In this brief guide, we are going to discuss the question “what mortgage can I get for £500 a month?”. This is a very common question many people have as you will find that many people are only able to put around a maximum of £500 per month away into their savings.
This means if they wanted to get a mortgage they will ideally want to get a mortgage for £500 a month.
What mortgage can I get for £500 a month?
For £500 a month you can get a host of residential mortgages or buy to let mortgages. £500 a month will allow you to get a mortgage of £139,000 at a mortgage rate of 1.8% APR with a 30-year mortgage term but this is all subject to your mortgage affordability.
You may want to consider using a mortgage calculator to see what mortgage you can get for £500 a month based on the number of years you want to borrow for and the current mortgage rates you may be able to access.
Use a mortgage calculator
What factors affect your ability to get a £500 a month mortgage?
Getting a £500 a month mortgage will mean that the mortgage lender will take you through their mortgage affordability assessments as they will do with any other mortgage which they offer.
Below are the key points which the mortgage affordability checks will focus on:
Your credit score
When looking to get a mortgage, the mortgage lender will want to see your credit score to get an idea of what your financial habits have been over the past few years. If you have a low credit score or negative markers such as CCJs on your credit score then you may find it much harder to get access to a mortgage or other credit products.
Your mortgage deposit
Your mortgage deposit is also a very important factor when a mortgage lender will look to see if you can afford a mortgage of £500 a month in monthly mortgage repayments. Your mortgage deposit determines what loan to value rate the mortgage is set at and this subsequently affects what mortgage rate you are given.
The mortgage rate is, of course, one of the biggest factors which affect your monthly mortgage repayment.
Putting down a sizeable mortgage deposit will mean you fall into a lower loan to value rate and are more likely to get a mortgage for £500 a month. If you are not able to save a sizeable mortgage deposit then you may be able to use a government scheme to increase your mortgage deposit.
The property type
The property type is also a very big factor when considering if you can get a mortgage for £500 a month.
If you are getting a non-standard construction property then the mortgage lender will likely increase your mortgage rate.
What bad credit mortgage can I get for £500 a month?
You may be able to access some bad credit mortgages for £500 a month but this will depend on your personal circumstances but most importantly the type of bad credit you have.
For example, some mortgage lenders may be willing to lend to a borrower with bad credit if the bad credit is a satisfied CCJ but other mortgage lenders may only lend if the CCJ was below a particular limit and based on how old it is.
There are bad credit mortgage lenders who will accept borrowers with bad credit but they all have their unique mortgage lending criteria and a bad credit mortgage broker may be best placed to advise you on what bad credit mortgages you can get for £500 a month.
When considering bad credit this could be:
A debt management plan
A home repossession
What mortgage can I get for £500 if I am self-employed?
If you are self-employed you may still be able to get a mortgage for £500 a month but this will again depend on your personal circumstances.
Most self-employed mortgage lenders will insist that you have at least 3 years worth of accounts but there are some self-employed mortgage lenders that will accept a minimum of 12 years worth of accounts.
Sel-employed mortgages are thought of as being much more difficult to get but this is mostly because of the mortgage affordability assessments the mortgage lender uses to ensure that you can indeed afford the mortgage.
If you want to get a mortgage for £500 a month then the self-employed mortgage lender ill look to ensure that you have enough reliable income which can comfortably cover your monthly mortgage repayments of £500.
If you are looking to get a self-employed mortgage for £500 a month then you will likely need to provide the below documents to the self-employed mortgage lender. Getting these documents ready will ensure the mortgage process runs much smoother for you.
The documents you may be required to produce include:
Your SA302 tax calculation form
Your company accounts if you work through a limited company
If you are unsure of how to go about getting a self-employed mortgage for 500 then you could use the services of a self-employed mortgage broker who will likely have some experience of which mortgage lenders may be willing to offer you a £500 a month mortgage.
Can’t get a mortgage for £500 a month?
If you find that you cannot get a mortgage for £500 month then you could alternatively look to get a first-time buyer or home mover government scheme which would allow you to get a mortgage with either the help of a loan or by reducing the cost of buying a home through the property price if you are eligible.
Some of the government schemes available include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy- allows you to buy your home at a discount price.
- Preserved right to buy- same as above.
- Right to acquire- same as above.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
To ensure you are able to access any of the above government schemes for a £500 a month mortgage you should check the eligibility requirements of each of the government schemes or rather use a Government scheme calculator.
Once you have figured out which government scheme you are eligible for you should ensure you continue to meet the schemes eligibility requirements.
How to get a mortgage for £500
You may want to consider using an independent mortgage broker to get a mortgage for £500 a month.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases. This could be over 11,000 mortgage products. This may have some advantages than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. This will allow you to shop for your home easier as more estate agents and sellers may take you seriously or it will give you confidence that your remortgage is indeed a possibility before you make a full mortgage application. Once you have found a home you want to buy or are satisfied with the mortgage offer for your remortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document which details out the features of your mortgage including how much you will pay per month if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer. Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it, they will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer and set a completion date with the seller or their conveyancer.
In this brief guide, we answered the question “What mortgage can I get for £500 a month”. We hope you found it useful. If you have any further questions or comments please let us know.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.