Many people cannot afford buying a house or flat for cash, which is why they decide to take out a mortgage. The problem, however, is that too low income may prevent you from obtaining this method of financing. Mortgage installments are usually quite high after all, so the bank may consider that with low incomes their timely repayment may not be possible. So how do you get a low-income mortgage?

Improve your credit standing

Improve your credit standing

Low incomes may prove to be much less problematic and significant if we are able to demonstrate to the bank that despite them we are a credible and reliable customer.

To this end, we must increase our credit standing. How do you get a low-income mortgage by raising your credit rating? There are several ways to do this.

Build a positive credit history

Credit history is an important part of creditworthiness, and often it is not paid much attention. In many cases, young people who do not have much experience with banking products decide on mortgage loans. This means that their credit history is either very short or completely empty. Therefore, it is worth starting work on building a positive credit history as soon as possible, because it is not something that can be done quickly.

The easiest and safest way is to build a positive credit history by taking short and cheap loans or buying items (such as electronics) for so-called “0% installments”. It is crucial to pay these liabilities back on time. After some time, thanks to such activities, our credit history will be full of positive entries, and we will appear to the bank as a diligent and trustworthy customer.

However, if we cannot afford regular repayment of even such small debts, it is better not to go in this direction. Collecting an unnecessarily negative credit history will only further reduce your chances of getting your dream loan.

Reduce your commitments

It is known that reducing the amount of your liabilities is not so simple. Contrary to appearances, it can be carried out even with a very tight budget.

First of all, it is worth closing any unused or rarely used credit cards and revolving loans. Even if we don’t use them, they still have a negative impact on our credit standing.

Debt consolidation can be the second step, thus combining several different liabilities into one. Although it extends the loan repayment period, at the same time increasing its cost, but at the same time the monthly installment decreases, and this is mainly important for the bank. A lower installment means less burden on our monthly budget, and therefore more space for a new loan installment.

Additionally secure the loan

Additionally secure the loan

The mortgage is, as the name implies, secured by a mortgage. This alone often gives you the opportunity to receive it even with low income. However, it may happen that, despite everything, the mortgage itself is too weak a security for the bank. How to get a mortgage at low income? By reducing the risk of lending to a person on low incomes, they additionally secure it. The most popular credit collateral methods include:

  • guarantee
  • purchase of credit insurance.

Surety means that an additional person joins the loan and undertakes to pay it back if the borrower cannot do it on time. The guarantor does not have to be a co-owner of the property for the purchase or construction of which the loan was taken.

Becoming a guarantor is a very big responsibility and may have unpleasant consequences, but on the other hand, it significantly increases the chances of the bank’s approval of your loan application. Therefore, this role is usually played by relatives (family members, friends), although formally nothing prevents a guarantor from becoming a completely stranger to the borrower. It is only important that it has sufficient creditworthiness.

The purchase of credit insurance is mandatory if we are not able to accumulate 20% of the own contribution to the mortgage. In this case, we can take a loan with only 10% of the own contribution, provided that you purchase insurance. However, even if we don’t have to do it, it can sometimes be profitable. Some banks, in return for purchasing optional loan insurance, lower their margin or commission and look at lower creditworthiness more favorably.

It’s good to know how to get a low-income mortgage. Contrary to appearances, this is not impossible at all