My siblings and I jointly owned our family home together, but I have recently sold them my stake. It means I now have enough for a deposit on a property of my own.
But I have also just quit my job to take part in a year long MBA course that will hopefully help propel my career to the next level.
I am living off savings and dividend income from shares, and can dip into the money from the house if I need it.
There is a house on the market that is perfect, but I would need a mortgage to afford it. Can I still get one based on my income from shares and savings?
If not, could a buy-to-let mortgage be a possibility? Part of my MBA is abroad, so could I let it out, and once I have started earning again, switch it back to a normal mortgage and then move back in?
Cash rich but income poor: Our reader is wondering if their savings and investments will be enough to secure a mortgage
Ed Magnus of This is Money replies: The usual advice to this question would be to wait until you complete your MBA course and have started a new job.
With any luck you’ll be on a good salary and be able to borrow more, enabling you to afford a bigger and better home than you would if you tried to buy now.
The problem is that you have found a property you think is perfect, so I’m not going to sit here and tell you to wait.
But the situation you have described will certainly make it much harder to get a mortgage.
If it is possible, you’ll be looking at an extremely small pool of lenders and likely facing higher rates for the privilege.
Most banks and building societies offer residential mortgages based on a person’s annual income.
The maximum they are prepared to lend typically ranges between 4.5 to 6 times someone’s gross annual salary. This depends on the specific lender and the borrower, however.
So trying to buy something without any annual salary or any self-employed income is going to be tricky.
Purchasing a property as a buy-to-let would open up more options, given that the mortgage amount in such situations is determined by how much rent the property can command, rather than the landlord’s personal income.
However, if you do that, you can’t then live in the property, which rather defeats the point. To do so would be in breach of your mortgage agreement.
We sought expert advice from mortgage broker Chris Sykes, a property finance specialist and director at MSP Financial Solutions.
Chris Sykes, a property finance specialist and director at MSP Financial Solutions
Can someone get a mortgage without a job?
Chris Sykes replies: It’s possible to get a mortgage in this situation, but only in very specific scenarios.
My first question would be whether this person has anyone who would be willing to buy the property together with them, or to be a guarantor.
A guarantor with income being named on the mortgage would help, but this person would be liable to step in and make payments if you could not.
If you can assure certain lenders that the gap in income is temporary, with concrete evidence – for example, a signed job contract from a firm with a future dated start date, they may be willing to lend – but that doesn’t sound as if it is the case here.
Finally, you don’t say how much you have in cash and investments, but some lenders may also consider lending to you if are a high net worth. This means having £3million-plus in net assets.
If you purchase the property as a buy-to-let, you will need to rent it out and not stay there yourself.
If you intended to live in the property at some point in the future, this would need to be disclosed to a lender and more often than not you would be declined.
If you want to buy it as a genuine buy-to-let investment, it will be tricky to get a mortgage, but potentially possible depending on your individual circumstances.
A lot of lenders will have minimum criteria, for example stipulating that you must own a property already to buy a buy-to-let.
Many will require you to earn over £25,000 a year and you must have good credit history.
There are exceptions to every rule, but if you are looking for exceptions to multiple rules then you are really looking to stretch the possible.
There are bridging loans that can provide short term property finance, but the lender has to see a clear path to getting the money back.
Without some certainty of your ability to get a residential mortgage in the future, that likely wouldn’t be an option either.
Have you had any similar cases to this one recently?
I’ve had a case where a borrower split up with his ex, took the money from the sale of their house and moved in with his parents.
He didn’t have any income because he decided to go to university near home as a mature student, but he also didn’t have any bills or rent to pay.
He didn’t want to just be sat on a large sum of money and decided he wanted to stay on the property ladder by purchasing a buy-to-let property far away from where he lived.
We justified this to lenders by the fact he’s always lived around the same place, an investment didn’t make sense where he lived, and he had plenty of leftover cash after completion to cover any potential rental voids. It worked.
