Income Needed For A Mortgage

Some of the most common queries across the mortgage industry focus on how much you need to earn to get a mortgage and how much you can afford to borrow with your own salary.

In this guide, we’ll clarify the different types of income you can include for this calculation, what you potentially need to be earning to borrow a range of different loans, and how a broker can help secure the mortgage you need.

Typically, most mortgage lenders will allow you to borrow up to 4.5 times your annual salary. If you’d like to see how this could work out for you, based on your own annual household income, take a look at our mortgage affordability calculator here:

How much income do you need for a mortgage?

Whilst there are some lenders that may impose a minimum income requirement of around £20-£25k, this is certainly not the case for all.

It’s worth bearing in mind that some lenders are willing to consider alternative forms of income alongside your main salary, which has the potential to significantly increase the amount that you could borrow. For example, Income from investments and pensions, bonuses, commission and shift allowances, and even some forms of benefits could be used in some lenders’ calculations, so it’s important to seek guidance from a broker if you think this could apply to you.

How do lenders work out how much you can borrow?

Each lender has its own unique criteria and methods of assessing your affordability, but the vast majority will allow you to borrow a maximum of 4.5 times their annual salary. This is because every lender in the industry is bound by regulations that only allow them to offer a higher multiple than 4.5 to 15% of applicants, per quarter.

To benefit from the 15% of mortgages that are calculated at 5 times, 5.5 times, and even in some cases, 6 times your income, you’ll usually need to fall into one of the following categories:

• You have a deposit of 25% or above
• You are a high-net-worth individual
• You are in certain professions, such as a doctor or lawyer

Although the ‘mortgage income multiple’ metric is not relied upon as heavily as it once was, and most lenders now use a more holistic approach to assessing your income, it is still used for guidance by most lenders.

Of course, income is not the only factor considered by lenders, so even if you have a substantial salary for the size of loan needed, you’ll still need to meet the lender’s other criteria.

Did you know… You could access 30% more of the mortgage market with a broker on your side.

Mortgage affordability examples

The table below shows how much you could borrow at a range of different incomes, and how the income multiple offered by the lender impacts the size of the loan.

Although it’s unlikely that someone earning £20,000 (as shown in the first row) would be able to achieve a mortgage at a multiple of 6 x their income, as you can see, the difference between 4 x (£80,000) and 6 x (£120,000) is substantial.

The only circumstances where lower earners may potentially be able to access higher income multiples are those in specific careers, such as police officers, as typically, lending in income multiples of 5 or over is reserved for those earning over £50k.

*The above table is for demonstrative purposes only and you should always consult your lender or broker for the most up-to-date information.*

It’s important to bear in mind that the income figure in the table refers to household income. Therefore, if you apply jointly with another applicant, both incomes will be combined, and it can make buying a suitable home much easier to achieve.

How a broker can help secure the mortgage you need

There are an absolute plethora of ways that a broker can help you to achieve the size of loan that you’re looking for, but it depends on your exact goals and circumstances. If your main goal is to borrow the largest loan possible for your income, they could:

• Find lenders that will consider 100% of your additional sources of income
• Find lenders with the most flexibility on term lengths, allowing you to extend the term
• Find the lender with the best interest rates for your circumstances, minimising your monthly payments
• Provide advice on improving your credit record, which can also help you access better interest rates
• Help you to organise your finances to increase your expendable income, maximising the amount of income lenders are able to consider in their calculations
• Recommend ways to increase your deposit, either through government schemes or by accepting a gifted deposit from someone
• Suggest different ways to maximise your borrowing, such as through a joint application, or potentially with the help of others through the JBSP (Joint Borrower Sole Proprietor) mortgage or using a guarantor
• Ensure that borrowers in trusted professions find the lenders that will offer professional mortgages at a higher level of borrowing and that high-net-worth individuals approach those lenders able to offer them 6 times their income, or more

The good news is, regardless of which of the above situations applies to you, we can pair you with a broker who specialises in that area. Get in touch today, to set up a chat with the broker that is best placed to help you.

What income is needed for a 120k mortgage?

If you’re aiming for a mortgage of £120,000, the chances are you’ll need to earn between £26,000-£30,000, assuming you’re offered an income multiple of 4-4.5 times your income.

It will be difficult to find a lender willing to go above 4.5 x salary at this level of income, but there are a few lenders offering 5 x salary with no minimum income requirement, depending on the size of deposit you have available.

160k mortgages

The below table shows how much you’re likely to need to earn if you’re looking to borrow £160,000. Don’t forget that the income needed can be spread across more than one applicant.

400k mortgages

To get a mortgage of £400,000 the minimum you’ll need to be earning is between £88,000 and £100,000 at 4-4.5 times your income.

However, at this level of income, there will be more lenders available to you that are willing to offer 5, or even 5.5 times your household income, meaning that it may be possible to achieve this size of a loan with as little as £72,727, especially for those in secure professions.

If you’re looking to borrow a little more, the income needed for a £450k mortgage would typically be between £112,500-£100,000. It could be as low as £75,000 if you qualify with a lender offering an income multiple of 6 times annual salary.

500k mortgages

If you’re looking to borrow £500,000 then you’ll need an income of £111,111 for a standard 4.5 x your income multiple mortgage. If you earn this amount individually, however, the likelihood is that you will qualify for a high-net-worth mortgage, as the earning threshold is typically £100,000. 

600k mortgages

The below table demonstrates how much you would need to be earning, either individually, or jointly, in order to borrow a home loan of £600,0000.

Typically mortgage lenders will only consider the income of 2 applicants for a joint mortgage, but there are some willing to consider 3 or 4 applicants in certain circumstances, which could assist with borrowing at this level.

800k mortgages

This table demonstrates the household income you would need in order to borrow £800,000. At this level of borrowing, you may find that fewer high street lenders are able to help you, as many cap their borrowing at £750,000.

There are plenty of specialist lenders who can lend at this level, however, so it’s highly recommended that you speak to a broker to access the lenders that can help you.

£1 million mortgages

If you’re looking to borrow £1 million or more to purchase property, then this will be considered a large mortgage loan, and will typically only be offered by private banks and specialist lenders.

You will also likely need to be a high net worth individual, as even at 6 x your income, you’d need to be earning £166,666 to borrow this much. Assuming you went with a lender that only offered 4.5 x your income, however, you would need to be earning £222,222.

How the level of security you offer can impact your mortgage

The majority of lenders decide on the income multiples they are willing to offer, and the interest rates, based on the risk involved in lending to you. The more substantial security you’re able to provide, the less of a risk your borrowing becomes, and therefore the lender is more confident with their offer.

You can provide security in the following forms:

• Deposit – A deposit is almost always needed, but the larger deposit you offer, the lower your LTV (Loan to Value). As some lenders have maximum LTV limits on their higher income multiple borrowing, offering a higher deposit could result in borrowing more in certain circumstances (albeit indirectly).
  Typically those offering more than 20% deposit will be able to access the most attractive income multiples and interest rates.
  It’s possible to get a mortgage with as little as 5% deposit, however, the interest rates will be higher and you’re unlikely to be able to access the same level of borrowing, regardless of your income.
• Additional assets – if you already own other properties or similar assets of significant value, some lenders may be willing to consider this either in addition to your deposit or in lieu of one, depending on the value.
  As these assets can be used as security on your loan, this lowers your risk profile from a lender’s perspective, and could potentially open up higher income multiple borrowing in some circumstances.