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Mortgage Advisor & Director
Welcome to our mortgage affordability guide. Here you will learn how it works, how to calculate your maximum borrowing and what to do after you’ve crunched those numbers.
How much can you borrow on a mortgage?
Most mortgage lenders will calculate your maximum borrowing by multiplying your household income by 4.5, but some will let you borrow more. There are lenders who offer mortgages based on 5 times and even 6 times salary under the right circumstances.
Example calculation: If you and your partner earn £75,000 combined, you would qualify for a joint mortgage of between £337,500 and £450,000.
Mortgage lenders who offer the higher income multiples will decide which one you qualify for based on the overall strength of your application but you may also be able to stretch your affordability by declaring supplemental income on top of your main salary.
Although salary multiples will give you a rough idea of your maximum borrowing, your fixed outgoings will be factored in too, and may reduce the amount you can borrow.
Calculate how much you can borrow
You can use our mortgage affordability calculator to get a rough idea of your maximum borrowing. Enter your total household income into the box below and hit ‘Calculate’ to get some quick results based on four income multiples used by UK lenders:
Now that you have run some calculations, your next step is to compare the mortgage deals available. You can do this for free on Teito and access advice from one of our mortgage brokers, if you wish to discuss all of your options - get started here.
Which income multiple will you qualify for?
Some mortgage lenders won’t offer a larger income multiple than 4.5 times annual salary under any circumstances, but other lenders will at least consider going higher. Below we have summarised the circumstances where each income multiple may be applied:
- 4.5 times salary: The standard income multiple used by the majority of UK mortgage lenders to calculate the applicants’ maximum borrowing potential. Those applying through government schemes are usually limited to this income multiple.
- 5-5.5 times salary: Only some lenders will offer these higher income multiples. They are usually reserved for applicants with higher income, typically £60k per year or more, and lower loan-to-value (LTV) ratios, typically around 85% or less.
- 6 times salary: This income multiple is usually reserved for borrowers who qualify for lenders’ ‘professional mortgage’ range. These deals are reserved for people in certain lines of work, such as medicine, law, the civil service and more.
- 7 times salary: A very rare income multiple that would only usually be offered to borrowers with high net worth exemption, for which you would need an annual net income of at least £300,000 or assets worth £3 million or more.
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Which outgoings will impact your affordability?
Mortgage lenders will expect you to declare these outgoings for the affordability assessment:
- Council tax
- Utility bills
- Broadband
- Loan or credit cards agreements
- Car payments
- Childcare costs
They will offset your outgoings against your income to work out your debt-to-income (DTI) ratio. There is no cut-off point for DTI that disqualifies you from getting a mortgage, but to qualify for the best deals and high income multiples, it will need to be around 20-30%.
You can work out your DTI ratio by adding up all your monthly debt payments and dividing them by your gross monthly income.
Supplemental income you can declare
You can potentially stretch your affordability by declaring any supplemental income you might have on top of your main salary. Some mortgage lenders accept the following:
- Benefits (excluding housing-related ones)
- Bonuses and commission
- Regular overtime
- Investment income
- Rental income
If you earn any of the above on a regular basis, it may be possible to declare it on your mortgage application to boost your borrowing potential, but keep in mind that not all lenders will accept all of these income sources, and some only allow a capped percentage.
The best way to find a lender who is flexible with supplemental income and allows 100% of it to be declared is to apply through a whole-of-market mortgage broker.
Example calculations for salary amounts
The table below reveals how much you can borrow for different salary amounts based on the standard income multiples that UK mortgage lenders are known to use.
You can use this table to work out approximately how much income is needed to qualify for common mortgage amounts, up to just under £400,000.
|
Income |
4.5 x Salary |
5 x Salary |
5.5 x Salary |
6 x Salary |
|
£112,500 |
£125,000 |
£137,500 |
£150,000 |
|
|
£135,000 |
£150,000 |
£165,000 |
£180,000 |
|
|
£157,000 |
£175,000 |
£192,500 |
£210,000 |
|
|
£139,500 |
£200,000 |
£220,000 |
£240,000 |
|
|
£202,500 |
£225,000 |
£247,500 |
£270,000 |
|
|
£225,000 |
£250,000 |
£275,000 |
£300,000 |
|
|
£55,000 |
£247,500 |
£275,000 |
£302,500 |
£330,000 |
|
£270,000 |
£300,000 |
£330,000 |
£360,000 |
|
|
£65,000 |
£292,500 |
£325,000 |
£357,500 |
£390,000 |
Income requirements for specific mortgage amounts
The table below shows approximately how much income is needed to qualify for specific mortgage amounts between £100k and £600k. These example calculations are based on 4.5 times income to 6 times income, the standard range used by UK lenders.
|
Mortgage Amount |
Salary Needed (Approx) |
|
Between £17,000 and £22,250 |
|
|
Between £25,000 and £33,500 |
|
|
Between £33,000 and £45,000 |
|
|
Between £41,750 and £55,500 |
|
|
Between £58,400 and £78,000 |
|
|
Between £66,500 and £89,000 |
|
|
Between £75,000 and £100,000 |
|
|
Between £83,350 and £110,000 |
|
|
£550,000 |
Between £91,650 and £122,200 |
|
Between £100,000 and £133,500 |
Click on any of the mortgage amounts to find out what their repayments will be
How affordability is calculated for self-employed mortgage applicants
Mortgage affordability will still be based on income multiples if you are self-employed, but the lender will take an average of your earnings over a set period - typically the last 2-3 years - and apply their income multiple to that figure to arrive at your maximum borrowing.
If you haven’t been trading for at least two years, it may be possible to find a lender who will offer you a mortgage based on 12 months’ accounts, but it is advisable to talk to a broker before you begin, to boost your chances of finding a lender who will offer this.
The way you work is also relevant here because the income you can declare will differ depending on your trading style. We have summarised how this works below:
- Sole traders: Can declare net profits (if based on accounts) or total income received.
- Partnerships: Borrowers in business partnerships can declare their share of the net profits (if based on accounts) or their share of the total income received.
- Company directors: Can declare salary, share of dividends, or net profit if there has been a large business expense or a sum earned that was retained in the business.
Which lenders offer higher income multiples?
The table below shows examples of the lenders who offer mortgages based on more than 4.5 times salary and the criteria they have for higher income multiple-based lending.
|
Mortgage Lender |
Highest Income Multiple Available |
Criteria |
|
4.75 times salary |
Borrowers taking the highest income multiple will be subjected to extra scrutiny to ensure they have enough income left over each month after paying their mortgage |
|
|
5 times salary |
To qualify for the highest income multiple borrowers need income higher than £80k per year and an LTV ratio of less than 90% |
|
|
5 times salary |
Borrowers need income of more than £50,000 and an LTV ratio lower than 85% to qualify for the highest income multiple |
|
|
5.5 times salary |
Borrowers need income of more than £100k and an LTV of 75% or lower to qualify for 5.5 times salary |
|
|
6 times salary |
Highest income multiple limited to the ‘Professional Mortgage’ range. Borrowers need 80% LTV or lower |
How buy-to-let mortgage affordability is calculated
Buy-to-let mortgage affordability is calculated differently to residential mortgage affordability. Rather than using income multiples, lenders will look at how much rent the property you’re buying will generate. Most lenders will need the rental income to be 125-145% of the mortgage payments, and will be less concerned about your personal income.
There are, however, lenders who will expect you to have a minimum amount of personal income as well, especially if you are a first-time landlord. The standard minimum salary requirement is £25,000, on top of a satisfactory rental income projection.
You can read more about how buy-to-let mortgages work in our standalone guide
Why choose Teito for your mortgage needs?
Now that you have a better idea of the amount you can borrow, you can compare mortgage rates for free on Teito and access support from a whole-of-market broker.
Here are just some of the reasons why customers source their mortgage through us:
- You can access rates and deals for FREE in seconds
- Our brokers can provide you with bespoke affordability calculations
- We are 5-star rated on leading review websites
- You can secure an agreement in principle in minutes
Ready to compare mortgage rates and take advantage of a free, no-obligation chat with a whole-of-market mortgage broker? Get started here.
FAQs
If you are in full-time employment, your mortgage lender will expect to see 3-6 months' payslips to evidence your income. You will also need bank statements covering this period and may be asked to produce a P60 at some point in the process.
Self-employed mortgage applicants will need to provide either their full accounts for a period of 2-3 years (where possible), or SA302 year-end tax calculations (usually along with the corresponding tax year overview) from HM Revenue & Customs.
There are also scenarios where the lender might ask to see an employment contract, such as if you are a contractor or cannot produce at least three months’ wage slips.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.