Applying for a mortgage as an individual has both pros and cons. The upside is that the assessment process is often much faster since there is only one person’s income and affordability to assess.
The obvious difficulty is that mortgage thresholds will inevitably be lower based on one salary rather than two. However, there isn’t any reason you can’t apply for a single person mortgage – but it helps if you have an expert broker on your side to direct your application to the most appropriate lenders!
In this guide, Think Plutus runs through some considerations to bear in mind and how single person mortgages tend to work.
Mortgage Lending to Individual Applicants
First, let’s clarify that a mortgage lender doesn’t have any preference about how many people are applying for a mortgage – their primary objective is to risk-assess the requested loan and make sure you can afford the repayments.
Single person mortgages are common for:
- Buying a buy-to-let investment property.
- Mortgaging a home when one partner has a low income or has adverse credit issues (we’ll explain this option further down).
- Remortgaging to buy out an ex-partner.
- Applying for a first-time buyer mortgage.
You can have up to four people on a mortgage, so there isn’t anything more difficult about the eligibility requirements regardless of whether you want a joint mortgage or a single person mortgage.
Single Person Mortgages – Can I Apply?
If you want to buy a property, remortgage, or invest in a buy-to-let, you can very likely apply for a single person mortgage. As we’ve mentioned, this is typical in many scenarios, such as a first-time buyer looking to purchase their first home.
Most single person mortgages tend to be for lower values – purely due to the practicalities of needing a residence for one person, rather than a large family home, so it’s much easier to qualify if the mortgage repayments are comfortably within your means.
There are benefits to applying for a joint mortgage, but that only really applies if you both have a stable income and can contribute equally to a deposit.
Maximum Mortgage Borrowing on a Single Person Mortgage
As with any mortgage product, the lender will need to apply affordability checks and a stress test.
In essence, they’re looking to establish:
- How much you earn and how reliable that income is – the ideal is a salaried role in permanent employment. Still, you can also factor in self-employed pay, commissions, bonuses and regular overtime.
- Your debt to income ratio – this calculation looks at other obligations, your typical expenditure, and the surplus earnings you have to cover the mortgage payments.
- Stress tests – lenders apply a nominal interest rate (usually about 5.5%) and then use this exaggerated mortgage cost to check if you’d still be able to afford the mortgage if interest rates spiked.
Other assessments include credit checks, so if you have bad credit or a very low credit score, your broker might have to work harder to negotiate terms and competitive rates with the recommended lender.
It’s also important to note that lenders all have different policies and ways of calculating affordability – so applying to the first lender you come across is a bad move if you have a variable income structure.
For example, some mortgage providers include regular overtime, and others exclude it altogether.
Benefits of Using a Broker in Single Person Mortgage Applications
Of course, as an accomplished private specialist mortgage broker, Think Plutus would always advocate seeking professional advice, but it’s also to your benefit for several reasons.
- Applying to unsuitable lenders may impact your credit report if you accumulate multiple hard credit checks but are unsuccessful.
- We know the market and the lenders (several thousand of them!), which means recommending mortgage providers that we are confident can meet your borrowing needs.
- Rates vary wildly, depending on the lender, your circumstances, and the type of property you buy. Our job is to identify the best rates and suggest mortgage products that we feel are to your advantage.
As a rough guide, lenders tend to cap your maximum mortgage at anywhere between three and five times your annual earnings.
That isn’t set in stone, but you’ll find a lower multiple available if you have any higher risk circumstances such as adverse credit or a fluctuating self-employed income.
Single Person Mortgages for Self-Employed Applicants
Expanding on that a little – if you’re self-employed, it’s very unlikely you earn an identical amount every month and year.
Therefore, a lender needs to put in additional steps to verify your average earnings and reassure their underwriters that your affordability metrics meet their requirements.
Usually, that means a few extra assessments:
- Providing three years of accounts or tax returns to arrive at an average income (although some lenders are flexible and will work with applicants with younger businesses).
- Analysing your experience – if you have three years or more of self-employment, with regular trade, you’re an easier lending prospect since there’s a reduced potential for the business to close.
The trick is to provide all the supporting evidence and documentation your lender needs from the first step – the easier it is for them to offer approval, the faster you’ll get your single person mortgage in place!
Deposit Requirements for Single Person Mortgages
In any higher risk scenario, a larger deposit will mitigate the lender’s exposure, reduce your interest rates, and make your application more appealing.
But, you don’t necessarily need a huge deposit for a single person mortgage – that depends on the strength of your application and all the surrounding circumstances.
Lenders will be happier to accept an applicant with a 10% deposit or higher, and you’ll get a better deal if you have a down payment of above that, but it isn’t a prerequisite to gaining mortgage approval.
Residential mortgages can start with deposit requirements of as little as 5%, and there are several schemes that you might apply for, such as:
- The 95% Mortgage Guarantee Scheme
- Help to Buy equity loans
- Shared Ownership initiatives
While they’re all slightly different, each of these programmes is designed to make it easier to buy a property and minimise the deposit value you’ll need to put down.
It is wise to save as large a deposit as possible, but Think Plutus will always advise if we think you could benefit from a mortgage support scheme.
Other options include using a gifted deposit from a family member or a guarantor single person mortgage to bump up the deposit available and reduce the lender’s perceived risk.
Getting a Single Person Mortgage With a Bad Credit Rating
If you have a low credit score or an adverse credit history, the initial step is to access your credit reports – preferably from each major credit referencing bureau – and ensure everything is updated.
Some single person mortgage lenders won’t automatically reject a bad credit applicant, but they will need to know:
- How serious the issues were – a few late payments several years ago are a much less severe obstacle than a recent CCJ.
- When the credit problems happened, and if you’ve been in good financial standing since.
High street mortgage providers aren’t generally suited to bad credit mortgages simply because they have less manoeuvrability in their policies and often turn down applicants outright since they don’t have the resources to tailor a mortgage to the individual.
However, specialist bad credit lenders can often help. There are many ways to improve your credit score and submit a compelling mortgage application to add context to the situation that resulted in your credit problems.
Applying for a Single Person Mortgage When Married
We mentioned earlier that we’d talk about single person mortgages if one partner doesn’t work, has a low income, or has bad credit that you feel would impact your mortgage eligibility.
You can get a single person mortgage if you’re married, but it’s not a straightforward process and may be inadvisable. Very few lenders will accept this type of application, and since it’s a rare mortgage product, you’d usually pay higher rates and higher application fees.
Where there is a resident of the property, and they aren’t on the mortgage deeds, it is inevitably stickier for the lender since there are increased potential problems – say if the couple separates and each has a legally valid claim to the property.
However, if you have a viable reason for applying for a single person mortgage, it can be possible, even if you have a civil partner or spouse living with you.
Expert Tailored Mortgage Advice for Single Person Mortgages
Think Plutus is a dedicated mortgage broker, working with clients to provide one-on-one service, fully bespoke advice, and oversight of all the potential options to secure the mortgage you require.
If you would like to learn more about the best single person mortgages available or explore the lenders we would recommend please get in touch for a friendly, confidential chat about the right mortgage solutions.