What house can I afford in the UK?
Eager to put down roots and buy your own home, but unsure whether you have the funds to support your dreams? If you’re still wondering what property you could afford to purchase in the UK, you’ve come to the right place.
Here, we’ll explore how far your house-buying budget can stretch based on your annual income and savings.
As reported by the BBC, Nationwide has confirmed that UK house prices are at a 17-year high! Coupled with soaring inflation, ever-rising energy prices and increasing interest rates, it’s no wonder many potential homeowners are wondering whether they can afford to buy a home right now.
Can I afford to buy a home?
When it comes to buying a home, many UK citizens won’t have the full funds to meet the average (as of January 2022) £274,000 house asking price in their bank account: this is where mortgage lenders come in.
Instead of saving up hundreds of thousands of pounds and living off beans on toast for five years, a mortgage lender will often lend up to five times a borrower’s income to help them purchase a home.
As long as you can meet the mortgage lender’s affordability criteria, which takes into consideration your committed expenditure and bills as well as your income, you will only need a deposit to secure your new home. Depending on the amount you are allowed to borrow, house deposits are typically 10% of the property purchase price.
For example, if you had your heart set on a property with a purchase price of £150,000, you would be required to provide a deposit of at least £15,000. Your mortgage lender would therefore need to provide you with (at least) the remaining £135,000 that you would then typically pay back in monthly instalments over a 25 to 35-year period.
What house can I afford on 30k+ a year?
Lenders will often allow you to borrow up to four times your income. So, if you earn £30,000 a year, you may be offered up to £120,000. However, this will depend on whether you meet other requirements of their affordability criteria to assess your ability to make the required monthly repayments. Paired with a 10% deposit of £12,000, individuals earning an annual income of £30,000 should be able to afford properties with an asking price of up to £132,000.
What house can I afford on 20k+ a year?
Following the same principle, those with an annual income of £20,000 can expect to be offered around £80,000 to buy their home. However, with average UK house prices continuing to rise, you might be wondering ‘how much house can I afford?’ with just £80,000 and unfortunately, the answer is that your options are limited.
What house can I afford on less than 20k a year?
Similar to those earning £20,000 a year, those earning less than this figure may find it even more difficult to purchase a property. For example, those with an annual income of £18,000 will only be able to borrow up to £72,000. With the lowest average house prices being £150,787 in the North East, buying a suitable property as individual on 20k or less a year isn’t easy.
However, you can apply for a joint mortgage with a partner or family member to boost your application’s chances of success. If they earn a similar annual salary, you could potentially double the amount of money that a mortgage lender is willing to offer you, allowing you to purchase more expensive or suitable properties.
How do you buy a house with a low income?
If a joint mortgage isn’t an option, but you still need affordable housing, there are several affordable home ownership schemes offered by the Government that you can explore: this includes loans for new-build homes if you’re a first-time buyer and shared ownership.
If you’re eligible to receive an equity loan for a new-build home, you’ll be required to pay at least a 5% deposit of the property purchase price and arrange a repayment mortgage of at least 25%. This equity loan can cover anywhere from just 5% up to a more substantial 20% of the property purchase price. For London properties, this percentage is increased up to 40%.
Shared ownership, on the other hand, is ideal if you can’t afford the deposit or mortgage repayments for a suitable home. Instead of purchasing the full property, you’ll be able to purchase a certain percentage share of the property (often 25%, 50% or 75%) while paying rent to the landlord on the rest.
Begin the search for your new home
Now you have an idea of what house you can afford based on your income and the current help-to-buy schemes offered by the Government, you’re ready to begin your property search – exciting!
Luckily, we’ve made shopping around online for your new home effortless thanks to our handy search filters. Alongside filtering our available properties for purchase by location, you can also set the minimum price and maximum price to ensure you’re only shown properties within your budget.
Offering everything from trendy apartments to sprawling family homes, Pick My Pad have something to suit every potential homeowner. Explore our impressive selection of properties for sale today.