Can I get a mortgage for 5 or 6 times my salary?
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Mortgage lenders have had an absolute limit set by the UK’s Financial Conduct Authority (FCA) on the number of mortgages they’re allowed to issue at more than 4.5 times an individual’s income. (Or 4.5 times the joint income on a combined application.)
The number of homeowner mortgages they can offer at a higher loan to income ratio (LTI) is capped at an average 15% per quarter.
This is the loophole that some lenders have been using recently to lend up to 6 times salary for some specific categories of mortgage borrowers – including first-time buyers.
Access a high-LTI mortgage
So how can you be one of that 15%?
- We can find you a mortgage offer with several lenders offering deals equivalent to five times your salary if you earn at least £75,000. You can put down a deposit of 25% (feasible for homeowners trading up in expensive housing areas).
- Other institutions lending at just below five times salary require only a 10% deposit.
- One bank offers 5.5 times income mortgages, with a tiny deposit requirement of just 5%.
- The first-time buyers they’re targeting need qualified professionals such as accountants, lawyers, chartered surveyors, architects, dentists, doctors, vets and pilots. And they need to be earning at least £40,000 a year.
- One lender is offering a massive six times salary mortgage deal on its "professionals mortgage": for borrowers who must be fully qualified, practising and registered professionals (architects, engineers etc.).
While you're here, read our latest new piece on rising interest rates in the UK: NEWS: Are Mortgage Rates Going Up in Response to Interest Rate Hikes?
Big borrowing for professionals
Banks want to do this business and help borrowers who can well-afford this enhanced borrowing to buy the homes they’re aiming for.
But they don’t want the reputational damage (or the financial losses) if interest rates rise and significant numbers of homeowners default on their mortgages.
So, within their 15% quota of higher-LTI mortgages, they’re looking for the most profitable business (which will be larger loans) and the most secure business.
In their view, "professional qualifications" are shorthand for a level of education that offers reasonably assured career progression opportunities and employment alternatives if a borrower loses their job.
Are you a first-time buyer? If so, read our latest market update: NEWS: First Time Buyer Mortgage at 5.5 Times Salary Now Available.
Significant borrowing for non-professionals: via a broker
Some lenders advertise their “professionals’ mortgages” deals. But if you don’t have professional qualifications, a well-connected broker such as Clifton Private Finance can get you access to similar rates.
We can currently get you:
- 5x your salary if you earn £45K+, and you’ve got just a 10% deposit to borrow up to £570K
- 5.5x your salary if you earn £75K (or £100K on a joint application) if you've got a 15% deposit, to borrow up to £2M
"How many times my salary can I borrow?"
The idea that mortgage lenders use a secret salary-multiplier formula is that UK borrowers are reluctant to let go.
Even though income hasn’t been the key lending criteria for banks and building societies for more than five years.
Mortgage lenders used to calculate how much they would lend by a simple rule-of-thumb multiplication of an applicant’s income: 4 or 4.5 times salary was the limit.
So a first-time borrower earning £30,000 a year who could put down a 5% deposit could go looking for properties up to a maximum price ceiling of £142,000.
How much can I PAY vs how much can I AFFORD?
After a wholescale review of the mortgage industry by the FCA in 2014, banks and building societies were no longer allowed to look at the maximum a borrower could pay (by verifying salary and other sources of income).
Instead, they were obliged to conduct an in-depth assessment of how much each borrower could afford.
That’s why your lender (or your mortgage broker) now asks about all your regular financial commitments:
- childcare costs
- school fees
- utility bills
- car costs
- membership fees
- credit commitments
Lenders now need to be confident that you can afford this additional mortgage commitment now and in the future when the mortgage interest rate might have substantially increased.
Are you struggling to get a mortgage as a first-time buyer?
Boost your mortgage budget with the help of your family – without needing a cash gift.
Even with the 5% deposit scheme, most first time buyers are struggling to afford the value of an average property in the UK with their deposit savings and income, simply due to the disproportionate rise of house prices compared to wages since the 1990s.
And while many first time buyers turn to their parents for help with a deposit, many families don’t have the cash on hand to gift to them, with their wealth tied up in their property or their pension.
But there are other ways that your parents could help with your mortgage.
- Deposit Booster
We can use the equity your family member has accumulated in their property to get you a bigger deposit for your first house purchase without downsizing their home, drawing from their pension, or selling other assets to raise funds.
- Income Booster
Or, we can use their annual income on your mortgage application in a joint borrower, sole proprietor mortgage (JBSP). This means they can add their income to yours without needing to be named on the property deed or securing the mortgage against their own home.
How can I maximise the mortgage I can borrow?
You can’t suddenly acquire an engineering degree (or at least not a legitimate one!).
But you can make yourself eligible for borrowing from the broadest range of lenders possible – giving yourself access to the best mortgage deals you could get – by prepping your mortgage application and grooming your credit rating.
At least a year before you want to start applying for a mortgage, you should start taking action which will improve your "qualification" for a mortgage:
1 Push for an improvement in your employment status
- A transfer from a fixed-term or temporary contract to a permanent contract
- A pay rise
will both significantly improve your mortgage eligibility.
Most private-sector employers respond to pay increase requests from employees rather than proactively reviewing salaries. If you’ve been with your employer for at least a year and can provide evidence of your effectiveness, this is a reasonable request that you can’t be penalised for.
2 Prep your mortgage application
Start to assemble all the documentation you will need. This will highlight any changes you need to make to improve your mortgageability:
- Look at the recurring payments on your bank accounts
- Multiple store credit card accounts, and regular payments to bookmakers, can be a red flag
Documents you need for your mortgage application:
- Passport or driving licence (as proof of identity)
- Current utility bills (as proof of address)
- P60 form from your employer
- If you’re self-employed: statement of your accounts from an accountant for the past two to three years
- If you’re self-employed or have earnings from more than one source: tax form SA302 from HMRC
- Current account bank statements for the three months immediately previous
3 Improve your credit rating
Taking action in advance to improve your credit score gives you access to the broadest number of possible lenders for your circumstances and a chance to pick and choose the best rate.
- Having unforeseen problems with your credit rating wastes time on mortgage applications that are refused further down the line.
- Subsequent mortgage lenders will be able to see previous credit checks made and will be deterred by several loan applications that haven’t proceeded.
Check your credit score:
Not all lenders report credit details to all three of the UK credit agencies, so you need to check all three:
Checking your credit score yourself doesn’t affect your rating.
Fix any credit rating problems:
- Update any incorrect old addresses related to bank accounts etc
- Challenge any accounts which you believed you had closed but which are still presenting monthly direct debit requests which are being refused (mobile phone companies/broadband suppliers are particular culprits)
- Get notice of disassociation from anyone you used to be associated with financially (an ex-partner or flatmate) who may have a poor credit rating
- Avoid making any new applications for additional credit (any hire purchase, store credit cards, or online credit)
- If you’re cancelling any regular service that you pay for by direct debit, keep a record of your service cancellation but leave the direct debit until the service provider cancels it and refunds any payments.
- Take out a joint credit card with someone who trusts you, who has a strong credit rating (such as a parent). Their credit rating will be "shared" with you.
You can also read our blog on How to get a large mortgage loan
What else can you do to improve your mortgage offer?
You’ve got two remaining cards up your sleeve.
1 Apply for a longer mortgage term
You may not get a larger loan offer, but you could substantially reduce your monthly payments.
Affordability is usually calculated over a standard 25-year mortgage term. If you apply for a 30 or 35-year term, your monthly repayments will be lower. But the overall cost of interest that you’ll be paying over the mortgage term will be significantly higher.
2 Use a mortgage broker
Individual lenders can only provide information about their mortgage products. Finding out about alternative offers that might be available from any of the 300+ mortgage lenders in the UK is difficult and time-consuming - and many of them can’t be contacted directly by potential borrowers.
A well-connected mortgage broker will know about the full range of mortgages available right across the market and will be able to advise on high-income multiple mortgages, e.g. on a 5x or even 5.5x basis.
They’ll be able to propose the lenders who will look most favourably on your particular circumstances and will “package” your application, so it demonstrates your suitability for their lending criteria.
The result can be a more generous mortgage offer, a cheaper borrowing rate, or a variation in the terms (such as a shorter initial period with early repayment charges), which will better suit your circumstances.
Clifton Private Finance will find you the best mortgage offer you’re eligible for
We have the product information you need right across the mortgage market, and we’ll get you the best mortgage offer that could be available to you. Give us a call to arrange a suitable time to talk through what you need:
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