Few people are lucky enough to buy a home when they’re in their late teens or early 20s - but if you are, will your age stand against you when you apply for a mortgage?
How young is too young?
Well, as with any type of formal borrowing, you need to be at least 18 to take out a mortgage. However, there are plenty of reasons why getting a mortgage as soon as you’ve blown out the candles on your birthday cake is not common among 18-year-olds in the UK.
The first is that you’ll need to have a deposit saved that’s the equivalent of (typically) at least ten per cent of the value of the property you want – and usually more if you want to get the best deal possible. Even if you’ve been working part time, it’s unlikely you’ll have saved up that amount of cash.
But what if you’ve just received a windfall like an inheritance, or got access to a savings account your family have been making donations to your whole life? If you have the cash you need for a deposit, will you be able to get a mortgage then?
Credit history? What credit history!
The fact is, mortgage applications are judged on a case-by-case basis and there are plenty of factors that can affect the outcome. If you have the money you need for a deposit, you’re in a good position, but that’s not the only thing lenders will take into account.
Another thing mortgage providers will look at is your credit history. This is a record of your borrowing and it helps them make an informed decision on whether you’ll be a responsible borrower – making your mortgage payments on time and in full each month – or whether you could pose a risk to them.
In the UK, you must be aged over 18 to enter into a formal borrowing agreement, whether that’s for an overdraft, credit card, loan or mortgage. If you are only just 18 or even in your early 20s, this doesn’t give you long to build up the credit history lenders are looking for.
What else counts against me?
As we mentioned above, lenders all have their own unique criteria by which they measure mortgage applicants, and it’s impossible to know exactly what this is. However, it’s a safe bet that they’ll want to know what your salary is and have the knowledge that your job is secure.
Again, if you’ve only just turned 18 it’s unlikely you’ll be able to demonstrate much permanence in a full-time job, as you’ll probably have only just left school or college. And if you plan to head to university, you’ll need to wait even longer before you can show lenders you’ve been able to hold down a permanent job with a salary that allows you to afford your mortgage payments and other outgoings.
Should I just give up?
Of course not! While the above factors may make it more challenging for you to find and secure a mortgage, if you have a deposit saved and a secure job, there’s no reason why you should give up on your dream entirely. A large deposit will put you in a better position, and if you plan to take out the mortgage with a partner or friend, their salary and credit history will also be taken into account, which could help your cause.
However, you may equally decide to take some time out to keep saving towards your deposit and start building up your credit history. You can do this by opening a credit card and making sure that you pay the balance in full each month. This shows lenders that you’re able to borrow responsibly, which will make you a less risky bet in spite of your age when you do apply for a mortgage.