Buying a Rented Home with a Limited Deposit
The latest industry news and guides from Active Mortgages.
The latest industry news and guides from Active Mortgages.
A long-term tenant approached us after being offered the opportunity to purchase the property they were currently renting.
The landlord had given them first refusal before placing the property on the open market, creating a unique opportunity to become a homeowner without the disruption of moving.
The client was employed and also received pension income, giving them a total annual income of approximately £45,000. They were in their mid-sixties, planned to continue working for several years, and had minimal unsecured debt.
However, they had only been able to save a deposit of around £10,000.
The property was being offered for approximately £400,000.
While the client had a stable income and a strong desire to purchase the home, there were two significant barriers:
The client hoped that their employment income, pensions, and additional benefit income would be sufficient to secure the mortgage required.
Unfortunately, the combination of the purchase price and low deposit meant a substantial borrowing requirement that exceeded what lenders were likely to offer.
We completed a detailed affordability assessment using:
We also explored lenders that offer low-deposit mortgage options and assessed the maximum borrowing available across multiple providers.
The aim was to establish whether a suitable mortgage solution existed before the client incurred unnecessary costs or raised expectations.
Following a full review, the maximum borrowing available was significantly below the amount required to purchase the property.
While the client’s income profile was stronger than initially expected, affordability calculations indicated that the desired loan amount was beyond current lending limits.
As a result, we were unable to recommend a viable mortgage solution for the purchase at that time.
Although this was not the outcome the client had hoped for, they received clear and honest advice based on lender criteria and affordability requirements.
Not every mortgage enquiry results in a successful application, but every client deserves clear and transparent advice.
This case highlights the importance of carrying out a full affordability assessment before proceeding with a property purchase, particularly where:
By taking an advice-led approach, we were able to provide the client with certainty about their position and help them avoid pursuing an application that was unlikely to succeed.
Sometimes the most valuable advice is providing an honest assessment of what is realistically achievable.
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