How to buy a house in London (2023)

FAQs

What salary do I need to afford a house in London? ›

You need to be earning a total of almost £60,000 a year to afford the average house in the UK.

There are no legal restrictions on foreigners buying property in the UK, regardless of if you are a resident or not. You also don't need a visa for foreign investment in UK residential property.

To get a mortgage of £400,000 the minimum you'll need to be earning is between £88,000 and £100,000 at 4-4.5 times your income.

Rising house prices, high rents and low salaries are to blame, according to Michael Edwards, a University College London lecturer and expert on the relationship between property markets and planning.

You need somewhere between £5,000 and £10,000 saved up as a deposit to buy a low-cost home, £10,000 to £20,000 for a property costing the UK average, and around £40,000 to £50,000 if you're buying in London or similarly high-priced areas.

It's the norm for lenders to offer a loan of 4.5 times annual salary. That means the salary needed for a £500,000 mortgage would sit around £110,000.

Generally speaking, you can borrow 4.5 times your combined household income. That means your annual earnings would need to be just over £66,000 to borrow £300k.

Can you get UK citizenship by buying property? Investors cannot rely on investment in UK property assets as the basis of an application for residency or citizenship.

Is it cheaper to buy or rent your home in London? In the short term, it is often cheaper to rent in London. This is because the rent you pay is likely to be lower than your mortgage repayments, and the deposit on a rental property is significantly less than the initial costs of buying a home.

There are no legal restrictions on expats buying property in the UK. Foreigners and non-residents can also get a mortgage in the UK. However, those with less than two years of residency in the UK and without a job may face more stringent requirements and a bigger deposit.

Is London worth buying? ›

In short, yes! Buying a flat in London is a great investment for your money. With house prices continuously rising in the capital, it's an opportunity that shouldn't be missed. The market conditions have never been better to buy a property in London.

Can you use a 401(k) to buy a house? The short answer is yes, since it is your money. While there are no restrictions against using the funds in your account for anything you want, withdrawing funds from a 401(k) before age 59½ will incur a 10% early withdrawal penalty, as well as taxes.

Generally, you need to try to save at least 5% of the cost of the home you'd like to buy. For example, if you want to buy a home costing £150,000, you'll need to save at least £7,500 (5%) for the deposit.

Can I get a mortgage on £20k a year? Earning a salary of £20k a year is a decent income and getting a mortgage on this wage is certainly possible.

So, for a £200,000 mortgage, that means yearly earnings of approximately £44,000 would be required. Given the average UK salary sat at £31,772 in 2021 that may seem a bit high but if you're buying jointly with someone, the £44,000 can be your collective earnings.

How much do you need to earn to get a £250,000 mortgage? Based on the typical income multiple used by most lenders – 4.5 times annual income – you'd need to earn £55,000 to be able to borrow this amount.

The Office for Budget Responsibility (OBR) said it expects house prices to fall for the next two years, predicting a drop of 9% between now and autumn 2024. The cost of a mortgage, however, is likely to remain high. Currently rates are just above 6% – the highest since the financial crisis.

London becomes fourth most expensive city in the world: Rent, petrol and cooking oil drive cost of living. A perfect storm of rising inflation, the war in Ukraine and soaring house prices and rent, have turned London in to a pressure cooker of expense, making it the fourth most costly place to live in the world.

Some lenders can ask for 40% deposits, which means that if the property you wanted to buy was worth £120,000, you could need a £48,000 deposit. Applicants with a good credit history and high affordability are likely to have a wider range of lenders to choose from, potentially with more desirable deposit requirements.

How can I buy a house with low income UK? ›

Broker fees -

So, for a £150,000 mortgage this could mean a deposit (based on the property value) between £8,000-£50,000. This type of fee will not apply to all lenders or products, but it's important to find out if it applies, as it can be between 1-2% of the total loan amount.

If you consider that people earning £2,500 to £3,000 gross per month (which equates to a gross salary of around £40K per annum) are thought to be getting a decent wage, then yes. Those earning a gross salary of £3,300 to £4,000 per month, are on a good salary by UK standards.

UK residents and citizens can buy property within the UK and foreign nationals can also buy property within the UK. There are no legal restrictions on expats or foreign nationals buying property.

How much does a £100,000 mortgage cost per month? For purely example purposes, a £100,000 mortgage with a 25 year term and an interest rate of 2.75% would work out at £461 per month. However, the exact figure will depend on the interest-rate and mortgage term available from the lender you choose to deal with.

What you'll need to earn for a £450,000 mortgage depends on the income multiple a lender is willing to go to. It is common for banks to lend 4 times or 4.5 times your annual salary, which would mean you will need to earn between £100,000-£112,500 a year.

The amount you can borrow will vary between lenders, but - assuming you pass affordability checks - most lenders allow you to borrow up to between 4.5 and 5.5 times your annual salary. That means that if you earn £30,000, you may be able to get a mortgage of around £150,000.

On an annual income of $80,000 after-tax, a lender may offer you a mortgage of $1.75 million. This assumes that the applicant's credit score is at least average. It also assumes that there are no outstanding debts owed. The applicant's expenses are also zero.

You can apply for citizenship if you've lived in the UK for 5 years and have had one of the following for 12 months: indefinite leave to remain in the UK. 'settled status' (also known as 'indefinite leave to remain under the EU Settlement Scheme')

If you've lived in the UK for 5 years, you may be able to apply to stay permanently. Indefinite leave to remain is how you settle in the UK. It's also called 'settlement'. It gives you the right to live, work and study here for as long as you like, and apply for benefits if you're eligible.

Can I live in the UK without a visa? ›

Contrary to popular belief, you need a visa to move to the UK if you are an American citizen. The only exception to this is that if you are visiting with no long-term plans, you can stay in the UK without a visa for six months – but you cannot work during your visa-free stay.

Despite the pessimism some consumers feel, 2022 could be a great year to buy a home. However, it's a good idea to act quickly while market conditions are still favorable. For instance, if you get your initial mortgage approval soon, you can lock in interest rates before they go any higher.

If the answer is less than five years, you're probably better off renting. In general, it's best to buy when you have your eye on the horizon and you're thinking long-term. Experts largely agree that you shouldn't own unless you plan on staying in the home for at least five years.

Renters are returning to London in droves as offices and universities return in person. Interest rates are rising, which in turn, pushes mortgage rates up for landlords. And everyone is poorer because of a cost-of-living and energy crisis. All of this has made renting in London near impossible.

The general rule is that you need to live in the UK for three years if you want to get a UK mortgage. This gives you a three-year address history, which is the standard amount that is required to give you a reliable and traceable credit history.

If you are exceptionally talented or wealthy or have a familial connection to the UK, you can move to the UK without a job. Instead, you can apply for one of the following visas: UK Ancestry Visa.

Some individuals have misconceptions regarding the various routes to residency in the UK. Purchasing a residential property in the UK will not give the investors or them residency in the UK.

South London

Wandsworth was the highest ranking borough for first-time buyers, according to the metric. It has the highest employment rate in the capital, at 77pc, and the cheapest quartile of homes cost an average of £472,348.

April or May are generally the best times to buy a house in the UK. There are usually more properties on the market as sellers emerge from winter and consider a move, while the market is generally more active once the weather starts to warm up and the clocks go forward.

Can I afford a 450k house? ›

To finance a 450k mortgage, you'll need to earn roughly $135,000 – $140,000 each year. We calculated the amount of money you'll need for a 450k mortgage based on a payment of 24% of your monthly income. Your monthly income should be around $11,500 in your instance. A 450k mortgage has a monthly payment of $2,769.

What to do next. Open a savings account if you don't already have one – go online or book an appointment at your bank or building society. Check whether you can reduce the deposit you need, for example, through a Help to Buy scheme or family support. Set up a regular payment into your savings account every month.

To calculate 'how much house can I afford,' a good rule of thumb is using the 28/36 rule, which states that you shouldn't spend more than 28% of your gross, or pre-tax, monthly income on home-related costs and no more than 36% on total debts, including your mortgage, credit cards and other loans, like auto and student ...

Government 95% mortgage guarantee scheme

In the Spring Budget 2021, the government announced a new 95% mortgage guarantee scheme. The scheme enables homebuyers to secure a mortgage with a 5% deposit, with the government underwriting 95% mortgages.

The best age to buy is when you can comfortably afford the payments, tackle any unexpected repairs, and live in the home long enough to cover the costs of buying and selling a home. Legally, you must be at least 18 in most states to buy a home.

Let's get the above answer out of the way first: If you are a single person who has never owned a home before anywhere in the world, you will be regarded as a bona fide first-time buyer. Same applies to couples where both partners have never previously bought a home.

Help to Buy for a single person

Help to Buy is a range of government schemes for first time buyers. One option is an equity loan, which is like those offered by developers, but it comes from the government. The scheme is designed to help you create a 20% deposit (40% in London), but you'll need to put down at least 5%.

A person is generally classified as a first-time-buyer if they're buying their only or main residence, and have never owned a freehold or have a leasehold interest in a residential property in the UK or abroad. A mortgage is a loan taken out to buy property or land.

In almost all cases, you will need a deposit of at least 5% of the property price. That said, the average for a first time buyer in the UK is around 15%. The bigger the deposit, the lower your mortgage interest rate and the smaller your monthly repayments.

What benefits do first-time buyers get UK? ›

The government's Help to Buy scheme is designed to help first-time buyers get a foot on the property ladder by allowing them to buy their first home with a mere 5% deposit. Buyers can borrow 20% of the property's price (or 40% if they live in London), interest-free for the first five years.

The maximum amount you are able to borrow from a lender is based upon your annual salaried wage. Most commonly lenders allow you to lend between 4 and 4.5 times your annual salary – some will offer 5 times, some 6 and in very, very rare cases, 7 times the amount.

With a first-time buyer mortgage, you're likely to be looking for a 90% or 95% mortgage deal (meaning you'll need a 5% or 10% deposit saved).

A broad definition of low household income, as suggested by the Government, applies to annual earnings less than 60% of the median UK household income. For London, this cut-off point is approximately £21,000[75].

A single person living in London would need about £50,000 a year; A couple should be able to get by with £60,000 a year; A family of four would need an average income of £70,000 to cover the cost of living in London.

Most buyers will require a mortgage in order to purchase a home. You can typically borrow a multiple of your household income and this amount will be influenced by your credit score. Adding this sum to your deposit will give you an indication of your budget.

To access low-cost deals, it is recommended that you aim for a minimum deposit of 20%. Interest rates will continue to fall in 5% LTV brackets until you have at least a 40% deposit. After that stage, you could have a 40% deposit or an 80% deposit, as an example, and you would have access to the same interest rates.

You may find that with this deposit you are able to get a mortgage and take your first step on the property ladder – perhaps through a scheme like Help to Buy. There are also mortgage providers like Ocean Finance that offer home loans designed for people with a less-than-perfect credit history.

The industry standard deposit requirements for a £200k mortgage is around 20 - 30%. Although there are a number of other factors affecting lender requirements, you should prepare to have a minimum of £40,000 set by if you want access to the most competitive rates.