The amount of mortgage capital that you can borrow varies significantly depending on various factors.
The traditional mortgage lending model suggests that borrowers can borrow a maximum of 3 times salary. Therefore, even on a £30,000 salary you would be limitied to a mortgage of £90,000
With a partner the amount of mortgage that you can get is usually either 2.5 times combined income. Or 3 times your salary plus 2 times your partners.
Affordability. With lower long term interest rates in the UK, banks and financial institutes are increasingly willing to lend more than traditional models. Instead of income multiples, banks use an affordability survey. Basically, they look at your income plus all the necessary outgoings and examine how much disposable income you have to realistically put towards a mortgage. Therefore, if you have many debt repayments or other high monthly repayments the amount you can borrow will be lower.
Mortgages 5 Times salary.
In some cases banks may stretch to a mortgage loan equivalent to 5 times salary, which would enable a £150,000 mortgage, on the £30,000 average salary. To be able to borrow this amount is unusual, although increasingly common. It may require a special type of mortgage. For example, if you were to get an interest only or 50 year mortgage, income multiples can be higher.
Mortgage 6 or 7 times salary.
A traditional mortgage lender will in all probability not consider a mortgage of 6 times salary or greater. If you are determined to get this sized mortgage it is probably necessary to get an uncoventional mortgages like a self certification mortgage. Strictly speaking a self certification mortgage is for people who have difficulty proving their income. Therefore, it means that in practice that lending institutions are not obliged to ask for proof of income. Therefore, it means that borrowers can use “creative accounting” to get a mortgage loan which is much bigger than salary.
Mortgage lending and Deposit.
Generally speaking the more you wish to borrow, the more important it is to be able to pay a high deposit. For some self certification mortgages, a deposit of 25% will enable a low interest rate and attractive interest rate.
Another option, less risky and less dubious is to get a joint mortgage or government mortgage. This means that you get a mortgage for part of the value of the house.When you are more able to pay more you can start paying off the other section of the house. This is not really a way to get a bigger mortgage. However, it is a useful tip to get on the property ladder.
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2 comments ↓
thanks for the mortgage post…will come in handy when im move to my new home
As we have entered the credit crunch unfortunately banks are now getting tighter with their affordibility. The once 5 x income lenders have dissapeared along with the 100% mortgage. There are still a couple of 100% mortgage products around however they are backed by a guarantoor who’s income is taken into account when underwriting the mortgage, and they are liable.
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