Which kind of mortgage can you afford?
Mortgage lenders generally use income multiples to work out the maximum amount they can loan to you. The most common multiple is 4 times your annual income, but some lenders will offer up to 5 times your annual salary. However, in recent years, some lenders have offered higher income multiples, such as 6 times your annual salary.
To be eligible to borrow 5 times your salary for a mortgage in the UK, you will need to meet certain requirements. Lenders will look for borrowers with a better credit history, meaning no missed or late payments on credit accounts, and a high credit score.
Additionally, Lenders normally have a minimum income requirement to qualify for a 5 times salary mortgage. Lenders will use your income as a basis to calculate your affordability and determine if you can afford to make the monthly payments. They will also factor in any financial commitments you have and your expenditure to ensure the mortgage is affordable.
Ultimately, having a combination of a high income and a good credit score is crucial to qualify for a 5 times salary mortgage.
The benefits of joint incomes
When applying for joint mortgages, your income will be combined with your partner’s income. This means that you may be able to borrow 5 times your joint annual salary possibly giving you a much needed boost. Two incomes can provide more security too and this can work in your favour with some lenders who may perceive the level of risk you pose as lower.
Higher the income the better
Having a high income is a benefit when applying to borrow 5 times your salary. Note that some lenders will base criteria on what you do for a living and what your salary is. For example, some will lend to doctors and lawyers, because they require a minimum £200,000 salary for more than 5x multiple income. With an experienced broker on your side, it will help to secure borrowing, as well as manage the long-term cost of the overall debt.
Your credit score counts
If you have a bad credit history or a low credit score, it may be more challenging to borrow 5 times your annual salary. Lenders may view you as a higher risk, and they may be hesitant to offer you a mortgage. However, this does not mean that you cannot get a mortgage. You may need to work with a mortgage broker to find a lender that is willing to work with you.
As specialist Mortgage Advisors, Greenacre Financial Services are here to help with 5 x income mortgages.
Mortgage application requirements
When you are applying for 5 x your income or any mortgage, the lender will look at your credit history and your income to determine how much you can borrow. They will also look at your outgoings, such as your monthly bills and expenses, to ensure that you can afford the monthly payments.
Your age, job type, source of deposit, loan to value (LTV) will all be factors too. It’s worth noting that you don’t have to borrow the maximum amount that a lender is willing to offer you. You should only borrow what you can afford to repay. You may want to consider using a mortgage calculator to determine how much you can afford to borrow.
Deposit requirements for a 5 times income mortgage
The deposit amount required for a mortgage product depends on the type of mortgage you wish to apply for. For residential buyers, some lenders may offer mortgages with as little as a 5% deposit, but others may require a 10% deposit, resulting in a loan-to-value rate of 90%.
Generally, residential mortgages have lower deposit requirements compared to buy-to-let mortgages, as they are considered less risky to lenders. The repayment of residential mortgages is dependent on the borrower’s income, while buy-to-let mortgage repayment relies on the borrower’s ability to find tenants to pay rent.
Read our blog on The three biggest factors that determine mortgage affordability, which includes advice on income flow limit and the mortgage affordability test.
Word of warning
It’s important to note that higher income multiples may not always be in your best interest. Borrowing more money means you will have higher monthly payments, and you may struggle to make ends meet. Additionally, if interest rates rise, you may find it difficult to keep up with your mortgage payments.
It’s essential to seek advice from a mortgage advisor with positive reviews. Reviews can give you an insight into the broker’s experience, knowledge, and professionalism. A good broker should be able to provide you with tailored advice and help you find a mortgage product that suits your specific needs and financial circumstances.
How can we help you?
So, to answer the question, can I borrow 5 times my salary for a mortgage? Yes, it is possible to borrow 5 times your salary for a mortgage – or more – but it will depend on your circumstances. It’s important to work with a Whole of Market mortgage broker to find the best mortgage deal for your circumstances.
You can visit your bank or building society, but with so many mortgage lenders out there it can be challenging to find the right one for you. Working with a mortgage broker like us here at Greenacre Financial Services will help you navigate the mortgage market and find a lender that is willing to offer you a 5 times salary mortgage.
For more information about any of our services, or if you have any questions including can I borrow 5 times my salary for a mortgage? get in touch by calling us on 0203 3939 222.