Entering the world of homeownership is an exciting milestone for young adults. The prospect of owning a home and taking the first step onto the property ladder can seem daunting, especially for those who have just turned 18. In this article, we will explore whether it is possible to secure a mortgage at the age of 18 in the UK, as well as the challenges and opportunities that come with this undertaking.
Eligibility for a Mortgage at 18
In the UK, the legal age to enter into a mortgage contract is 18. This means that, theoretically, it is possible for an 18-year-old to secure a mortgage. However, there are several factors that can make this a challenging endeavour.
Credit history: A key element in securing a mortgage is your credit history. At 18, it’s likely that you have a limited credit history, which can make it difficult for lenders to assess your creditworthiness. However, responsible use of credit products like credit cards or taking out a small personal loan and making on-time repayments can help with this over time.
Employment history and income: Mortgage lenders typically require a steady employment history and a minimum income level to ensure that you can afford the mortgage repayments. At 18, you may not have an established employment history, and your income may not meet the lender’s requirements.
Deposit: Saving for a deposit can be a challenge for anyone, especially for young adults who may not have had the time to accumulate significant savings. A larger deposit not only reduces the loan amount you need to borrow but also makes you a more attractive candidate for a mortgage.
Affordability: Mortgage lenders in the UK use affordability calculations to determine if you can afford the mortgage repayments. These calculations take into account your income, expenses, and any existing debts you may have. At 18, you may find that your affordability is lower compared to someone with a more established financial profile.
Overcoming the challenges
Although securing a mortgage at 18 may be difficult, it’s not impossible. Here are a few steps you can take to improve your chances:
Improve your credit score: Start building your credit history by using credit products responsibly. Make sure to pay your bills on time and avoid maxing out your credit limit.
Secure a stable job: Focus on finding a stable job with a reliable income, and try to demonstrate a track record of steady employment.
Save for a larger deposit: The larger the deposit, the better your chances of being approved for a mortgage. Start saving early and consider setting up a Help to Buy ISA or Lifetime ISA to take advantage of government bonuses.
Explore government schemes: The UK government offers various schemes to help first-time buyers get onto the property ladder, such as the Help to Buy Equity Loan and Shared Ownership schemes. These can make homeownership more accessible for young adults.
Consider a guarantor mortgage: If you have a family member or friend who is willing to act as a guarantor for your mortgage, this can improve your chances of being approved. However, this option comes with risks for the guarantor, as they will be liable for the mortgage repayments if you default.
While it is legally possible for an 18-year-old to secure a mortgage in the UK, several challenges need to be overcome. By focusing on building a strong credit history, securing stable employment, and saving for a larger deposit, young adults can increase their chances of successfully obtaining a mortgage. Additionally, exploring government schemes and considering a guarantor mortgage may provide the necessary support to make homeownership a reality at a young age.