If you are an employee, the majority of mortgage lenders will calculate the maximum size of a mortgage loan based on your salary.
Traditionally, for single applicants, most lenders have been prepared to offer an amount up to three times salary. In
the case of joint applicants, the offer has been either:
For example, if Mr Smith earns £40,000 per annum and his wife earns £20,000 then they could expect to borrow either:
- Up to three times the larger salary, plus one times the other salary, or
- Up to two and a half times the combined salaries.
The definition of salary is usually your full basic salary plus 100% of guaranteed bonuses or 50% of regular
bonuses/over time. Before applying the multiples shown above the lender will deduct from your salary the annual payments
to any existing loans, but if a loan finishes within the next year it will normally be ignored.
- 3 x £40,000 + £20,000 = £140,000, or
- 2.5 x £60,000 = £150,000
Nowadays, higher multiples are available from some lenders. Loans of up to four times salary are not uncommon, and some will
even go as
high as five times salary for certain occupations.
Whatever maximum amount you are offered, it is very important to make sure you can afford the mortgage repayments. You need
to consider the situation as it is now, and also what would happen in the future if interest rates were to increase.
mortgage calculator can give you an idea of the figures,
or you can talk things through with a member of our panel of professional mortgage brokers.
As fully qualified mortgage brokers and independent financial advisers, the specialists we work with can help you to look at your whole financial
situation to determine a sensible level of borrowing, taking into account your present requirements and the likely impact
of any future rises in interest rates.
If you would like to know more, we would be happy to hear from you. Simply complete
our online enquiry form and a consultant will
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Your home may be repossessed if you do not keep up repayments on your mortgage.
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