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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 July 2019* | Published: 13th May 2019

We are always inundated with enquiries from customers who want to know how mortgage providers work out the amount they’re willing to lend. This will depend on the lender you approach but most offer mortgages based on a salary multiple (with other factors taken into account).

We’ve put together this handy guide to UK mortgage borrowing and the role of income multiples in 2019, and you’ll find the following topics covered in depth below…

The brokers we work with are experts in these areas and can give you the right advice on how to get the best deal, even if you’ve been declined a mortgage or have bad credit - make an enquiry to speak with one of the right now!

Furthermore, we also have standalone articles on mortgages based on…

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What are mortgage income multiples?

To put it simply, they’re figures based on a multiple of your annual salary that lenders use to help them determine the size of the mortgage they can offer you.

Historically, most lenders used a mortgage income multiplier calculation to work out how much a customer was able to borrow. These days, however, they tend to take a broader view of affordability which involves other factors beyond the numbers on the applicant’s monthly wage slip.

How many multiples of my salary can I borrow for a mortgage?

The concept of a mortgage as a multiple of the borrower’s income is far from redundant as most lenders will cap the amount they’re willing to lend based on x4.5 the customer’s annual salary, some will go up to x5 their declarable income and a few will stretch to x6, but the affordability calculators they use are backed by complex algorithms which take many variables, such as other significant outgoings and supplementary income sources (e.g. benefits, bonuses etc), into account.

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 and you should check with your lender for the most up-to-date information for your circumstances

What is the maximum multiple of income for a mortgage?

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. You would need to tick all, or at least most, of the items on their affordability and eligibility checklists to get a loan of this size.

So this would usually mean…

If you don’t meet all of the above requirements, there’s no need to panic. 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.

How do I get the best mortgage income multiples for mortgages?

In order to convince the lender to offer you a deal based on a higher multiple of your income, you will 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…

We discuss how each of the above can affect mortgage income multiples throughout this article, but if you need more information on this, don’t hesitate to make an enquiry to speak with a specialist advisor over the phone. They can help you find the lender offering the highest income multiple mortgage deals to borrowers with your needs and circumstances.

What is a mortgage affordability calculator?

An affordability calculator - or a mortgage income multiple calculator - is designed to show a mortgage applicant how much they can borrow when they enter their income and outgoings. Some are straightforward mortgage income multipliers, while others will reveal the overall living cost for a property and feed other variables into the equation to give a full picture of affordability.

Some lenders are more generous than others with these calculations, as certain calculators take different factors into account. For instance, some lenders are more willing to take supplemental income into account, while others are more flexible when it comes to bad credit customers.

Although you can use a multiple of your income as a rough guide when working out the size of the mortgage you’re eligible for, it’s always advisable to talk to one of the  specialist - brokers we work with who have access to the entire market, since some providers use a different type of calculator to others.

How does income type affect mortgages based on earning multiples?

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 regular overtime.

If you earn your money one of these ways, the income multiple you’re offered for a mortgage might be based on only a percentage of your total earnings at some lenders, while others might turn you away.

If your aim is to borrow the maximum amount available, you will need to find the lender who will accept the highest percentage of your earnings - access to the entire market through the expert brokers we work with can help you do that, so contact us today.

Mortgage earnings multiples for self-employed borrowers

We often hear questions like “what multiple of my salary will the lender cap my mortgage offer at if I’m self-employed?”

Well, 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 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 lender under these circumstances.

What else do I need to know about income multiples for a Ltd Company mortgage?

Firstly, that most lenders calculate income based on a Ltd Company director’s salary + 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, to make sure you are paired up with the provider offering the best rates for somebody with your needs and circumstances.

Why do I need a specialist lender if I trade as a Limited Company?

Well, for all of the reasons we’ve outlined in this section, for a start. How your income is treated and the percentage of it that it is deemed declarable can vary across the lender spectrum, and some mortgage providers will want you to have been trading this way for longer than others.

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 vs. a specialist lender.

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

Incomes Considered Typical High Street Lendrs (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 specialist brokers we work with have access to the entire market and can pair you with the lender best positioned to offer you a mortgage based on the most favourable multiple of your earnings, so make an enquiry to speak with one of them on the phone today.

If you trade as a limited company and are in the market for a buy to let mortgage, check out our guide to limited company but to let mortgages.

What multiple of salary mortgage can I get if I’m newly self-employed?

The maximum income multiples lenders consider for new businesses tends to be the same as for established businesses, at between 4-5x income. However, there are fewer lenders considering businesses trading for 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).

Can supplemental earnings count towards my income multiple for a mortgage?

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.

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 ave. of last 12 months)
Monthly Bonus 0-100% From payslips (usually ave. of last 3-12 months)
Commission 0-100% From payslips (usually ave. of last 3-12 months)
London Weighting 0-100% From payslips
Car Allowance 0-100% From payslips
Shift Allowance 0-100% From payslips, (Usually average of last 3 months.)

How does the number of mortgage applicants affect the salary multiples?

Most mortgages are commonly based on multiples of two applicants’ combined income. As we’ve already covered, the majority of lenders will times that by 4, others 5 and a minority 6.

Mortgage multiples for couples: Will we be offered a mortgage based on joint income multiples?

A majority of lenders will limit the number of applicants to two, so any other salaries within the household will have no bearing on the loan size or affordability - the mortgage calculations would still be based on the joint income multiples of the two borrowers named on the mortgage itself.

Family mortgages

Select lenders allow up to four applicants to go on the same mortgage (and not all of them have to live at that address). These mortgages can be based on multiples of up to four peoples’ salary, making them more affordable and the household’s borrowing potential greater.

How does my outgoings impact on mortgage income multiples?

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 loans
  • Children
  • Other dependants (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 any debts that will be redeemed before completion, loans with less than six months left to run and mobile phone contracts.

When it comes to children, certain providers are more accommodating, in the sense that some might turn you away if there are a certain number of children in your 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, but you should seek specialist advice first, since not all lenders will allow this.

Which commitments do lenders ignore?

Some lenders ignore certain commitments that are either considered a day to day expense or aren’t long-term enough to have an effect on the mortgage.

Some examples:

  • 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, and in these cases 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 the monthly payments and balance of any outstanding finance commitment therefore confirming the term left.  With a mortgage/house purchase typically taking 2-3 months any loan in place after completion should quickly be repaid and so can be ignored by some lenders.
  • Self-Funding Buy To Lets –
    There are many landlords and people with buy to let mortgages on properties they rent out in the background, and in certain circumstances these can impact affordability calculations. Generally, as 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 % (for instance 125% would require £625pm rent to cover a £500pm payment) to cover the risk of rental void periods (when the property is empty) and/or other costs associated with letting the property i.e. agent’s fees/maintenance etc.

How do my deposit affect the salary multiple for my mortgage?

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%.

The important thing to keep in mind is that putting down a bigger deposit than the bare minimum will help minimise any risk in the eyes of the lender, and might even convince them to base their mortgage offer on x5 your salary, rather than the typical mortgage income multiple of x4.5.

Does the term length impact the income multiplier calculation for my mortgage?

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, as 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 seek expert advice from the advisors we work with before proceeding.

Mortgage affordability on secured loans

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, consult our dedicated page on the topic or make an enquiry to speak with a whole-of-market expert over the phone.

Mortgage income multiples FAQ

In this section, you will find additional information about mortgage income multiples based on the most frequently asked questions we hear about them.

How does mortgage lending based on income multiples work?

Lenders typically impose a cap on the amount they are willing to lend based on either x4, x5 and (in rarer cases) x6 the borrower’s salary. Most providers, however, will take other factors into account when calculating the customer’s affordability, such as their outgoings, their credit rating, and more.

To land a mortgage deal based on x5 or x6 your salary, you will need to convince the lender that you’re a low-risk borrower by ticking all, or at least most, of the boxes on their eligibility and affordability checklists. We discuss what these items are throughout this article.

What are considered average mortgage income multiples?

Deals based on x4 you salary would be considered standard mortgage income multiples, but some lenders will go up to x5, and as we’ve already mentioned, x6 under the right circumstances.

Speak to a mortgage income multiples expert

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today 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. They can connect you with the lender offering the best salary multiple mortgage deals for borrowers in your shoes.

We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 10th July 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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