When you work part time, it can seem that it might be difficult to get a mortgage. And while there are some lenders who don’t offer mortgages for part time workers, there are also a lot that does. When you work with a mortgage broker, you can access to lenders who will consider your situation.
In this guide, we will look at:
- The type of contract you are on
- How long you have been in the job
- The maximum you can borrow and your affordability
- Other income you receive
- Deposit levels
- Credit history
- Buy to let mortgages with part time income
The type of contract you are on
If you have a permanent contract and are in a stable position with your income, then it will be considered less of a risk by lenders that if you are on a temporary or unstable contract. This is even more relevant when you are on a part time contract.
How long you have been in the job
If you have recently started in the role, there are still companies who will consider you on a part time contract. They will look at your affordability and this might limit how much you can borrow. Some lenders look for at least 6 months of employment while others look for 12 months. On the other hand, some will consider your income from the start of employment.
For new starters who have a probationary period, some lenders will want this to be finished before they will consider you for a mortgage, but others will work with you from the start of employment.
The maximum you can borrow and your affordability
Lenders all have their own ways to calculate how much you can borrow based on their affordability model while others have a more traditional income multiplication model. So they may take 4.5 times your gross income for the year while others might go as high as 6 times your annual income.
Some lenders have a minimum acceptable income. This is something they can set themselves. So some might say you need to have an income of £20,000 to be considered. Others will look at each case individually.
Outgoings will always be taken into account when deciding about affordability. So if you are paying off existing debt, this will reduce how much you have to pay the mortgage and will affect how much you can borrow.
Other income you receive
When you are part time, you may receive some government benefits such as child benefit or child tax credits. Some lenders will also take this into account – some fully and some up to a certain percentage. So one lender may accept all £10,000 of the benefits you receive, while others may only accept 50-75% of this.
If you have more than one job, the lender may also consider this income when looking at affordability. Some may only take your primary income source while others will look at all of the money you have coming in to make a decision.
Deposit levels are dictated by the amount you want to borrow. So if the property is worth £200,000 and you have a part time income of £20,000 then the maximum loan would be £100,000. You would need the other £100,000 as a deposit to get this mortgage.
Most deposits will be between 5-15% depending on your circumstances. Your credit history will factor into how much deposit a lender looks for.
If you have bad credit in your past, this will limit the number of lenders available but there are still companies who will help. A lot depends on the type of problems. Things like a debt management plan, late payments or defaults are not as serious as having been made bankrupt. It is worth getting a copy of your credit record to see what it shows and to provide to the mortgage broker to help get a clear picture of your credit history.
Buy to let mortgages with part time income
Buy to let mortgages with a part time income can be more difficult than with a full time one but can still be done. Generally, as first-time landlords, you will need a minimum income to cover the risk of rental voids – times when the house isn’t occupied.
For experienced landlords, it may be that the overall financial position is more relevant than the part time job income. Lenders will have their own view on how they treat these situations.