How To Buy A House In London With A Low Income

5 Pounds Banknote With Five Coins

If you’re considering buying property in London, you may think you’ll quickly be able to locate an affordable house that you love, make a bid, and move in soon. Home buying in London, though, is very different, particularly if you’re concerned about the amount of income you make each month. Even the cheapest houses for sale are quite expensive if you’re looking to buy a house in London. Are there any cheap houses in London? How is buying a house in London different from buying a house anywhere else? Can you get government help to buy money if you’re looking for affordable housing in London? Are there alternative housing arrangements that might be helpful? This guide will help you better understand the answers to all of these questions and more.

What to Buy in London If You’re Looking for Cheap Housing in the UK

The first thing you need to understand about buying a house in London is that the cheapest properties in the UK aren’t in the city. Among cheap cities in the UK to buy affordable houses, London probably ranks last. Cheap houses to buy in London may not seem cheap anywhere else. The average cost of a cheap house in London is anything less than £552,755. The average cheapest houses in the UK for sale, by comparison,   run less than £295,903. That’s quite a difference when you’re buying homes. If you look at most guides that help you find the cheapest houses to buy in the UK, one of the first notes you’ll see is that you shouldn’t buy in London. Buying a house in London means paying London prices for houses.

So, is there any path to low-cost home ownership when you buy a home in London? Actually, yes. There are four different options if you’re looking for a house to buy in London for cheap. The first option you have is shared ownership. This concept is sometimes known as share buying, and it happens across the UK. What is shared ownership in the UK? It’s essentially a process where you’re buying a share of a home.  What is shared ownership in London? It’s the same idea as shared ownership in Luton or anywhere else in the UK. It’s essentially partly buying and partly renting a home, and it’s aimed at first-time buyers who want to get a home in the city. Under this idea, you buy at least 25% of a home, then you pay a certain amount of rent to the freeholder on the remaining portion. The shared ownership rules work like this. Housing associations, local councils, and other organizations offer these schemes to buyers who can’t afford the entire cost of a house in a place like London. You buy a share between 25% and 75% of a given home. You can either take out a mortgage for that amount or pay for it with your savings. You’ll need to pay that amount as well as a 10% deposit. In the future, you’re able to buy additional shares of the home. The amount of rent you pay is based on what percentage of the home you own. Naturally, if you own 60% of the home, you’ll pay less rent than you might if you only owned 25% of the home. The shared ownership criteria, though, must be met before you can participate in this kind of buying. You must have a household income of £90,000 or less in London (it’s lower throughout the UK). You must not be able to afford a deposit and a mortgage payment on a house that meets your needs. You must also either be a first-time buyer, owned a home previously but can’t afford one now, be forming a new household, be an existing shared owner, or want to own a home but can’t afford one that meets your needs. The last criterion is one that primarily applies to older people’s shared ownership, as often they need a space that better meets the needs of ageing homeowners.

Once you purchase your share, you’ll find the rent is capped at 2.75% of the unsold share on the day it is sold, so you’ll never pay too much in rent. If you have common areas in the property, as you might with some of the cheapest houses in London, you may need to pay additional service charges for maintenance and upkeep within those areas.

Can you make a profit on a shared ownership house? Actually, yes, you can. It works just like any other home does. If the value of the home goes up with the market, the value of your share goes up.

A shared ownership scheme isn’t the only way to get affordable housing in London, though. There are Help to Buy schemes across the UK and in London to ensure you can get access to affordable homes in the area. Most Help to Buy schemes, though, have specific criteria you need to meet, and this is as true in London as it is anywhere else. The Help to Buy scheme in London dictates that the home must be a new build. It must be advertised as a government first-time buyer scheme by a Help to Buy registered Housing provider. It can have a maximum price of £600,000. What’s more, though, is that this is a first-time buyer scheme only. Government Help to Buy programs like this one are only for those who are trying to move onto the housing ladder, so it must be your only residence. You’ll have to follow all of the Help to Buy rules and meet eligibility for the Help to Buy program to become part of it.

It works a bit like this. You’ll get an equity loan from the government – up to 40% to buy a new build home, so you’ll need at least a 5% mortgage deposit and a 55% mortgage. The equity loan from the government runs until you sell the property or redeem the mortgage, whichever is shortest. For the first five years, you don’t pay any interest at all on that 40% loan. After that, you have to pay interest on the equity loan, and it may go up as the market does. Also, you cannot sublet a home purchased under this program, so be cautious of the rules that surround it.

Shared ownership and Help to Buy are both great ways to be able to afford cheap housing in London, but there’s one other program you may want to consider. First Dibs for Londoners is a great option as well. This is a voluntary scheme that offers housing cheap in the city for ownership. The idea is that developers and housing associations alike commit to restricting certain properties just for Londoners. Several key housing developers are part of this, including members of the Home Builders’ Federation and the g15, and they’ve agreed to restrict sales and marketing of all of their new build homes with a cost of up to £350,000 just to UK residents. That gives London residents a head start on properties that they may be able to afford to buy.

Your Other Options

While these are the three main ways to get a home in London if you have a fairly low income, the key to almost all of them will be to get a mortgage you can afford. Naturally, that will depend on the principal you have to borrow, and while government help for first-time buyers can make sure you can afford that loan, you’ll still need to make sure you can afford it. The best way to do that is to talk to a mortgage broker or a lender. Keep in mind that there is no real set income to buy a home whether you’re taking advantage of a shared ownership scheme in London or you’re just buying a home. Instead, how much you earn will affect how much you can buy on a lender-to-lender basis. Income is not the only thing a lender considers when loaning you money. You may have a fairly large deposit available, thus a lender won’t worry as much about your low income. You may also have a steady job and a great credit rating. All of those can be factors in helping you get the mortgage you need no matter what income level you’re at. In most cases, whether you’re considering becoming part of a rent-to-buy scheme, a shared ownership scheme or you’re just buying a home the old-fashioned way, a lender will look at your income, how much you’re spending each month, and what the monthly repayment amounts might look like for the home (or the share of the home) you’d like to buy. If all of those things match up, you’re going to be able to get a loan. If you’re concerned because of your income, though, you can certainly meet with a mortgage broker who specialises in low-income mortgage loans. Just be sure you look for a whole of market broker, as he or she will be able to give you access to mortgage loans from across the spectrum of lenders, not just a few.

If you can’t seem to get a home even with Help to Buy eligibility or a shared ownership scheme in London, don’t give up. There are many different things you can do to get on the property ladder eventually. First, you can work on increasing your credit score. Remember that your credit history is a sign of your trustworthiness to banks, and that means something. The higher that trustworthiness is, the more likely lenders are to accept you as a customer. You can also work on reducing your overall debt payments. It’s a great idea to make sure the overall debt load you’re carrying is as low as possible to help you out before you apply for a mortgage. The lower your overall monthly payments, the better the chance you have of actually being accepted for a given loan.

In addition to taking those steps, you may want to work on saving for a larger home deposit. The higher the deposit you can pay, the less likely it is that your low income will matter. What’s more, though, is that you can afford to make the repayments because they’ll be lower as a whole, which could help make you just a bit more attractive in any lender’s eyes.

The Bottom Line – Buying a Home in London

The simple reality is that buying a home in London doesn’t work like buying a home anywhere else in the country does. Instead, it can be quite expensive to live in London. One study even found that London was the 6th most expensive city in the world to live in, and that can hit hard as you start looking for a home in the city. While you can certainly shop outside the city and look for a home with great transport links, there’s nothing quite like living in London, so finding an affordable house here is a powerful motivator for many people. If you’re shopping for a home in London that you can afford, don’t forget to consider some of the most obvious opportunities for low-income buyers. Things like shared ownership can be a great way to take advantage of London’s expensive property market. Options like Help to Buy first-time buyer schemes may help you own your first home. While the homes in London aren’t among the cheapest houses in the UK for sale today, you will find lots of different options that will help you get on the property ladder, even if you don’t make very much or you want to live in London. The key is to work with a financial professional who can help put you in the home of your dreams as quickly as possible in a property market like London. Only then will you be able to truly take advantage of this great city and everything it has to offer?

We are proud members of...

  • NAPB
  • RICS
  • The Property Ombudsman
  • Trading Standards

We are proud to be the most regulated property buyer operating in the ‘Quick House Sale’ industry. We are an active member of the NAPB (National Association Of Property Buyers) and are RICS regulated, which means you can have every confidence of selling your home with us quickly & easily.