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Salary and Income Multiples

The key info you need to know about the income multiples mortgage lenders use when calculating how much you can borrow

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 10th October 2019 *

Many mortgage lenders use a multiple of your income to determine how much they could potentially lend you.

But what exactly is an income multiple, how does it work, and is it the only deciding factor when it comes to how much you could borrow for a mortgage?

In this article, we look in depth at salary multiples and the ways that mortgage providers assess your application against their affordability and eligibility criteria.

Click the links below for more information or read on for a comprehensive understanding of income multiples.

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What are mortgage income multiples?

To put it simply, income multiples are figures based on a multiple of your annual salary that lenders use to determine the size of the mortgage they can offer you.

Historically, most lenders used a mortgage income multiple to calculate how much you’d be able to borrow.

Nowadays, however, many lenders tend to take other factors into consideration to calculate your affordability. Other providers won’t even set a maximum income multiple, instead working your affordability out by assessing your income against any expenditures.

How many multiples of my salary could I get?

It depends on a number of factors, including whether you’re a single or joint applicant, your salary, the amount of deposit you have, and your credit history. Each mortgage provider use complex calculators which take many variables, such as other significant outgoings and supplementary income sources (such as benefits and bonuses) into account as well.

Many lenders offer an income multiple of between 4-4.5 times your annual salary, though some will consider 5 times in other circumstances, or possibly even six.

If you’re considered to be a less ‘risky’ applicant, a lender may offer you a higher income multiple. However, if you have adverse credit and a low deposit, then they may offer you a lower multiple of your salary.

The table below will give you an indication of how much you can borrow, based on the multiples of income a lender may offer.

Income 3x Income 4x Income 5x Income 6x Income
£35,000 £105,000 £140,000 £175,000 £210,000
£40,000 £120,000 £160,000 £200,000 £240,000
£45,000 £135,000 £180,000 £225,000 £270,000
£50,000 £150,000 £200,000 £250,000 £300,000
£55,000 £165,000 £220,000 £275,000 £330,000
£60,000 £180,000 £240,000 £300,000 £360,000
£65,000 £195,000 £260,000 £325,000 £390,000
£70,000 £210,000 £280,000 £350,000 £420,000

The above is for comparative purposes only. You should check with a mortgage broker for figures tailored to your circumstances.

Will my mortgage deposit affect how much I could borrow?

If you’re able to put down a bigger deposit, you’re more likely to get a higher income multiple.

The salary multiplier calculation used for working out the size of your mortgage might be based on a higher multiple if you’re able to put down a bigger deposit.

The maximum loan-to-value (LTV) you’re likely to find for a residential mortgage is 95%, meaning you will need at least a 5% deposit. However, some lenders have a 10% minimum and 25% is standard for a buy-to-let deal, although some will accept as little as 20% or 15%.

Bear in mind that by putting down a deposit that’s larger than the minimum amount, a lender will consider you as less of a risk and may offer you a higher income multiple as a result.

What’s the maximum amount I could borrow based on my salary?

The highest income multiple your mortgage is likely to be based on is x6 your salary, but only a minority of specialist lenders will go that high, and under the right circumstances.

In order to get this multiple, many lenders would require the following from you:

There are specialist lenders for every niche, including providers who will consider offering favourable rates and maximum income multiples to self-employed borrowers, older customers, people with bad credit and those with low deposits.

Make an enquiry and we’ll match you with an expert shortly.

How do I get offered a higher multiple of my salary?

In order to convince the lender to offer you higher income multiple, you’ll need to meet their eligibility and affordability criteria as closely as possible. Most providers will base their lending decision on a combination of the following factors…

The experts we work with will be able to take these factors into consideration to find the best mortgage deal for your circumstances. Make an enquiry to find out more. 

Could an online calculator tell me how much I could borrow?

You can get a very rough idea of how much you could borrow with many online affordability calculators. They often work by entering your income and outgoings to provide a very basic calculation, though they can’t factor in other important variables such as income from benefits, types of adverse and if you’re wanting to use a mortgage scheme such as Help to Buy.

You can use our affordability calculator to work out rough estimates, though for a more accurate quote, speak with an advisor.

Does income type affect salary multiples for mortgages?

Mortgage borrowing is often based on a multiple of a PAYE salary, but things can be more complex if the customer is self-employed, a contractor or an agency worker. The same can be said for those who make a significant amount of their income through bonuses, commission and/or regular overtime.

If any of the above apply for all or part of your income, then lenders may base your mortgage income multiple on a percentage of your total earnings, while others might turn you away. If your aim is to borrow the maximum amount available, you will need to find a lender who will accept the highest percentage of your earnings.

Luckily, the expert brokers we work with have ‘whole-of-market’ access, meaning that they can find mortgage deals that may not be available to the public. Make an enquiry to see what they can do for you.

How likely is it that a lender will accept my income type?

Below is a breakdown of the types of income that lenders are likely to consider at varying amounts…

Income Types % Considered Notes:
Basic Pay 100% Taken from payslips/contract
Regular Overtime 50-100% Usually average of last 3 months
Irregular Overtime 0-100% Usually average of last 3 months
Annual Bonus 0-100% Taken from payslips/P60
Quarterly Bonus 0-100% From payslips (Usually avg. of last 12 months)
Monthly Bonus 0-100% From payslips (Usually avg. of last 3-12 months)
Commission 0-100% From payslips (Usually avg. of last 3-12 months)
London Weighting 0-100% From payslips
Car Allowance 0-100% From payslips
Shift Allowance 0-100% From payslips (Usually avg. of last 3 months)

Can self-employed borrowers use a multiple of their income?

Self-employed applicants who have been trading for at least three years and derive their income from sole-trader net profit or limited company salary plus dividends would likely be offered a mortgage based on the same multiple of salary as pay-as-you-earn (PAYE) borrowers by most lenders.

Those who have been trading for less and professionals whose income is more complex should seek specialist advice, as some lenders may only be willing to offer a mortgage based on a multiple of a percentage of their total earnings and others simply won’t lend under these circumstances.

What else do I need to know about mortgage income multiples for a ltd company?

Firstly, that most lenders calculate income based on a limited company director’s salary plus dividends drawn over the year, as evidenced in the accounts, and offer a mortgage based on a multiple of the average income from the last 2-3 years, depending on how long the firm has been trading.

Some mortgage providers, however, may offer a mortgage based on a multiple of the trading figures from the last year, which is great for firms that have just started out or have had a profitable year.

There are also lenders who will base their mortgage offer on a limited company borrower’s HMRC self-assessment returns SA302 instead of using the firm’s accounts, and that might be a better fit for anyone who has recently changed trading style or when a firm’s year-end split spans two tax years.

The point is that ltd company borrowers will be treated differently from one lender to the next, so it’s important to seek whole-of-market advice before proceeding. Make an enquiry to get started.

Why do I need a specialist lender if I trade as a limited company?

Because of how niche and/or specific ltd company applications can be, not all lenders will treat your income the same. Some could deem only certain percentages of your income as declarable, and others will only accept your application if you’ve been trading for a specific amount of time.

To put this into perspective, a specialist lender may be happy to offer you an income multiplier mortgage which includes the company’s retained profits, while a mainstream provider might only be able to offer you a deal based on the salary and dividends you draw from the firm.

The table below illustrates the possible difference in lending potential for a limited company borrower at a mainstream leader versus a specialist lender.

Salary = £10,000, Dividend = £15,000, Net Profit before Tax = £40,000

Incomes Considered Typical High Street Lenders (Salary and Dividend) Specialist Lenders (Salary and Net Profit before tax)
Income Calculation £25,000 x 4.5 (£10,000 + £40,000) x 4.5
Total Lending £112,500 £225,000

The above table is for demonstration purposes only.

The specialist brokers we work with have access to the entire market and can pair you with the best lender for your circumstances. Make an enquiry to get started.

I’m newly self-employed. What mortgage income multiple can I get?

The maximum income multiples lenders consider for new businesses tends to be the same as for established businesses – between 4-5 times your income.

However, there are fewer lenders considering businesses trading for less than 12 months, so getting the highest loan size can be more difficult. Lenders still consider either net profits for sole traders and partnerships, and salary, dividends, or retained profits for company directors.

Whether sole trader, partnership or limited company, most high street lenders require 2-3 years full trading accounts before they’ll look at granting you a mortgage.

However, those with their first full year’s trading can still be approved so long as the business is profitable and the income can be evidenced – either through a full year’s certified accounts or SA302s (often lenders will want both when only having traded for 12 months and the applicant has history and experience working in the same type of job).

Do supplemental earnings count?

Yes, some lenders treat the following supplementary capital as declarable:

  • Child Benefit
  • Child Tax Credit
  • Maintenance Payments
  • Working Tax Credit
  • Disability Living Allowance
  • Pension income
  • Investment Income
  • Overseas earned income
  • Rental Income
  • Bursary
  • Stipend

However, the percentage of the above sources that a provider will add to the multiple of your salary they’re basing the mortgage on can vary from one lender to the next, so it’s essential to speak with a specialist broker with access to the whole market so your borrowing potential is maximised.

Could I borrow more with a higher number of mortgage applicants?

Yes, it could do. A joint application would typically offer a higher income compared with a single applicant, though as we’ve already discussed, the amount you can borrow will depend on many other factors.

Some lenders can accept up to a maximum of four individuals as part of a mortgage application, however, they will typically only consider two applicants with the highest salaries. So, while you can find a mortgage provider who accepts more than two applicants, the extra income from a third or fourth applicant is typically not factored in.

How will my outgoings impact the amount I could borrow?

Other significant outgoings are often factored into the salary multiplier calculation a mortgage lender carries out when working out how much you can borrow.

They may include:

  • Outstanding loan(s)
  • Children
  • Other dependents (e.g. parents who live with you or a partner you’re supporting)
  • Another mortgage

Some lenders take a more flexible approach to borrowers with the above on their plate than others. For example, there are providers who are happy to ignore loans due to be paid off before your mortgage is completed, a default with only a few months left on your credit file and mobile phone contracts.

When it comes to children, some providers prefer only a certain number of children in the household. Others are flexible on this and a minority won’t factor in child-related expenses at all when carrying out the wage multiplier calculation for your mortgage application.

Finally, if you have a dependent spouse, it may be more cost-effective for you to apply as a married sole applicant. However, it’s recommended that you seek specialist advice first as not all lenders will allow this.

Speak with an advisor for more information.

Which commitments might lenders ignore?

Some lenders ignore certain commitments that are either considered day-to-day expenses or aren’t long-term enough to influence the mortgage. Some of which include:

Mobile Phones

These often appear on credit reports as a commitment because they are considered a contract for credit. However, these tend to be considered a variable expense in the same way as gas/electric and are added into calculations for the general cost of daily living rather than a physical commitment.

Loans/finance/cards that will be redeemed before completion

Often along with the sale of a property clients will clear their credit commitments before moving into their new property.

In these cases, many lenders can ignore the monthly repayments, which in turn increases the amount they’d be prepared to lend. Lenders will make this a condition of the mortgage offer, and many will ask the solicitors to confirm these have been repaid before completion, however this isn’t always a mandatory requirement with every lender.

Loans with less than 6 months to run

When lenders perform a credit check, they will see any outstanding payments you may have left on a loan.

With a mortgage and property purchase typically taking around two to three months to complete, some lenders may overlook a loan if you only have a few months left to pay it off post-completion.

Self-funding buy-to-let

There are many landlords and people with buy-to-let mortgages on properties they rent out, and in certain circumstances these can impact affordability calculations.

Generally, so long as the rent received covers the mortgage payment, lenders will ignore the commitment. Some stipulate that the rent must be over and above the mortgage payment by a certain percentage to cover the risk of rental void periods and/or other costs associated such as agent and maintenance fees.

For example, if the lender requires a percentage of 125% of a £500pm mortgage payment, you would be required to rent your property at a minimum of £625pm.

Do mortgage term lengths impact salary income multiples?

It can do. Most residential mortgages are offered on a repayment basis and the average term is 25 years, but if you take out a home loan on a longer term (30 years, for instance), this will make the monthly instalments less and the mortgage more affordable (at least in theory).

Therefore, the lender might be willing to be generous when calculating the earnings multiple for your mortgage, so long as the lengthier term does not run into your retirement years.

You should, however, be aware that taking out a longer-than-average mortgage term should never be done lightly, so be sure to make an enquiry before proceeding.

Could a secured loan offer me a higher multiple of my salary?

The highest salary multiple lenders typically offer for a mortgage is x6 your income, but these deals are rare and only offered to customers under very specific circumstances (i.e. when the applicant ticks all or most of the items on the provider’s eligibility and affordability checklists).

Secured loans, however, are more flexible and the way they are underwritten is very different. These products are aimed at anyone who already owns a property and wants to borrow against its equity. It is possible to take out a secured loan worth up x10 your income, under the right circumstances.

For more information about secured loans, make an enquiry and we’ll match you with an expert.

Speak to an expert

If you’re looking to see how much you could borrow for a mortgage, speak with one of the independent brokers we work with. They’ll be able to provide you with tailored advice and find the best mortgage deals based on your circumstances and requirements.

Make an enquiry for a free, no-obligation chat with an expert.

Updated: 10th October 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.

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