending 4.5 times annual salary to even 5 or 6 times
• You can get a mortgage even if you’re accessing government benefits
• Supplementary income can form part of your mortgage application
• There are lenders specialising in bad credit mortgages

Some of these factors might mean you can actually afford a mortgage, especially if you engage with an experienced broker whose job it is to access better rates and terms than you might find alone. Armed with a comprehensive knowledge of your situation they could source a deal you perhaps hadn’t thought possible.

Low-income as a barrier

Many people across the UK earn minimum wage at £8.91 per hour. They might only work part-time or on a casual basis, be a trainee or work for an agency. While some lenders might view such a situation as a hard no for potential lending, others will be willing to lend as long as the requested loan is a reasonable amount, and especially if they can see you can still afford the repayments, have a good credit history and little debt.

Just remember most lenders are willing to loan around 4.5 times a salary so if you earn minimum wage and work a 48 hour week that totals £22,239.36 making a mortgage of just over £100,000 possible. Of course if you apply jointly with someone else their salary will be considered in the calculations, boosting what you could borrow.

You can find out exactly how far your salary will stretch based on the maximum income multiples that lenders use by inputting the combined salary of all applicants into our mortgage affordability calculator below.

Improving your ability to afford a mortgage

If after considering the above factors, you still feel you’re unlikely to be able to afford a mortgage in your current circumstances, there are various things you can do to change that. These include:

Checking your eligibility for a government scheme

The UK government runs multiple programmes aimed at supporting people on their path to home ownership. These include:

• 95% mortgages: Launched by the government in 2021 and extended until December 2023, this scheme supports buyers who only have a 5-9% deposit saved. The government provides lenders, such as Lloyds TSB, Santander and NatWest, with the guarantee they need so they feel assured in offering a loan to value ratio of above 90%.
• Shared Ownership: If you can’t afford a property outright, this scheme allows you to purchase a portion of a property. The rest remains owned by a developer or housing association, depending on who you buy from. You then pay rent on the remaining share.
• Right to Buy: If you currently live in a council property and have done so for over 3 years, this scheme allows you to ask your local council about buying the home. Usually such properties come with a substantial discount making them more affordable.

A broker would be able to advise on whether you qualify for any such support.

There are then ways of reducing monthly payments such as:

Exploring a longer mortgage term

Typically mortgage terms span 25 years but if you can find a lender willing to lend over a longer period that reduces your monthly repayments potentially making them more manageable. These days, 35-year terms are common with Nationwide while Kensington Mortgages will go up to 40 years.

Finding a lender with lower interest rates

The lower the interest rate, the less your monthly repayments would be. Currently (May 2023) the lowest interest rates are around 4%-4.5% but not all mortgage lenders can offer these rates. It all depends on whether you can reduce your risk in other ways. Perhaps you can put up a large deposit or show you’re in a profession deemed reliable such as a dentist or doctor. Regardless, a broker will know which lenders have the most appealing rates and are likely to offer them to you in your situation.

How a broker can help boost your affordability

It’s easy to simply write yourself off as not being an eligible homeowner if you don’t immediately seem like the ideal candidate but it’s something definitely worth verifying to ensure you’re not wasting any time. This is where a broker we work with can help. Assessing your situation before you attempt to apply to a lender directly, they can:

• Review your financial situation and advise on whether you can indeed afford a mortgage as well as ways to improve your eligibility.
• Share information on any support you might be able to access and how to apply for that support.
• Assist in compiling a mortgage application more likely to get you the loan you need.
• Assess the whole of the lending market, including lenders offering exclusive rates and deals you otherwise wouldn’t be able to see.

If you get in touch we’ll arrange for a specialist with experience in this area to contact you directly.

What to do if you’re worried about repayments on an existing mortgage

If you already have a mortgage and the repayments are proving too challenging, there are options to help ease the burden. These options, whilst not ideal, can also act as reassurance that there is support available if things get too tough:

• Talk to your lender: Lenders might be open to extending the mortgage term midway through the agreement to reduce your monthly repayments. In some circumstances, they might let you take a payment holiday, giving you a few months relief or they could let you defer some payments to a later date.
• Remortgage: If the current arrangement really is too much, you can work out a new mortgage agreement with your lender or even switch to a new one if you think a better deal is out there.
• Switch to Interest-Only: If your mortgage is a capital repayment method you could ask your lender if you could switch to interest-only. That would significantly reduce the monthly repayments but you would need to have a viable plan for paying back the whole loan in one lump sum at the end of the term.
• Opt for equity release: This is where you borrow a lump sum against your property and pay it back when you sell further down the line. This, however, is only an option if you’re over 55.

Connect with a mortgage expert

If there’s any doubt in your mind when it comes to your potential for owning a home, it’s worth getting matched to a broker to explore your options. The brokers we work with are experts when it comes to accessing mortgages for those with low income, a small deposit and even bad credit. They’ll be able to help improve your financial outlook, advise on how to speed up the process for purchasing a property and potentially find you a mortgage that works for your situation.

Get in touch today by calling 0808 189 0463 or filling out this form, for a free, no obligation consultation with a broker specifically matched to meet your needs.