Being a single parent is not easy. It is financially challenging and often stops you from taking on full-time employment. It shouldn’t, however, stop you from getting a mortgage.
In reality, however, your chances of getting a mortgage are lower than of those buying a house together. The main obstacle is usually low income of a single parent. Low income significantly reduces the amount you can borrow. Banks are willing to lend you three, sometimes four times your annual income – usually no more than that.
This especially affect single parents living in big cities such as Manchester or London where prices of the properties are very high. High price pretty much closes the way of getting into a property ladder to many single mums and dads.
While it is not easy to get a mortgage being a single parent it is not impossible.
Increasing your chances of getting mortgage
Because of usually low income you need to demonstrate to the lender that you are capable of paying off the loan. While you income might be low you still get some benefits which will be taken into account when calculating the amount you can borrow.
What is taken into account?
Your child benefits, tax credits and maintenance fees you receive from your ex. There might be other streams of your income which all will be added. To give you an example if you are on £10k/year you will be able to borrow anything between £20k and £40 (depending on bank). However, all benefits you receive may raise the amount you can borrow. For example all benefits may amount to £10k. This, with your £10k annual income will be treated as £20k. You will be able to borrow more. Receive more information about the benefits you are entitled to here.
It is important to remember that any papers shown to the bank need to be official. You need to prove all of your income.
Of course my calculations are very simplified. Bank will take many other factors into consideration. For example, how much money goes into childcare? Your monthly expenditure etc. This is a standard procedure – your mortgage broker should be able to calculate this with you to check if you can really afford to pay back your mortgage.
There is no point of getting mortgage and then not be able to pay it back.
Do all banks lend to signle parents?
Unfortunately finding a lender willing to lend money to a single parents may prove challenging. Single parent possess a greater risk to the lender hence many simply won’t grant you a loan.
How single parents usually get a mortgage?
Usually single parents get guarantor (more about guarantor mortgages here). Guarantor can be someone from family or close friend. Usually parents decide to help their children.
Guarantor can either be used for a whole loan or a part of mortgage. If you financial situation is good and then guarantor maybe used for a part of mortgage increasing the amount you can borrow.
If you use parents as your guarantor make sure they have majority of their own mortgage paid off and some employment years ahead of them (being retired will decrese guarantor’s chances).
More popular option is raising a high deposit. While I understand saving up for a deposit is very difficult being a single parent you may help your family to help you out.
Alternative ways of getting into property ladder for single mums and dads.
If you failed to secure a mortgage you still have some options. You can either sign up for a government Help To Buy scheme or buy a percentage of a property on so called shared ownership basis. More information.
Please be aware that while Help to Buy scheme may sound extremely attractive it usually mean high LTV mortgage. In result you pay significantly more during the mortgage term.
Many single parents who received social housing are able to buy the property they live in from council. These properties cost less than market price and often are the only way someone on very low income can afford to buy.
Securing your mortgage being a single parent may be tricky but it’s worth doing. Owning home gives you more independence and often is a good way of protecting yourself against ever-rising rent charges (especially in large cities).
Remember that your property will be passed to next generation through inheritance. It is a great chance to improve a living status of ones you love.
SINGLE PARENT? COMPARE MORTGAGES THE RIGHT WAY
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