Mortgage income multiples
When it comes to buying a property, a mortgage income multiple refers to how lenders assess the amount you can afford to borrow when applying for a mortgage.
A lender will decide the amount you can borrow by multiplying your annual income by a set amount, usually around 4 times your salary.
In this guide, we discuss mortgage income multiples and how you may be able to borrow more for your mortgage with the right advice.
What are mortgage income multiples?
A mortgage income multiple is the amount you can borrow based on a multiplication of your annual salary.
Different lenders will use different income multiples, so you will be able to take out a larger mortgage with one who uses a multiple of 5 compared to a multiple of 4.
Other factors such as your occupation can also affect how much a lender will allow you to borrow. Often high earning or skilled occupations can equal lenders being more willing to lend more, due to lower risk of you being unable to afford repayments.
The mortgage income multiple a lender will offer you will depend on several factors. This includes:
- Deposit amount (a larger deposit is preferrable)
- Annual income
- Credit score (do you have bad credit or debts?)
- Income vs outgoing expenses
- Your occupation (high skilled job role, self-employed, sole trader, contract worker etc)
- If a business owner, what are your net profits?
- Is it a single or joint application?
- Any additional income such as investments or dividends
The lender will consider all the above factors when looking at your application.
It is important to give lenders as much information as possible so they can get an accurate picture of your finances. If you leave anything out or supply incorrect information this can cause delays with your mortgage application, or you may even be declined.
Speak to one of our specialist mortgage brokers if you need guidance on how your financial history may affect your application. We have years of expertise with helping people secure high value mortgages and understand the process well.
Typical mortgage income multiples
In the UK mortgage market, most lenders tend to offer an average of 4 or 4.5 times salary mortgage multiples as standard.
This means if you earn £35,000 per year, you could take out a mortgage for 4x this amount with a 4 times multiple lender. This would equal a mortgage of £140,000.
If they offered a mortgage income multiple of 4.5x salary, you could take out a mortgage of up to £157,500.
All lenders are different and certain lenders may be able to offer income multiples of 5.5x salary – or even higher. If looking to borrow such a high amount, it is worth speaking to a specialist broker who knows exactly which lenders are best to approach.
High income multiple mortgage lenders
It can be possible to take out a mortgage with a higher-than-average income multiple – with the right advice from an experienced broker.
We specialise in high value loans and can help you to find the right lender for your mortgage deal. Most often you will be able to access higher income multiples if you are in a skilled profession with a steady income stream such as a doctor, dentist or vet.
This is because lenders will see you as less of a risk when it comes to lending, as you will be more unlikely to default on your repayments.
This doesn’t mean it is impossible to borrow more for your mortgage if you do not work in this type of occupation. It just may not be as easy to do so without the help of a mortgage expert.
It is important to remember that the more you borrow, the more you will have to pay back. You also need to take into account extra costs such as broker fees, stamp duty and the interest rate charged on your loan.
Maximum mortgage income multiples
Though 4 or 4.5 times salary is standard with most lenders, by going through a broker who can access specialist rates and deals you may be able to get as high as 5 or 5.5 times your income.
There are even cases in which you can get mortgages with income multiples of 6 or even 7 times salary.
This is rare though and you would have to speak to the right lender if aiming for a multiple so much more than your salary. Generally, to access multiples this high you would need to put down a much larger deposit than normal and have a very high income anyway.
The main way to borrow this much is to qualify for a high-net-worth exemption, but this would require an annual income of over £300,000. It can be possible to borrow 6 or 7 times salary with a lower level of income but is far more difficult to do so, with less lenders offering this as an option.
Income multiples for joint mortgage
A key benefit of taking out a joint mortgage deal is that affordability is based off more than one income. As this figure will be considerably larger, this will usually mean you can be approved to borrow far more than if you were applying alone.
The mortgage income multiple applied can however vary depending on the lender. Having two or more people on the application does not equal being able to borrow 4x your salary, plus 4x their salary etc.
All the annual incomes will be combined and assessed to determine how much a lender believes your household will be able to afford to pay back over time. With most lenders, it is this overall figure that will then be multiplied to determine your loan amount.
It is worth getting advice from a broker who understands joint mortgages well and can point you in the direction of lenders offering the best multiples for joint applicants.
Self employed mortgage income multiples
If you are self-employed, you should be able to get a mortgage the same way someone employed in any other way can.
It just means that your income will be assessed slightly differently. Most lenders will need to see:
- Self assessment tax returns (SA302)
- 2 or 3 years accounts
- 3 months of bank statements
- Dividends and profit evidence
- Accountant references
- Profit projections for the next year
Although your income can be less straightforward to assess, it shouldn’t prevent you from taking out a deal with the average mortgage income multiple of 4 or 4.5x salary – or even higher with the right lender.
Mortgage income multiples advice
Our team have years of expertise when it comes to helping buyers get high value mortgage loans. We know the best lenders to approach and can help you find specialised deals that would be unavailable without the help of a highly experienced broker.
With our experts, you should be able to find a great mortgage offering excellent rates. We can help anyone from first time buyers to those more experience when it comes to the property market.
Speak to our advisors to find out how you can borrow more for your mortgage deal with help from essentialMORTGAGES.