What mortgage can I get with my salary?
One of the main questions we get asked is “what is the maximum I can borrow for a mortgage?”
This is a key element to understanding if you can proceed with your plans, or how you may proceed with them. It also gives you an idea of what price range you can consider for your property purchase.
However, there isn’t always a straightforward answer to this question as lots of elements play a part in your borrowing.
Fill out our quick and easy Mortgage Affordability calculator below. We only require a few details to see how much you may be able to borrow.
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What mortgage can I afford?
Knowing what you can borrow is one thing but knowing what you can afford can be a completely different thing altogether. Everyone’s circumstances are different, therefore we will all have a different view on what we feel we can afford.
On top of this, it is also likely that a lender will have a different view on how much they think you can afford to borrow.
At the end of the day, what you can afford is determined by the mortgage lender you apply to. So, what do lenders look at during their affordability assessment? Below we have highlighted some of the key things a lender will look at during your application.
What will lenders consider during your application?
- Income– this can be from a variety of sources, such as a salary, self-employed income, benefits or maintenance. Some lenders may even consider investment income, such as rents received if you have a rental property.
- Number of dependants– this does not necessarily solely relate to children, but instead refers to anyone who financially relies on you. Certain assumptions or figures from the Office of National Statistics are used to calculate how much of a financial commitment a dependant is.
- Credit commitments– this is how much you pay for your contractual credit commitments, such as loan payments, or HP agreements. Your credit card balances will also be taken into consideration. Most lenders calculate the monthly commitment based on the balance outstanding at the time of application This is regardless of your monthly payments, which may be different.
- Credit reports– by looking at your credit score and history lenders can get an idea of how you manage your money. Someone with a clean record will be presented in a better light than someone with bad credit.
- Travel– some lenders will predetermine a certain amount for expected travel costs. However, some will ask you what you actually spend or will likely spend after your move. It may also be that you pay for an annual travel or rail pass.
- Council tax– again, some lenders will build this into their automatic assessment. Some lenders will ask what it is or what it will be on a monthly basis following a house purchase.
- Other mortgages– the mortgage you are enquiring about may not be your only one following completion. Therefore, lenders will want to know details about any other mortgages you may have.
- Your age– this will dictate what term you are able to take your mortgage over. The term of a repayment mortgage can have an impact on the amount of the monthly payment, i.e. the longer the term, the lower the payment, and your age will play its part.
- Property value and loan amount– by having an indication of this, the lender can assess what the expected loan-to-value (LTV) will be. The lower this is, the less risk you pose to the lender and, in turn, the more they may be prepared to lend to you.
How much income do I need for a mortgage?
To get a mortgage for your own residential use, lenders rarely set a minimum personal income. Do bear in mind though, that a lender has to be happy that you can afford to pay your day-to-day bills before they can make any allowances for what may be left to cover a mortgage payment.
Therefore, whilst there may not be a minimum, you may find that a lender may not consider you are able to afford a mortgage.
If you’re looking at Buy-to-Let mortgages, many lenders now impose minimum personal incomes. This is usually £25,000 per annum, though there are some that will not impose a minimum.
If you want to run over your finances in detail with an expert, why not reach out today? One of our expert advisors will be happy to discuss your situation over a free initial consultation.
What mortgage can I get on my salary?
As mentioned above, when deciding what mortgage you can get, a lender will assess your affordability.
However, also built into their calculations will be a maximum income multiple that will override this affordability where necessary. The income multiple used will vary from one lender to the next and can also consider other factors, such as:
Type of interest rate – if taking a 5-year fixed rate or more, some lenders may increase the income multiple and permit you to borrow more. This is due to the lender having the security that the interest rate and mortgage payment will not change over this period. The thought is that in 5 years your financial situation will have changed for the better and you can accommodate any possible cost rises.
Loan-to-value (LTV) – the lower your LTV, the less risk you represent to the lender. In turn, they may opt to give a higher income multiple. As a reverse of this, should the LTV be higher such as 95%, they may decrease the usual income multiple.
Level of income – those on higher incomes are likely to have a greater disposable income after they have accounted for bills. As such, some lenders increase their income multiples for those earning above a set amount, such as £100,000 per annum.
Type of profession – some lenders may give a higher income multiple to those in certain professions. This is typically for those such as doctors, accountants, solicitors, teachers, dentists, vets, barristers and certain engineers.
Typical income multiples are between 4.5 to 5 times your income. However, a few schemes will permit even more with those that will go to 7x an applicant’s income.
As perhaps expected, those offering higher income multiples will have strict criteria attached. This means these deals aren’t always available to most people. Therefore, it can prove valuable to consult the help of a mortgage broker.
They will be able to assess your situation and determine who the most suitable lender for you is, based on your circumstances.
Borrowing that little bit more from one lender could make all the difference to your plans.
As a quick reference, the following shows the difference between 4.5x and 5x income with no additional commitments:
| 4.5x income | 5x income | Difference | |
| A mortgage on £20K salary = | £90,000 | £100,000 | £10,000 |
| A mortgage on £30K salary = | £135,000 | £150,000 | £15,000 |
| A mortgage on £40K salary = | £180,000 | £200,000 | £20,000 |
| A mortgage on £50K salary = | £225,000 | £250,000 | £25,000 |
| A mortgage on £60K salary = | £270,000 | £300,000 | £30,000 |
| A mortgage on £100K salary = | £450,000 | £500,000 | £50,000 |
How can I increase my chances of success and maximise my borrowing?
Navigating the market, especially as a first-time buyer, can bring uncertainty and anxiety, leaving you wondering whether you’ll be accepted for a mortgage.
However, if you undertake the right preparation you will have the confidence in knowing you have put yourself in the best position to maximise your chances of success.
Below we have highlighted our top tips on how you can increase your chances of success and maximise your borrowing.
As mentioned earlier in this guide, your credit score is one of the key areas looked at by any mortgage lender. Therefore, if your credit is poor it can work against you when applying for a mortgage.
In turn, this could result in things like higher deposit requirements, or a less competitive product being offered – one with higher interest rates. This is due to the risk a lender pairs with a less than good credit score.
Before applying take steps to ensure your more recent credit is in a better position. This will work in your favour as it demonstrates to lenders that you have taken control of your finances, and you can now better manage borrowed money.
Of course this is much easier said than done, however putting down a larger deposit can improve your chances of being accepted, as well as allow you to borrow more.
This is because the loan-to-value ratio will decrease, essentially meaning that a lender will have to lend you less money in comparison to the value of the property.
In turn, your application will be seen as lower risk which can allow you to unlock competitive products with lower interest rates.
If you are struggling to build up a deposit, you could consider something like a gifted deposit, which allows a family member or friend to provide or contribute towards your deposit.
Demonstrating to a lender that your finances are in a healthy position is another great way to maximise your chances of success. This will reassure lenders in your ability to meet monthly payments.
To do so consider showing a consistent income – a great starting point. If you are in employment provide payslips and bank statements from the last 3 to 6 months as a minimum.
If instead you are self-employed you will need to provide things like your SA302, bank statements and your trading accounts certified by an accountant.
Keep in mind that lenders will also assess your expenditure through your bank statements. If they deem that your debt-to-income (DTI) ratio is too high, they may not be willing to lend to you.
Essentially a DTI ratio compares how much money you owe to creditors in comparison to how much money you earn. So, if you can minimise this ratio, your application will be much more favourable.
Working with a mortgage broker can not only reduce a lot of leg work you may have to do, but it can also improve your chances of being offered a mortgage.
This is because expert brokers, like us, understand the market and the lenders in it. Therefore, based on an individual’s circumstances we can recommend the best lender for them to approach.
Each lender is different, so what is best for one person may not work for you. For example, a self-employed individual might be best suited to a lender who has products designed for those with a slightly more complex income.
If you want to get started on your mortgage journey today, or simply just have a chat and get an expert’s opinion, reach out today.
Phil Scott
Director
About the author
Phil has worked in the financial services industry since 1992, having started with a large insurance company. He went self employed in 1996 as an Independent Financial Adviser before setting up his first company, Needham Market Home Financial in 1999.
After four years, he decided to concentrate solely on mortgages and related insurances, and The Mortgage Centres was born. Since then, Phil has been influential in the opening of several new offices as the business continues to grow.
Qualifications
Financial Planning Certificate: 1,2 & 3
Year Attained: 1992
Certificate in Mortgage Advice and Practice (CEMAP)
Year Attained: 2001
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