5 Tips to Get on The Property Ladder With a Low Income
Finance questions and answers
How do I get onto the property ladder with a low income?
If you’re on a zero hour contract, lower income or minimum wage that dream of owning property may seem very far away. However, all hope is not lost. Anthony Sargent from Fish Need Water, a South East London estate agent, explains how, with the right attitude, you can get onto the property ladder.
1. Cut Out Luxuries and Start Saving ASAP
Consistent monthly saving is the best way to accumulate enough money to get on the ladder, for a deposit and purchase fees. To do this, you need to take a look at your monthly outgoings and think about what can be cut out. The money from coffee at Starbucks and a Friday night takeaway can actually go a long way.
You’ll be surprised at the amount of money you can save by cutting back just a little and the sooner you do this, the sooner you can get onto the property ladder. You may have to turn down some social events while saving, but if you’re really determined, this is the best way to do it.
Using a savings calculator can help you to establish how long you will need to save for a deposit. Based on your income, you can figure out a realistic amount to save each month.
2. Be Realistic in Your Property Search
If you’re on a low income, set a budget for the property price you would like to buy. You need to think realistically about the location and size of your property. While we all may want that house with a view or extra bedroom, can you afford it? If you do want that bigger property, be prepared to save for longer. Unlike rent prices, your monthly mortgage payment can increase when interest rates rise, so don’t bite off more than you can chew.
3. Consider Help to Buy Schemes
The government has introduced a few ways to help first-time-buyers. These opportunities are great for those on lower incomes to help get onto the property ladder. One of these is a Help to Buy ISA. When you open the account, you can first deposit anything up to £1200. After the first month, you can then additionally save up to £200 per month in the account. Depending how much you put into the account, the government can give you a bonus of up to £3000 towards your home. The Help to Buy ISA is offered by many different banks.
The other opportunity is a Rent to Buy Scheme. This was introduced in 2014 and allows you to rent a property at approximately 20% less than market value. During this time, you are able to save for a house deposit. During, or at the end of the tenancy agreement, you can buy the property you are living in or part-buy the property.
Alternatively, you can buy a property elsewhere or continue to rent and save some more. There are a limited number of properties available for the rent to buy scheme and terms and conditions do apply. However, if you fit the criteria and don’t mind being added to the waiting list, it is a good opportunity.
As of November 2017, first time buyers are exempt from Stamp Duty Land Tax on properties up to £300,000, or will pay a reduced amount on properties up to £500,000. This is definitely a helping hand onto the property ladder.
4. Consider Buying with Somebody Else
Investing with somebody else you know is a sure way to get onto the property ladder. You only need to save half the amount you would otherwise, so you can work towards getting your property sooner.
You can invest with a friend, family or partner. Naturally, it is a big step and a huge commitment so be open and honest about what you expect from living together — if you haven’t already.
Now is also a good time to make long-term plans for living together. You don’t want to get a mortgage without having these conversations.
5. Talk to a Mortgage Broker and Check Your Documents
Talking to a mortgage broker allows you to talk through all of your concerns; they can tell you exactly how much you will need to pay monthly and in upfront costs. What’s more, by looking at your income, they can tell you a maximum budget for buying.
As a first-time buyer, there are a number of things you need to do to ensure you can get a mortgage. Check you are registered on the electoral roll and make sure your address matches up with all of your bills and payslips.
If you are on a zero hour contract or working freelance you will need to provide further documents, such as tax returns and pay slips, from previous years. The more documents and evidence you have to show you earn enough to pay back a mortgage, the more likely a mortgage provider will be to lend you money.
reallymoving says: If you're concerned about saving for your deposit, why not have a look at our First Time Buyers section? We have articles and ideas to help you get on the ladder sooner rather than later.
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FK on 11/11/2023