What mortgage can I get with my salary?
One of the main questions clients ask us 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.
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.
NO CREDIT CHECKS!
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.
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 that they will consider.
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 for 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 take the monthly commitment as between of 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 scores 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 this 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 the details about any other mortgages you will 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 lesser 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.
What mortgage can I get with 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 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 better 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 – it’s shown that those on higher incomes 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 5x your income. However, a few schemes will permit even more with those that will go to 7x income.
As perhaps expected, those offering higher income multiples will have strict criteria attached. This means these deals aren’t always available to the masses.
Borrowing that little bit more from one lender to another 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:
| Income | 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 |
Using a mortgage broker for your mortgage application
The above table still shows things in a very simplistic way and should only be used as a rough guide.
To get a more accurate figure, we would strongly suggest that you use an actual mortgage affordability calculator. Or even better, you can speak to one of our advisors.
Our experienced team will be able to assess you circumstances and give you an idea of what you could borrow. Reach out today to organise a free, no-obligation consultation.
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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