Income multiples are used by lenders to determine the maximum amount you can borrow for mortgages. The most common income multiple used by mortgage lenders is 4x your annual income. However, some lenders will also offer up to 5x your annual salary. Some lenders have even offered up to 6x your annual salary in recent years.
To qualify for a 5x salary mortgage in the UK you must meet certain criteria.
You will need to have a good credit history, meaning you have not missed or late on any credit accounts.
You must also have a good credit score, which is a measure of your creditworthiness.
You also need to meet a minimum income requirement.
Lenders use your income to calculate your affordability. They will look at your income to see if you can afford the mortgage. They will also look at your financial commitments and your expenditure to make sure the mortgage is affordable.
In the end, when it comes down to high income and good credit, qualifying for a 5x salary mortgage is a must.
Benefits of joint incomes
Your income will be added to your partner’s income when applying for a joint mortgage. This means you could be eligible to borrow up to 5 times your combined annual salary. This could be a great way to boost your finances.
Having two incomes can also give you more security. This can be a plus with some lenders as they may view your income as less risky.
Higher the income, the better
Having a high salary is an advantage when applying for 5x your salary. However, some lenders will base their lending criteria on your occupation and salary. For instance, some will only lend to doctors or lawyers, as they require a minimum salary of £200,000 to be considered for more than a 5x multiple income loan. Having an experienced broker by your side will not only help you secure a loan but also manage the long term cost of your debt.
Counting on credit score
If you have a poor credit history or low credit score, borrowing 5 times your yearly salary may be more difficult. Lenders may consider you a higher risk profile and may be reluctant to provide you with a mortgage.
However, this doesn’t mean you can’t get a mortgage. Working with a mortgage broker can help you find a lender that will work with you.
The amount you need to put down for a mortgage depends on the product you’re applying for. Some lenders will let you put down as little as 5% for a residential buyer mortgage, while others will ask you to put down 10% and have you pay back 90% of what you borrowed.
In general, residential mortgages don’t require as much money from you as they do from lenders because they’re considered less risky.
The repayment schedule for residential mortgages is based on your income, while the repayment schedule for a buy to let mortgage is based on your ability to find renters to pay your rent.