It's a major life goal for many people to buy their own property. It can be daunting for even 2 people with reasonable salaries to save up for a deposit, let alone one.
And what if you’re a single parent? No matter how much you might want to provide for your children, the reality is that if you only have one income and a lot of outgoings, it’s going to be more challenging to get a mortgage. However, though it can be more difficult, it's definitely possible and not that different from any other sole borrower mortgage. Read on to find out how you can access single parent mortgage help in the UK and how an independent broker like John Charcol can help you apply for a mortgage.
In this Guide, We Cover the Following Topics:
- Can I Get a Mortgage as a Single Parent?
- How to Get a Mortgage as a Single Parent
- Affordability Criteria for Single Parents
- Can a Single Parent Working Part-Time Get a Mortgage?
- Can You Use Tax Credits and Child Benefit to Pay a Mortgage?
- How Does My Credit History Make a Difference to My Mortgage Application?
- What if I Am a Self-Employed Single Parent?
- What if I'm Divorced but Intend to Keep My Current Property?
- How Can I Save for a Deposit as a Single Parent?
- What Can I Do if I Am Turned Down for a Mortgage as a Single Parent?
Can I Get a Mortgage as a Single Parent?
Many will wonder if it’s possible to get single parent mortgage. In fact, this is the first question many single parents are sure to ask themselves, along with can a single parent working part-time get a mortgage? With so many criteria to follow, will lenders even consider a single parent?
The short answer is yes. Mortgage providers won’t automatically dismiss your application just because you're a single parent. As long as you meet their affordability criteria and eligibility requirements being a single parent shouldn't impact your mortgage options.
How to Get a Mortgage as a Single Parent
If you're a single parent, you’ll have access to the same mortgages as other borrowers. You may find it more challenging if you have a limited income and/or receive child benefits you would like the lender to include when carrying out their affordability assessment.
To ensure you get access to the best rate and lender for your circumstances, it’s a good idea to speak to a mortgage broker like John Charcol. We’ll be able to consider your income sources and your situation and direct you towards a lender with criteria that will allow you to get the best deal.
Affordability Criteria for Single Parents
No matter what situation someone is in financially or personally (whether they are a single parent due to divorce, bereavement, or other circumstances), it's the affordability aspect of any mortgage that makes the most difference.
The fact you’re a single parent won’t make any difference to the lender’s mortgage affordability criteria; they will consider you as they would with any other standard borrower. You may however, struggle to meet the lender’s affordability criteria, particularly if you work part-time or most of your income comes from benefits.
Can a Single Parent Working Part-Time Get a Mortgage?
Yes a single parent working part-time is able to get a mortgage. However, working part-time can obviously limit your income which in turn can reduce what you can borrow on a mortgage.
Although it does vary from lender to lender, on average you should be able to borrow up to 4.5x your total income. This can include your income from employment, self-employment and other sources. Obviously, the smaller that income is, the smaller the amount you can borrow will be too. Plus, when you have more than one child, your outgoings will be higher which will further reduce your disposable income.
The easiest way to maximise what you can potentially borrow on a mortgage is to speak to a mortgage broker like John Charcol who will be able to find you a lender that can consider any of your alternative sources of income, such as child benefits.
To help you determine how much you could potentially borrow as a single parent use our mortgage calculator.
Can You Use Tax Credits and Child Benefit to Pay a Mortgage?
The good news is that yes, for a single parent mortgage benefits such as Universal Credit can be used and these additional sources of income can be included as part of the lender’s affordability assessment.
Bear in mind that not all lenders can consider all benefits, and whether they can may depend on your situation. This is also true if you receive child maintenance payments from your ex-partner. For example, is the Universal Credit relating to child tax benefits and/or your monthly child maintenance income sustainable? Or, will your child reach 18 in the next couple of years? If your child is already 16 and you want a 25 year mortgage term, the lender may not be able to consider any maintenance payments you receive for this child as a source of income.
Similarly, if your benefits make up the majority of your income, the lender may need to look at your income in more detail to determine whether lending to you is the right thing as, for example, your circumstances and/or income could change in the future which means you would no longer be able to afford the mortgage payments.
It's definitely worth speaking to a mortgage broker if you would like to include child maintenance or other benefits as part of your income on your mortgage application. We’ll be able to talk you through your options and direct you towards a lender with criteria that aligns with your situation, giving you the best chance of borrowing more.
How Does My Credit History Make a Difference to My Mortgage Application?
Whenever you want to borrow money, whether for a mortgage or anything else, the lender will look at your affordability. However, that’s not the only important financial detail they will consider. They'll also check your credit history. This will happen whether you’re a single parent or not.
If you have a good credit score, you’ll be seen as a better candidate for a mortgage. A bad credit score, while it might not entirely rule you out, may give lenders a reason to reject you or may require that you use an adverse credit lender who will charge higher interest rates and cap your maximum borrowing.
The best thing to do before you apply for a mortgage is to check your credit score using the main credit reference agencies – e.g. Experian, ClearScore, etc. Doing this will give you a good initial idea of how you appear to lenders and whether you’ll have a wide array of options. Your mortgage broker will be able to look into this for you when you have a consultation.
What if I Am a Self-Employed Single Parent?
If you're a self-employed single parent, don’t worry. You’ll have access to the same products and rates as employed people. The main difference is that you’ll have to provide the lender with different evidence of your income. Most lenders require a minimum of 1 – 2 years of accounts. If you’re able to require 2 years of accounts – i.e. you have been self-employed for at least this long – you’ll have access to a lot more options than if you only provide a single year of accounts. Typically, when assessing income for self-employed applicants, lenders can use the latest year of accounts or the lowest income of the last 2 years.
You’re mortgage likely to struggle to find a suitable lender if you don’t have good records and therefore can’t prove your income. It can also be an issue if you've only recently become self-employed and therefore don’t have evidence that you’re making a certain amount of money each month and each year.
If you’re unsure, speak to one of our mortgage advisers on 0330 433 2927. We’ll be able to consider your application and clearly explain your options.
What if I’m Divorced but Intend to Keep My Current Property?
If you’re not selling your current property and buying a new one, but intend to retain it as a single parent, then you’ll have a few options depending on your circumstances. See what our experts have to say about removing an ex-partner's name from the mortgage and buying your ex-partner out of the property.
How Can I Save for a Deposit as a Single Parent?
The deposit needed for a mortgage will vary slightly from lender to lender but is generally 5% - 10% of the total purchase price of the property. This means a £400,000 house will require a minimum deposit of between £20,000 and £40,000.
As a single parent who may be paying rent and relying on one salary, saving for a deposit could be a stumbling block when it comes to getting a mortgage, even if everything else is in order.
It can feel impossible to get this money together, but there are places to go for help and bring your dream of owning your own home closer. Here are some options to consider.
A LISA (Lifetime ISA) is any easy way to boost your deposit. Essentially, when you take out a LISA, you’re able to put up to £4,000 into it a year until you’re 50 years old. The Government will boost the money you put in by 25%. This means that you could receive an additional £1,000 a year to use towards a deposit. This money doesn’t need to be paid back so it’s a fantastic way to help you build a bigger deposit more quickly.
Gifts from Family
Many people turn to family members to help them with funds to make up a deposit.
Lenders are comfortable with gifted deposits, although many may require a written agreement that the deposit is in fact a gift and not a loan. If the money is a loan, some lenders will still consider it as your deposit but will need to know your repayment plan for this money as it will impact your affordability.
Selling a Property or Using Equity
Not all single parents are renters. It may be that you actually already own a home but you need to find another home because you're getting a divorce, for example. It's possible to use the proceeds from the sale of a house like this to go towards, or even pay for, a deposit. This will depend on the financial obligations you have with the property.
Family Springboard Mortgage
A Family Springboard Mortgage is a mortgage which allows a borrower to buy a home using financial security provided by their family member(s). Essentially, a family member such as a parent offers up funds or equity in their property as security to the lender. This can allow the borrower who would otherwise struggle to save a deposit secure a mortgage.
What Can I Do if I Am Turned Down for a Mortgage as a Single Parent?
It can be upsetting to be turned down for a mortgage, especially if you feel you have everything in place and should be able to borrow the money you need. However, there could be a variety of reasons why your application to be rejected, and the best thing you can do is to look into those reasons and put the issues right.
Whether it’s your affordability, your deposit, your credit score, your debt-to-income ratio, or another factor, once you know what the problem is, you can take steps to improve it. Speaking to a mortgage broker is the easiest way to understand what may have happened and what you can do to improve your chances of securing a mortgage in the future.
At John Charcol, our expert advisers have provided many single parents with mortgage help so we’re well versed in this area. We know which lenders to consider and how to get you the best deal for your circumstances. Get in touch with us today on 0330 433 2927 to start your journey.
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