If you’re looking to buy a house that requires a £400,000 mortgage, you will likely want to know what your monthly repayments might be. This level of mortgage is double the average mortgage in the UK and therefore requires greater income as well as other factors we delve into in this guide. It also sheds light on the impact of factors like interest rates and the term of the loan on repayment amounts. For free independent advice on navigating a £400,000 mortgage, our expert mortgage advisers are here to help.
Eligibility for a £400,000 Mortgage
The cornerstone of your eligibility for a £400,000 mortgage lies in your financial health. Lenders must ascertain that you can comfortably manage the mortgage repayments and the associated costs.
A multitude of factors come into play, shaping your mortgage repayment eligibility and the overall financial commitment it entails.
Mortgage Lenders’ Criteria
Criteria for a £400,000 mortgage application vary among lenders. Some adhere to strict guidelines, while others are more accommodating and capable of adjusting to a wide range of financial scenarios.
Our brokerage services provide personalised guidance, adapting to your unique financial circumstances. We conduct an in-depth assessment of your situation to match you with lenders that align with your financial profile.
Mortgage lenders typically take into account the following considerations when evaluating eligibility:
- Employment Stability: Lenders scrutinise the consistency and security of your employment, looking for a stable work history as an indicator of reliable income.
- Income vs. Expenditure: Your financial discipline is assessed by comparing your incoming funds against your outgoings. This helps lenders gauge your capacity to handle the additional burden of a mortgage.
- Credit History: Your historical interactions with credit, inclusive of any negative instances, are examined to evaluate your reliability as a borrower.
- Age: Your age can influence the terms and eligibility for the loan, as it may affect the loan’s duration and the risk assessment.
- Property Type: The type of property you intend to purchase is also a factor, as different properties carry different levels of risk and investment potential.
It’s important to note that lender criteria vary; while one may reject an application due to adverse credit history, another might be more lenient if those issues are dated. As mortgage experts, we find lenders offering the most favourable terms for your specific situation.
Discover Your Mortgage Borrowing Capacity here >
How Much Do I Need to Earn to Get a Mortgage of £400,000 UK?
Lenders typically offer mortgages ranging from 4 to 5 times your yearly income. Therefore, for a £400k mortgage, an annual salary of £80,000 to £100,000 is generally required. This income mortgage multiple is a guideline set by lenders to ensure that you can manage the monthly mortgage repayments while handling other financial obligations. Bear in mind, these numbers are indicative and subject to change based on the lender’s evaluation of your financial status, including your credit history, debt-to-income ratio, and deposit size.
Considering Joint Income Mortgages?
For couples or joint applicants, combining incomes can significantly boost eligibility for a £400,000 mortgage, making it possible to own a more expensive property. Opting for a mortgage on joint income can also alleviate the burden of monthly repayments, as the merged financial strength offers more affordability and flexibility.
How much will my £400000 mortgage repayments be each month?
With interest rates approximately at 4.5% as of early 2024, and considering a standard 25-year mortgage term, the average monthly repayment for a £400,000 mortgage is about £2,223.
However, this is just an estimate as the monthly repayments on your mortgage will depend on a number of different factors. Keep reading to learn more and then get in touch with our team of mortgage brokers if you would like advice tailored to your situation.
The cost of your repayments every month will depend on:
- The interest rate
- The term of your mortgage
- The mortgage type
- The size of your deposit
- Your credit rating
As your repayments will depend on all of these factors, we cannot give you an exact figure here.
But if you would like to know what your monthly payments are likely to be, based on these factors, get in touch with a member of our team or use the mortgage repayment calculator further down in this guide for an estimated figure.
Let’s take a closer look at the factors that affect the repayment of your mortgage.
£400000 Mortgage Calculator
How do interest rates affect monthly repayments on a mortgage of £400 000?
Unless you choose an interest-only deal, your monthly payments will be made up of a portion of the loan capital and the interest rate set by your lender.
At the time of writing, lenders are offering fixed rates of around 5% but the rate you are offered will depend on a number of factors, including your credit score, the size of your deposit, and the mortgage term.
The lower your rate, the lower your monthly repayments. As a 400K mortgage is a larger mortgage than the average getting the lowest interest rate possible is important. Sometimes it can be worth paying a higher arrangement fee to obtain a lower rate of interest. We can easily calculate what is best for you. Talk to one of our experienced mortgage advisers.
If you want to benefit from the lowest rates of interest (which of course you do), you can take some of the following steps.
- Increase the size of your deposit
- Shorten the term of your mortgage
- Improve your credit score
- Use the services of a mortgage broker
Example Calculations on a £400,000 mortgage
The below table and graph can give you an idea of what the repayments on a £400,000 mortgage might be based on the interest rate and term of your mortgage.
| Term | 2.00% | 3.00% | 4.00% | 5.00% | 6.00% |
|---|---|---|---|---|---|
| 5 Year Term | £7,011 | £7,187 | £7,367 | £7,548 | £7,733 |
| 10 Year Term | £3,681 | £3,862 | £4,050 | £4,243 | £4,441 |
| 15 Year Term | £2,574 | £2,762 | £2,959 | £3,163 | £3,375 |
| 25 Year Term | £1,695 | £1,897 | £2,111 | £2,338 | £2,577 |
| 35 Year Term | £1,325 | £1,539 | £1,771 | £2,019 | £2,281 |
| 40 Year Term | £1,211 | £1,432 | £1,672 | £1,929 | £2,201 |
How does the mortgage term affect £400 000 mortgage repayments?
The typical duration for mortgage terms in the UK is around 25 years, providing a balance between monthly affordability and overall interest cost.
However, you can opt for a mortgage over a shorter or a longer term, depending on your financial goals and repayment capacity.
If you take out a mortgage over a shorter term, your monthly repayment will be higher. This is because you will be paying off the loan capital in a shorter amount of time. Despite the higher payments, you will usually pay less interest on a shorter-term mortgage.
If you take out a mortgage over a longer term, your monthly payments will be lower. However, the overall cost of your mortgage will be higher as you will be paying interest over a longer period of time.
How long should you set your mortgage term for?
Well, that depends on what you can afford to pay each month.
If you have the financial means to take out a mortgage over a shorter term, you will pay off your loan sooner.
But if finances are tight and you want to reduce the payments on a £400,000 mortgage, you might want to take out a mortgage over a longer term.
For tailored advice, get in touch with our team. We will look at your financial position and will advise you on your best course of action.
How does the mortgage type affect the monthly repayments on a £400k mortgage?
The specific type of mortgage you choose is a significant factor that influences the monthly repayments on a £400k mortgage, with options like fixed-rate, adjustable-rate, and interest-only mortgages each offering different repayment structures.
This variability can significantly impact the amount you pay each month.
Fixed-rate mortgages
Fixed-rate mortgages are popular with most people because the interest rate is set for a fixed period of time. This can make budgeting easier as there will be no sudden interest hikes over the loan duration.
If mortgage rates drop, you can remortgage to a new fixed deal at a lower rate at a later date. This will usually be at the end of your loan term as you may be hit with an early repayment charge if you decide to remortgage earlier. If you don’t move to a new mortgage deal, your mortgage will revert to your lender’s standard variable rate which will often be higher than what you were on before.
Tracker rate mortgages
The interest rate on a tracker mortgage will rise and fall in line with the Bank of England base rate. As many lenders offer discount tracker rates, your monthly payments may be lower than those on a fixed-rate mortgage. But as the rates will fluctuate at a set percentage above the base rate, there could be times when you have to pay more.
Interest only mortgage deals
If you choose an interest-only mortgage instead of a standard repayment mortgage, your payments are only made up of interest. This can reduce the size of your monthly loan amount but you may have to pay a higher rate of interest. You will also have to pay the loan capital when your loan ends.
Which type of mortgage is best for you?
There are pros and cons to each type of mortgage so you should take these into account when considering your monthly income and personal circumstances. To learn more, check out the relevant guides on our website and get in touch with a member of our team for mortgage advice based on your situation.
How does the mortgage deposit affect the monthly repayments of a £400k mortgage?
With a mortgage deposit, you pay off a chunk of the property value upfront. The bigger the deposit, the less you will have to pay overall as you will have paid off more of the purchase price at the start.
Mortgage lenders are also likely to offer you cheaper deals with lower rates of interest if you can make a higher deposit so your typical repayments will be more affordable than those on a mortgage taken out with a smaller deposit.
How does credit history affect £400k mortgage repayments?
With very few mortgage providers lending to customers with a low credit score, you should do all you can to improve your credit rating before you make your mortgage application.
This isn’t to say you won’t be eligible for a mortgage if you have a bad credit history as some specialist lenders will grant you a mortgage approval. However, you may be subjected to higher rates of interest and you might have to put down a bigger deposit due to the perceived risk you pose to the lender.
If you have a good credit score, you will pose less of a risk to lenders as they will assume you are less likely to default on your payments than somebody with a low credit score. As such, you will benefit from lower rates with the best deal on your £400,000 mortgage and this will reduce the size of your mortgage payments.
You can improve your credit score by making bill payments on time and reducing your credit card bills and other debt.
What other factors affect repayments on a £400k mortgage?
We have highlighted the main factors that can affect the monthly payments on a 400 000 mortgage. However, the monthly costs and the overall cost of your mortgage will also depend on other factors within the lending criteria. These include the following.
Your debt-to-income ratio
To calculate your affordability for a mortgage, your lender will take your earnings into account. They will work out your debt-to-income ratio, which is a measure of how much of your monthly income goes towards paying off your credit cards, finance loans, and other debts.
The less debt you have the better as your debt-to-income ratio will be lower. This is advantageous for you as you will have access to mortgages with the best deal and more competitive interest rates due to your increased level of disposable income.
Your age
Most lenders impose an age cap of 65-70 (the age you need to be when your mortgage ends) but there are some lenders who will raise that cap to 70 and above.
It’s been our observation that if you’re an older applicant, you may have to pay more on your mortgage. This is because you are less likely to be eligible for a 25-year mortgage (or longer) if you’re close to or at retirement age. As such, you will probably be asked to take out a mortgage for a shorter term and as we mentioned early, these come with higher mortgage payments.
Employment status
If you’re a PAYE employee, you may be offered better rates than somebody who is self-employed, as you should have a more reliable income.
This isn’t to say you won’t be offered attractive fixed rates if you’re self-employed. But as your income may be less stable than that of a PAYE employee, there is the possibility that you might be charged interest at an interest rate higher than the average figure.
Other costs that can affect your mortgage
You have to factor in more than the repayments on your £400,000 mortgage when budgeting your finances.
You also need to factor in mortgage fees such as:
- arrangement fees (sometimes called the booking fee or product fee),
- valuation fees,
- mortgage account fee,
- and the other fees that are included within the overall cost of a mortgage.
On top of these, you will have other expenses to cover. These will include the costs associated with your property, such as the
- estate agent fees,
- solicitors’ fees,
- homebuyers survey fees,
- and stamp duty.
It’s important that you settle on a property and mortgage that you can afford as your home may be repossessed if you don’t pay the debt secured upon it. As such, you should take all of these costs into account before making your mortgage application.
Please note: Some mortgage brokers will also charge you a fee if you decide to purchase a mortgage using their services. This is something you need to consider when using a broker-matching service. However, YesCanDo Money is a fee-free mortgage broker so if you arrange your mortgage with us, you won’t have to pay us a penny!
Frequently Asked Questions
What is the monthly payment on a 400k mortgage?
The monthly repayment on a £400,000 mortgage varies. Based on an average interest rate of 4.5% over a 25-year term, the monthly repayment on a £400,000 mortgage would be approximately £2,223.33.
Can I afford a 400k house UK?
To afford a £400,000 house in the UK, your annual income should ideally be 4 to 5 times the house price, which equates to about £160,000 to £200,000.
How much deposit do I need for a 400k house?
For a £400,000 house, a deposit typically ranges from 10% to 20% of the property's value, equating to £40,000 to £80,000.
How much is a 500k mortgage per month UK?
A £500,000 mortgage in the UK generally costs between £2,000 to £2,500 per month, depending on interest rates and a 25-year mortgage term.
How much is a 300k mortgage per month UK?
The monthly payment for a £300,000 mortgage in the UK is usually between £1,200 to £1,500, based on a 25-year term and varying rates of interest.
How YesCanDo Money Can Help
If you’re looking to buy a house with a property value of £400,000, our specialist finance and mortgage team can help you get the best mortgage rates and deals.
All the advisors at YesCanDo Money are knowledgeable about a range of different mortgage subjects so they will be able to tailor their advice to your situation.
Should you be looking for a £400k mortgage specifically or even a mortgage £500000 or greater, we will consider your approximate annual income, employment type, and the other factors we have discussed in this guide, and will let you know what the payments and overall cost of your mortgage could be.
But as it’s our goal to find you the cheapest mortgage deal, we may be able to find you a mortgage deal with a lower overall cost than our estimate. Your mortgage introducer will search the mortgage market for these deals and will let you know which lenders are likely to give you a mortgage approval.
As we are not a mortgage lender, we are not biased toward one lender or another so can promise that we only have your best interests at heart.
Get in touch
If you would like to know more, get in touch with an online mortgage advisor for a free initial conversation and tell us about your mortgage needs. Our team are fully experienced and will provide mortgage advice tailored to your needs and will give you further guidance and support should you decide to move forward with our FEE-FREE services.
You can get in touch with us about a mortgage online using the contact form here. Alternatively, give us a call or WhatsApp us to arrange your first consultation.
