If you’re in need of a mortgage, you will understandably want to know how much you can borrow.
In this guide, we will consider your salary and how much income has a part to play in your chances of getting offered the best mortgage deals with lower interest rates.
We will also give you advice on how to increase your chances of receiving more money from a mortgage lender.
How many times your salary for a mortgage?
How much you can borrow is usually based on 4-4.5 times your annual income. If you have little to no debt and an average UK salary, lenders offer 5 times your income and in some cases even higher than that.
Mortgage Borrowing Calculator
Our affordability calculator can help you figure out the amount of money a mortgage lender may lend you based on your combined household income. Just enter the full combined income for all applicants, and our calculator will take care of the rest.
It is important to remember that mortgage calculators only offer an approximate estimate; they cannot consider individual circumstances, so there could be other elements that would affect how much much you could borrow in reality.
To have an exact assessment of how much you’re able to borrow, consider working with a mortgage broker. They’ll build a personalised calculation based on your unique situation.
It’s essential to remember that some loan providers don’t use income multiples to know what you can borrow. Simplistic online mortgage calculators won’t give an accurate representation of the amount they are able to lend in this case. To take advantage of these lenders, it is often required for you to contact a mortgage broker.
How your salary affects what you can borrow for a mortgage
Before mortgage lenders approve your application, they will carry out an affordability assessment. This is a kind of ‘stress test’ where they look into your income and monthly outgoings and look ahead to assess whether you’ll be able to afford your mortgage payments should interest rates rise or if your circumstances change.
What’s looked at in the mortgage affordability stress test?
Every lender will look at your regular income and outgoings. These usually include but are not limited to the below.
Your income will include:
- Your annual salary
- Any benefits that you receive
- Any additional income, such as money gained from investments
Your outgoings will include:
- Debt repayments, such as credit card bills and student loans
- Your household bills, such as gas, electricity, and broadband
- Money spent on grocery shopping
- Transport costs
- Subscription costs
- Money spent on leisure activities
If the level of income you receive from your salary and other earnings is enough for you to pass these affordability tests, you may be eligible for a mortgage. However, this will also depend on your outgoings and whether your spending is close to your earnings, as your mortgage application may be turned down if your expenditure is high.
Mortgage income multiplier
What is meant by the term ‘Income Multiples for Mortgages‘? There are over 90 different lenders in the UK and all use different income multipliers. However, it isn’t always as straightforward as the income required for mortgage using a mortgage income multiplier as affordability depends on a number of factors. These include the size of your deposit, your credit score, and for the context of this article, your salary. Most people that still use income multiples as a rule of thumb go by these multiples. A single applicant applying for a mortgage is around 4 to 4.5x your income. For joint mortgages with two or more applicants, mortgage lenders use a slightly different mortgage income multiplier of 3.5 to 4x your income.
When it comes to your earnings, the lender’s decision is usually based on the loan-to-income ratio. The amount you want to borrow is divided by the amount of money you earn. This applies to all borrowers, from first-time buyers to frequent home movers.
Each mortgage provider has its own mortgage calculator which uses lots of information to work out how much you can borrow.
Can I borrow 5 times my salary for a mortgage?
Typically, a bank or building society will lend you 4.5 times your annual income. However, there are some lenders currently lending mortgages 5 times your salary. If you live alone, this will be based on your salary (and additional income) and if you live with another person, your joint income will be taken into account.
You could use a mortgage borrowing calculator to estimate the amount you may be able to lend from a mortgage provider.
Alternatively, you can do the maths yourself by multiplying 4.5 times your income over the past year.
If your salary was £40,000 per year, for example, you may be able to borrow £180,000 towards your mortgage. You would be eligible for more than this if you lived with a partner as your household income would be increased.
Can I borrow 6 times my salary?
In certain circumstances, you may be eligible to borrow more than 4.5 times your income. It’s not unusual for lenders to offer mortgages that are 5 or even 6 times larger than their customer’s total household income but your eligibility for a larger income multiple will depend on your employment status and the size of your deposit.
Example calculations
To estimate how much mortgage you may be able to borrow, you can have a go at the maths yourself or use a mortgage affordability calculator to estimate your maximum mortgage amount.
For your convenience, you can also check out the income calculations in the table below.
| Annual Income | 4x Salary Mortgage | 4.5x Salary Mortgage |
|---|---|---|
| £20,000 | £80,000 | £90,000 |
| £30,000 | £120,000 | £135,000 |
| £40,000 | £160,000 | £180,000 |
| £50,000 | £200,000 | £225,000 |
| £60,000 | £240,000 | £270,000 |
| £70,000 | £280,000 | £315,000 |
| £80,000 | £320,000 | £360,000 |
| £90,000 | £360,000 | £405,000 |
| £100,000 | £400,000 | £450,000 |
How can I improve my chances of borrowing more from mortgage lenders?
If you want to improve your borrowing potential, there are a number of steps you can take.
Increase your income
If you earn any supplemental income on top of your basic salary, you may be able to borrow more money.
Supplemental income can include:
- Overtime payments
- Bonuses
- Commission
- Shift allowances
- Income from a second job
Please note:
Not all mortgage lenders will consider supplementary income and there are some that will only consider certain types of additional income.
To access those lenders that do consider supplementary income, speak to a whole of mortgage market broker such as ourselves. We have contact with a wide number of mortgage providers within the mortgage industry, including those specialist lenders that can’t be found on the high street.
Increase the size of your deposit
The minimum deposit requirement for a mortgage is usually a 5% deposit to a 10% deposit for a residential purchase so you don’t necessarily have to save up much more than this for your deposit. First-time buyers often struggle to save more so these high loan-to-value mortgages are a useful way to get onto the property ladder.
However, to qualify for the best mortgage deals and to increase your borrowing potential, a larger deposit will improve your chances.
If you can provide a 15% deposit or more, mortgage providers will consider you a safer bet. As such, you may become eligible for a mortgage at higher multiples of your income, with more competitive interest rates and lower monthly repayments. How much your mortgage costs will depend massively on your deposit.
Use a guarantor
If your income isn’t enough to achieve a larger mortgage, it might be that a guarantor mortgage is an option. In some cases, you might even be eligible to borrow up to 100% of the property’s value, but this is usually very rare.
Guarantor mortgages can also be considered if you are only able to make a small deposit or if you don’t have a good credit score.
You will need to find somebody willing to be a guarantor if you want to go down this route. This should be somebody who is happy to use their own property or savings as security for the mortgage and who has a strong relationship with you. In most cases, borrowers ask family members to be their guarantors.
You are more likely to be approved for a guarantor mortgage if the potential guarantor…
- Is a homeowner
- Has paid off half or all of their mortgage
- Is able to make their monthly mortgage repayments while potentially covering yours
- Has a healthy credit report
Consider a joint mortgage
If your salary isn’t sufficient for a higher-income multiple mortgage, you may be able to access a bigger loan through a joint mortgage.
You might also consider this option if you want a mortgage that is 4.5 times your salary, as interest rate rises and the increase in house prices in some areas have made it difficult for some people to get on the property ladder.
Mortgage providers will use the combined income of everybody on the mortgage application when determining how much they are willing to lend to you.
Joint mortgages aren’t only given to married or unmarried couples. If you would like to move into a house with a group of friends, and you would rather buy a house with them than rent a property, you may be eligible for a combined mortgage.
If you have a parent or another family member willing to help you move into your own property, this is another way to increase your borrowing via a joint mortgage.
Most lenders will let you get a mortgage with up to 4 other applicants. You may struggle to find these lenders on your local high street so you should approach a mortgage specialist if you are interested in this option. Speak to a member of our team to learn more.
Speak to a whole of market mortgage broker
High street lenders will often limit how much they are willing to lend to borrowers. Therefore, it is wise to speak to mortgage brokers who have access to the whole mortgage market including specialist lenders that aren’t so restrictive.
At YesCanDo Money, our specialist team of mortgage brokers can explore all of your borrowing options with you, including those lenders that are more likely to lend you 5 or 6 times your salary, whether you’re self-employed or in full-time employment.
Get in touch with us to learn about our more about the help we can give you.
Do all lenders offer higher income multiples?
Not all lenders advertise loans with high-income multiples so it’s worth speaking to a broker to find out which ones do.
In some cases, you might need to turn to a specialist lender if you want to want to qualify for a mortgage that is over 5 times your income. As we have access to these lenders, we will be able to contact them on your behalf.
When it comes to lenders on your local high street, Barclays, HSBC, Halifax, and Kensington Mortgages are among those that may be able to lend you a higher amount under the right circumstances. Their lending criteria will differ so talk to us about their suitability for your circumstances and the mortgage products that may be able to offer you.
Will I be eligible for a higher income multiple with a mortgage lender?
No matter what type of mortgage you’re looking for, your chances of mortgage approval will always depend on the lender’s criteria. When it comes to mortgages with a larger income multiple, their criteria will be stricter.
Your eligibility for how much you can borrow will depend on:
Your profession
Your minimum salary will be taken into account when assessing your affordability. The higher it is, the more likely you are to get a bigger mortgage.
If you are in a low-risk profession, such as a career that promises a lot of job security, your maximum borrowing chances can also be increased.
If you are self-employed, your chances of a bigger mortgage could be compromised. However, this depends on your level of monthly income, your track record of acquiring work, and any income gaps within your self-employment. If you are unable to find a lender on the high street willing to lend you the money you need, you might still be eligible for a bigger mortgage from a specialist lender.
Your credit history
A common question for borrowers is this one: What credit score is needed to buy a house?
The answer, sadly, is yes. When it comes to how much you can borrow, a higher credit score will always work in your favour.
If you have an adverse credit history, perhaps because you have defaulted on your previous loan repayments, you are unlikely to obtain a mortgage that is over 5 times your salary. In some cases, you might even be turned for a mortgage that is 4.5 times your level of income.
Therefore, it is in your best interests to improve your credit rating if you have a bad credit score. When your credit rating improves, your ability to get a mortgage will be increased, and you may be able to borrow more at a better mortgage rate.
Your monthly outgoings and annual income
When determining your affordability, your lender will deduct your monthly outgoings from your income to work out your debt-to-income ratio.
If the ratio is small, you are more likely to get a better and bigger mortgage. But if you have a high debt-to-income ratio, your mortgage application may be turned down. This applies even if you earn a high salary as most lenders will reject your application if your outgoings are also high.
To qualify for a bigger mortgage with a lower interest rate, you should do what you can to reduce your outgoings. To this end, you should…
- Pay off your existing debts
- Avoid taking out further credit
- Find ways to reduce your household bills
- Cut back on unnecessary spending
After taking these steps, you may be able to get a mortgage with a lower interest rate and reduced monthly repayments. You might also qualify for a mortgage that is more than 4.5 times your income.
Get In Touch With YesCanDo Money Today
Speak to a mortgage broker at YesCanDo Money if you would like to compare mortgage deals to get the lowest rates.
After carrying out an affordability assessment to find out more about your personal circumstances, we will use our mortgage calculators to estimate how much you may be eligible to borrow.
Your appointed mortgage broker will also give you mortgage advice on how to improve your borrowing chances. Most lenders will consider your application if you meet their criteria but if there is a chance that you might be turned down for a mortgage, we will put you in touch with those specialist lenders that are more suited to your profession and level of salary.
Contact us today if you would like to learn more and begin your mortgage journey with us.
FAQS
Can I get a mortgage on 20k a year UK?
In the UK, it is possible to apply for a mortgage on an annual income of £20,000. However, your borrowing capacity will be limited since lenders usually employ multiples of your salary to decide how much they are willing to lend you - typically 3-5 times yearly earnings. Nevertheless, some loan providers may offer higher or lower sums based on additional considerations.
For instance, if a lender implements a 4x income multiple, you may be able to borrow up to £80,000. Yet other variables will also come into play such as your credit history, any existing debts and whether or not you can make the monthly payments. Remember that mortgage rates and lending criteria differ between lenders so it's wise to compare options before making your decision.
How much do I need to earn to get a mortgage of 250 000 UK?
Banks generally allow borrowers to take out mortgages of up to 4 or 5 times their income. To secure a £250,000 mortgage you must earn at least £62,500 if the lender uses the most stringent end of this ratio scale. However, more generous lenders could permit up to 5.5 times your salary which means that with ideal circumstances you would need an annual salary just over£45,500 in order to be approved for a 250k mortgage loan.
