Single parent mortgages – How to get one and which lenders are best
It can be challenging to get on the property ladder. However, a single parent looking for a mortgage loan can be more difficult, especially if your income is low.
Many UK specialist lenders offer single-parent mortgages and have flexible products that can be tailored to suit your needs.
This article will provide essential information on mortgages for single parents. It will also explain how to obtain them and what alternatives you have.
For single-parent applicants looking for the best mortgage lenders, please call us or enquire today to speak with a mortgage broker.
They can help you find suitable lenders using their ‘full market access. Sometimes they might even be able to find deals that aren’t open to the public. Your credit rating will not be affected by the advice you get.
Single parents face mortgage challenges.
Single parent mortgages are not products in themselves. However, choosing a mortgage product that meets your needs is essential.
Although it may seem impossible to be a single parent with a mortgage to cover, this is not always the case. Due to the extra risk, single parents might be unable to find a lender willing to lend money. However, some lenders will help.
You will likely be treated more favourably if you buy a property with a partner.
The main problem for single parents is their lower income. You may need to look for a mortgage lender that takes an open-minded approach to affordability.
How to find the best single-parent mortgage lender
Some banks can lend to single parents. The best way to locate one is to apply through a mortgage broker. They will be able to provide you with personalised advice and connect you to the best lender to lend to single parents.
A mortgage broker can help you understand your situation and find the best deals for your family.
What are the factors that influence a single parent getting a mortgage?
When assessing eligibility for single parents, lenders consider several factors.
Income
A single parent with a low or no income can reduce the amount of mortgage you can borrow. While most providers will only lend you three to four times your annual income, some lenders can stretch the loan to five and six.
This will depend on how many dependents you have. In other words, the more dependents you have, the more significant the impact on your affordability and the amount of a potential lender’s willingness to lend you money.
We can help you find the right lender for your situation and income.
Affordability
Lenders will also consider affordability, along with income limitations. Some banks may consider you a candidate if your monthly expenses are not too high, even though your income might be low. Lenders evaluate your ability to pay by looking at your income to debt ratio.
This allows them to see your income and outgoings. It also helps them assess if you can afford to repay the loan that you have applied for. We move on to…
Other sources of income
We’ve already established that mortgage applications must be submitted by someone who can prove to the lender that they can repay the loan. Lenders will consider other income sources, even if your income is low or non-existent. For more information, please refer to the following section.
What other income sources are lenders willing to accept for single parents?
What other factors can you consider when assessing a mortgage request for a single parent? The primary forms are child benefit payments, tax credits, and maintenance payments from your ex-partner. You may also have other income sources, such as universal credit.
If you are looking for a mortgage but also have a part-time job that pays £10,000 per year, you may be eligible for a loan between £30,000 and £40,000. However, this is subject to change by the lender and will be considered alongside other factors.
The sum of all the benefits you receive could increase the amount you can borrow. Your gifts, if they total £10,000 per year, plus your £10,000 salary, will be considered an annual income of £20,000. This theoretically increases the amount a mortgage provider would be willing to lend you.
Your lender will take your outgoings into account. Your monthly average expenditures, including current loans, and how much you spend on childcare are all examples. When assessing affordability, some lenders may also consider childcare vouchers.
What does it mean for single parents to get mortgage loans?
Lenders will not consider poor credit applications for mortgage applications. Lenders can consider adverse credit issues serious because they know that borrowers who have been in financial difficulties in the past are more likely to be in financial trouble again.
It all comes down to the severity and length of the bad credit problems and the lender’s criteria.
Some banks might consider you if you have light historical arrears, a satisfied default, or a discharged bankruptcy older than six years.
It is best to disclose any adverse credit information before you apply. Lenders may reject your application at any stage, including the completion, if they don’t know. They may be more accommodating to honest applicants.
Our in-depth guide provides more information on obtaining a mortgage with poor credit.
Our advisors can help you verify your credit reports from the UK’s three major credit reference agencies ( Equifax and Experian) free of charge. This will ensure that your application is complete. These reports won’t have any impact on your credit score.
What mortgage assistance is available to single parents?
Although there aren’t any mortgage programs for single-parent borrowers, the UK has many schemes that give you an edge on the property ladder.
To all single parents looking for help with their mortgage payments, please read on to learn which mortgage programs might benefit you.
Government Assistance to Purchase Equity Loan
Many government schemes can help people who are struggling financially. This is an excellent option for single mothers or fathers trying to save money for a deposit.
The equity loan scheme is part of the Help-to-Buy initiative. It allows you to purchase a home with as low as a 5% down payment. The government will lend you a loan up to 20% of the property’s value for a deposit.
You only need to save 5% from being eligible for this scheme. This gives you a much more attractive deposit of 25% with a 75% loan to value mortgage (although you could pay more from your pocket if you wish).
London Help to Purchase Equity Loan
Due to the high property price in certain parts of the UK, the government has raised the maximum equity loan limit from 20% to 40% to accommodate those looking to purchase within Greater London.
You’ll need to deposit at least 5% of your property price. The Government will lend you up to 40% of the property’s value. You’d take out a maximum mortgage amount of 55% to cover the remainder.
Government Shared Ownership scheme
Shared ownership is another government loan program available to first-time home buyers and low-income households. You can buy a share of a resold home or build from scratch through Shared Ownership.
You will also pay a lower rent on the remainder of the property. However, you can purchase a more significant portion later if you have the funds. These properties are leasehold.
Most lenders require that you save at least 5% for Shared Ownership mortgages. Only a few providers will offer 100% mortgages for Shared Ownership. This means that you don’t need to save any money. If you can show you can afford the repayments, speak to a share ownership broker.
Mortgages with low deposits
While you are more likely to be considered for a mortgage if your savings account is more significant than 15%, some lenders will take a 5 percent deposit on a standard mortgage.
Even if your deposit is small, you still have options if the government doesn’t want you to “invest”. Remember that the higher your deposit, the better you will be able to receive competitive rates. This can help you save money over the long term.
Guarantor Mortgages
A guarantor mortgage occurs when someone you know (typically, a family member) uses savings or an asset like their home to deposit for your account.
If you default on your mortgage repayments, your guarantor will be responsible for your mortgage repayments. The individual must own their home or have equity in the property to be accepted as a Guarantor. This figure may vary from lender to lender.
You will need a clean credit history and evidence that your income can repay your monthly repayments. This can be a great way to climb the ladder if you have little to no deposit and are confident that your income will cover your mortgage payments. Many lenders will let you borrow up to 100% of a property’s value.
Joint mortgage, sole proprietor agreements
A joint borrower sole proprietor mortgage is an alternative to a mortgage guarantor. This agreement allows you to have a 3-person mortgage to help with the mortgage payments, even though only one person is the property owner.
Learn more about sole proprietor mortgages in our standalone guide.
Deposits are given to the family by a loved one
Many parents want to help their children financially by contributing some, or all, of their deposit to their child’s home.
A family-gifted deposit may be a good option if you cannot save a large sum of money for a deposit but feel confident that you can afford the monthly repayments.
Most lenders will accept gifts from immediate family members, such as siblings, parents and grandparents. However, they may be more cautious about gifts from distant relatives. You may be able to receive a gift as a deposit from a family member.
This can be an effective and simple way to climb the ladder, even if your deposit is low.
Lenders will consider you more favourable if you can contribute to the deposit in addition to the gift.
Gifted deposit letters must be signed by the gifter indicating that the gift is non-repayable and they have no rights in the property.
Personal
If you consider borrowing to get a mortgage deposit, it will send warning signals to lenders.
It is partly because of its effect on your ability to repay a loan while also paying a mortgage.
The most crucial issue is that you haven’t personally invested any savings towards the deposit. As such, you are considered to be riskier.
However, it can be challenging to save a deposit as a single parent. Some lenders will consider you if the circumstances permit. You might be eligible if you show that you can pay the mortgage and all your outgoings.
This may be possible with a 5% loan and 95% mortgage, 10% loan, 90% mortgage, 15% loan, and even 85% mortgage.
It is important to remember that personal loans of more significant amounts are rare.
The maximum amount you can borrow for a personal loan is £25,000.
This allows you to make repayments over a more extended period than if the mortgage was fully paid off.
Can I use child benefit to help my single-parent mortgage application
Child benefits can be used to calculate affordability by many lenders. It can also be used as a primary income.
However, some lenders may not accept income from child benefits if the child(s) is under 13 years of age or if your annual income is less than £50,000.
Lenders may consider you unable to continue paying your child benefit payments if your affordability heavily depends on the number of child benefits you have received.
If you take out a fixed-rate mortgage for five years at 2.08%, your child should be able to afford the monthly payments. You may be unable to afford the higher rate of 4.87% of your child stops being eligible for child benefits (e.g., if your child is 18 and going to university).
Lenders will evaluate your ability to pay the mortgage payments in the future.
Not all lenders will approve mortgages if you include child tax credits, adoption benefits, or foster care income in your affordability assessment.
However, other lenders may accept these income sources.
Talk to an expert on single-parent mortgages today
Call us today to find out if you are eligible for mortgage assistance as a single parent.
Or, you can enquire here. Our experts can help you find the best deals for your situation and provide advice.