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Wondering “what mortgage could I get?” The amount you can borrow typically depends on your income and a few other key factors.
Most lenders allow you to borrow up to 4.5 times your annual income, but some can go up to 6 times. Here is a closer look at how this works and what influences your borrowing capacity.
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Mortgage Calculation Examples:
- £30k income x 4.5 = £135,000 typical borrowing
- £30k income x 6 = £180,000 maximum borrowing
The exact mortgage amount depends on several factors including your income, existing credit commitments, age, credit score, and property valuation.
Income Considerations
Your income plays a crucial role in determining how much mortgage you can get. Both the stability and composition of your income are important. Here’s how different income types are considered:
Employment
Lenders look at your salary, regular overtime, and bonuses. They also consider the length of your employment and whether you are on a probationary period. Even if you are starting a new job soon, like a teacher with a contract starting in a few months, you can still qualify.
Benefits
Some lenders accept benefits as part of your income for affordability calculations.
Self Employment
Calculating how much you can borrow when self-employed can be complex. Mortgage brokers can help navigate through the vast criteria that cover limited company owners, contractors, freelancers, umbrella company workers, and sole traders.
Pensions
For our more mature clients exploring their age 60+ mortgage options, private pension future income is often considered as part of the mortgage application. If you are unable to afford to make monthly payments, there are lifetime mortgage products available where payments are optional.
Existing Credit Commitments
Your existing credit commitments impact how much you can borrow. Major commitments include:
Car Loans
Commonly the largest credit commitment besides a mortgage.
Other Commitments
Child maintenance, student loans, school fees, credit card debts, personal loans, hire purchase agreements, and store card balances.
Age Factors
Age influences the repayment term and, consequently, the amount you can borrow. Older applicants might face higher monthly payments due to shorter repayment periods. However, options like 35 to 40-year repayment terms can make monthly payments more affordable. For those over 50, specialist mortgage advice can help explore suitable lending options.
Credit Score
Your credit score determines your risk profile to lenders. A lower credit score typically means a lower borrowing capacity. However, there are lenders that offer bad credit mortgages, including those with county court judgments, missed payments, or defaults. A larger deposit can improve your borrowing capacity by reducing the lender’s risk.
Property Valuation
The type and construction of the property also affect how much you can borrow. Lenders perform a property valuation to ensure it’s worth the purchase price. If it’s undervalued, the borrowing amount may be reduced, requiring either a renegotiation of the price or a larger deposit. Sometimes, a survey might be recommended, impacting the borrowing amount based on its findings.
How big of a mortgage can I afford?
Your mortgage affordability depends on a range of factors including income, existing credit commitments, outgoings, and credit score. You can borrow 4.5 to 6 times your income.
Example Mortgage Calculations Based on Salary:
| Salary | Mortgage |
|---|---|
| £20,000 | £90,000 to £120,000 |
| £25,000 | £112,500 to £150,000 |
| £30,000 | £112,500 to £150,000 |
| £35,000 | £112,500 to £150,000 |
| £40,000 | £180,000 to £240,000 |
| £45,000 | £202,500 to £270,000 |
| £50,000 | £225,000 to £300,000 |
| £55,000 | £247,500 to £330,000 |
| £60,000 | £270,000 to £360,000 |
Example Salary Requirements for Different Mortgage Amounts:
| Mortgage | Salary |
|---|---|
| £100,000 | £17,000 to £22,500 |
| £150,000 | £25,000 to £33,500 |
| £200,000 | £33,500 to £50,000 |
| £250,000 | £42,000 to £56,000 |
| £300,000 | £50,000 to £67,000 |
| £350,000 | £59,000 to £78,000 |
| £400,000 | £67,000 to £89,000 |
| £450,000 | £75,000 to £100,000 |
Consult a Mortgage Broker
Due to the variations in lender criteria, consulting an independent mortgage broker can provide a more accurate assessment of your borrowing capacity. Brokers can help you navigate through the complexities and secure the best mortgage deal for your situation. Online mortgage calculators may not provide precise results, so professional advice is invaluable.
By securing a mortgage agreement in principle certificate, you can strengthen your property offers, ensuring you are looking within your realistic price range.
Buy to Let Mortgage Borrowing
The above guide is based on residential borrowing aimed at both first time buyers and home movers calculate what mortgage they can get. If you are considering buying a property to let out, this is calculated differently, and you will need to read more about buy to let mortgage advice options.
