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How much do you need to earn to get a mortgage?

How much do you need to earn to get a mortgage? Get the right advice on this here.

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By Pete Mugleston   Mortgage Advisor

Last updated: 18th March 2019 *

A lot of customers approach us asking “how much do I need to earn to get a mortgage?”. Unfortunately there is no ‘one size fits all’ answer to this question, as it is entirely based on your circumstances and the lender’s criteria. Whatever your financial situation however, we’re confident that we’ll be able to put you in touch with one of the advisors we work with who can give you the right advice.

This article will be able to provide you with a rough idea as to how much money you will need to earn to get a mortgage in the UK, how lenders calculate affordability, and what other factors can impact eligibility when applying.

The following topics are covered below...

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Why are earnings important when applying for a mortgage?

Many customers want to know how much providers are willing to loan them based on their income, or the minimum earnings for a mortgage. As covered, there’s no set figure you need to be earning to be eligible for a mortgage; the amount of income required depends entirely on how much money you want to borrow (alongside other factors which we’ll be covering later in this article.)

Assessing your mortgage eligibility based on how much you earn is significant for a lot of lenders as there are so many factors to take into consideration. For example, how long you’ve been in your current role, your terms of employment (whether you’re full or part-time, permanent or temporary) - the list goes on. In addition, all lenders have different lending criteria, so just because one accepts your application does not automatically mean that others will.

This is why it’s important to get advice from a whole of market broker, who can scour all mortgage providers out there and find the best deal to suit you. Contact us today and we can put you in touch with a specialist.

How do lenders calculate mortgage affordability based on earnings?

When assessing your income to determine whether you can afford a mortgage they tend to cap loans at a multiple of your earnings using an affordability calculator.

Based on your annual earnings, the majority of lenders tend to cap at 3 - 4x your yearly income (however some lenders can look at as much as 6x your income). So as an example, someone earning £30,000 a year may only be able to borrow between £90,000 - £120,000 for a home loan (although other factors will also be taken into consideration).

However, this is not the case with all mortgage providers; some will consider loaning you more if you put down a larger deposit, whereas others may be more likely to authorise a bigger loan based on you having a clean credit history, having a particular job role such as doctors/dentists for example. Which leads us on to...

Lender generosity

Some lenders are more generous than others. Depending on your financial commitments (how much you earn included), some mortgage providers will offer you up to 5x your salary, and a handful will lend up to 6x, under the right circumstances.

For example, suppose you earn an annual salary (or joint annual salary) of £50,000. You want to buy a property that is valued at £300,000, and you have a deposit of 20% (£60,000), meaning you need a mortgage of £240,000. Considering that many lenders will only loan loan 3 - 4x your annual salary, it is unlikely that you will be accepted because the loan you require exceeds this value.

However, based on the same figures as above, a more generous lender can make a considerable difference:

Annual Earnings

Mortgage Required

Deposit Saved

Lender Loan Value Cap

Maximum Loan Allowance

Approved?






£50,000






£240,000


£60,000 (20%)

3x annual income

£150,000

No

4x annual income

£200,000

No

5x annual income

£250,000

Yes

6x annual income

£300,000

Yes

Secured Loans and mortgage lending

A secured loan or second charge mortgage is typically taken out by clients who are either tied in on their existing mortgage or credit/income does not allow any further borrowing via a normal or 1st charge mortgage loan.

In these situations some lenders offering secured loans follow similar criteria to that of “typical” mortgage providers when calculating affordability, but you may find that some are willing to loan you up to 10x your income - this can make a considerable difference for many borrowers. If you have a secured loan, the amount you can apply for depends on how much equity you have on an existing property or high value asset.

In the above scenario for example, assuming you were accepted for a loan that totalled 10x the value of your salary, you may be accepted for a mortgage up to the value of £500,000 - meaning that you may be eligible even if your yearly income or amount of deposit saved is considerably lower than the above figures.

Other factors impacting mortgage eligibility alongside earnings

As ever, there are plenty of other factors lenders assess before authorising a mortgage, alongside your yearly earnings. Some of the most common include:

Affordability

All lenders will want to know how much disposable income you have before authorising a mortgage. While annual salary is important, mortgage providers will want to look at this in relation to your monthly outgoings to make sure that you have enough to cover your repayments as well as other financial commitments. This is calculated using the debt-to-income ratio (income minus all outgoings).

As a basic rule of thumb, the lower your debt-to-income, the more favourably you will be looked at by lenders.

Affordability and source of income

Lenders will also factor in the sources of your income, because different types are perceived as higher or lower risk. So, if you were to receive the majority of your monthly income from gambling wins or untraceable cash transactions, it is likely you’ll be considered as considerably higher risk than someone in steady, full-time employment earning a consistent wage.

While employment status is taken into account (e.g. self-employed individuals are generally seen as higher risk than those those in permanent, full-time positions), each situation is different; for example, if you’ve owned your own business for a number of years and have yearly accounts providing proof of a stable income, you may be perceived as lower risk than someone who is in full time employment but has flitted between jobs over the past few years.

Does how much I need to earn differ depending on location

Lots of customers approach us with questions surrounding how the location in which they wish to get a mortgage impacts how much they need to be earning. For example, we’re often asked “How much do you need to earn to get a mortgage in London?”

While it is true that the cost of properties are higher in London and other areas of the UK, your annual salary will often reflect the increased living costs, and the same basic rules for calculating how much you are eligible to borrow will apply (most lenders capping at 3 - 4x your earnings, some x5 and a handful 6x.).

For example, supposing you want to purchase a property with a market value of £600,000 and you need a mortgage of £450,000 having put down a £150,000 deposit (almost 30%). If your provider is capping the mortgage they’ll lend you at 4x your annual income, you will need to be earning around £112,500 a year.

Some lenders tailor their affordability calculators to the proposed property location to take into account the living costs in that area, others just have a calculator that has no consideration for the location.

However, there are plenty of other circumstances lenders take into consideration, and in the above scenario the high deposit you’ve contributed may act in your favour, and other factors (covered below) may also help or inhibit your case.

Affordability and adverse credit issues

Affordability checks apply to all mortgage applicants, regardless of whether they have good or bad credit history. Typically though, lenders are less likely to loan to a borrower who has experienced financial issues in the past. Those providers who will consider lending to you are likely to charge higher rates and may cap the amount they are willing to loan, and will often require a lower loan to value (LTV) - usually a minimum of 85%.

That being said, all lenders have different lending criteria and different stances on the type of adverse they’re willing to accept.

If you’ve experienced any of these in the past (or are currently experiencing them), don’t give up hope - there are specialist lenders out there who are willing to lend to borrowers with bad credit issues. Visit our our bad credit section here for more information.

Affordability and age

Older applicants are often perceived as higher risk by lenders, resulting in these borrowers being limited to shorter borrowing periods and / or the loan amount being capped. Some lenders have upper age limits and won’t lend to borrowers over 75, while others will have a maximum age requirement of 85.

However, there are a few lenders that will lend into retirement, although this will be based on your retirement income. They may take into consideration other forms of income to calculate mortgage affordability which could include personal savings or a pension.

If you’re an existing homeowner aged 55+ and need a loan to finance a second property, equity release may be a good option for you.

Affordability and second homes

The same affordability checks will be carried out if you’re looking to take out a mortgage on a second home. The difference is that lenders will factor in the mortgage payments and running costs of your primary place of residence when assessing affordability, so they are safe in the knowledge that you can comfortably afford both mortgages. This means that in some instances, the amount you are able to borrow is decreased so as to ensure you are able to keep up with the repayments.

Speak to a mortgage affordability expert today

If you have any questions surrounding mortgages available based on your earnings and want to speak to an expert for the right advice, call Online Mortgage Advisor on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee, and there’s no obligation or marks on your credit rating.

Updated: 18th March 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Find out more about mortgage affordability

Mortgages and Affordability