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Mortgage based on Salary

Are you disappointed with your maximum mortgage offer or interested in the borrowing cap based on your income? Here we explore mortgage multiples and the upper limit of what a lender is likely to offer you.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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What Is A Salary-Based Mortgage Affordability?

Mortgage affordability tends to use your salary as a starting point. Lenders will calculate the maximum they can offer based on a multiple of your annual earnings.

However, there are multiple other factors to consider, including your credit rating, type of employment, and the deposit you have available.

Here we'll explore what factors impact the maximum mortgage you can apply for. If you'd benefit from independent advice, and expert support with negotiating your mortgage deal, give us a call on 0330 304 3040 or email the team at [email protected].

What Mortgage Can I Afford in the UK?

Lenders will start with your salary, and multiply it by their applicable rates to arrive at a maximum.

This calculation varies significantly between lenders - four or 4.5 times your salary is typical. Still, some lenders can offer as high as five or even six times your income, depending on how closely you meet their criteria.

The table below illustrates how significantly your maximum mortgage will vary depending on which lenders you apply to:

Annual salary

Lender A - 4 x Salary

Lender B - 4.5 x Salary

Lender C - 5 x Salary

Lender D - 5.5 x Salary

Lender E - 6 x Salary

£25,000

£100,000

£112,500

£125,000

£137,500

£150,000

£30,000

£120,000

£135,000

£150,000

£165,000

£180,000

£40,000

£160,000

£180,000

£200,000

£240,000

£240,000

£45,000

£180,000

£202,500

£225,000

£247,500

£270,000

As you can see, the amount you can borrow will be substantially different between lenders - so it is vital to consult an independent broker before making an application!

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Can I Use a Mortgage Calculator to See what I Can Borrow on my Salary?

You can, yes - but it's worth bearing in mind that mortgage calculators are only ever a rough indication.

For accurate information and to know whether you meet the eligibility criteria, it is advisable to work with an experienced broker who can assess your circumstances before quoting any indicative figures.

Does Affordability Work the Same on Secured Loans and Mortgages?

No, since most lenders have more flexible policies on secured loans. This borrowing still means that your loan is secured against your property, but is less rigid than a mortgage, and typically you can borrow more.

Secured loans can sometimes be arranged for as high as ten times your annual income.

What Other Income Streams Will Impact the Maximum Mortgage I Can Get?

Your basic wage is only one of many factors that a lender will need to assess, depending on your employment and pay structure.

If you earn bonuses, commissions, receive benefits or allowances, or work overtime; these can all impact the maximum you can borrow.

The complication is that different lenders take a different view on variable income streams for an affordability calculation. For example, if you earn commissions, some lenders will include 100% of this value on your annual earnings figure, and others 75% or 50%, so it's all about selecting the right lender to apply to.

Do Employment Allowances Help with my Mortgage Application?

They can, yes. If you receive a financial allowance for a car or home, a lender can include this income in your earnings figures to help you achieve a higher mortgage offer.

Again, how much of these allowances are included all depends on the lender. Many will ask for a written contract of employment or documentation to verify the value of such allowances.

How Much More Can I Borrow on a Mortgage Based on my Additional Income?

Lenders will assess your additional income depending on their policies, and how much of that income they accept in the affordability assessment.

The below table summarises different example income streams, and how a lender might assess those types of income in working out how much they can offer to lend you, assuming that bonuses, overtime and commissions are capped at 50%:

Basic Wage

Regular Bonus

Annual Overtime

Yearly Commissions

Annual Housing Allowance

Lender A - 4 x Total income

Lender B - 4 x Basic Salary Only

£20,000

£20,000

£0

£0

£10,000

£160,000

£80,000

£30,000

£0

£10,000

£10

£10,000

£180,000

£120,000

£35,000

£0

£0

£40,000

£0

£300,000

£105,000

This table illustrates why choosing the right lender is so important. For the first scenario, you could double your maximum mortgage by using a lender who will include your variable income, at 50% instead of a lender who will only factor in your primary salary.

What is the Maximum Mortgage I Can Get with a Joint Applicant?

Many couples and business partners buy a property together, and the affordability calculations work similarly to those already explored, although considering two salaries instead of one.

Generally, that means being able to borrow more. The below shows two different income scenarios, and what you might be able to borrow depending on the calculation policy of your selected lender:

Person A

Person B

Total Income

Lender A - 4 x Salaries

Lender B - 5 x Salaries

Lender C - 6 x Salaries

£20,000

£24,000

£44,000

£176,000

£220,000

£264,000

£22,000

£31,000

£53,000

£212,000

£265,000

£318,000

Again, this demonstrates why the choice of lender makes such a difference and can significantly change the maximum mortgage you can apply for.

How are Self-employed Earnings Assessed for a Mortgage Application?

Self-employed applicants will need to provide trading accounts to show how much they earn. Most lenders require three years of trading history, although some can accept less. Specialist mortgage providers can even offer lending to newly self-employed people in the right conditions.

  • Sole traders and partnerships - lenders usually rely on the net profit drawn from the business and use the average figure over the last three years to arrive at an annual income to use in the affordability assessment.
  • Limited company directors - most lenders will consider your salary and any dividends drawn, and average it out.
  • For contractors, lenders take your day rate and assume you work an average of five days per week for 47 or 48 weeks of the year to estimate your annual income.

What Eligibility Factors Aside from my Salary Impact my Mortgage Application?

Lenders will look at lots of different variables in addition to how much you earn:

  • Your outgoings, such as loans, dependents, and living costs, are all used in an affordability assessment to work out your net disposable income and how much you can realistically afford to repay each month.
  • The deposit is also important - most UK lenders need at least a 15% deposit, with 25% being more usual, although some niche products are available with as low as 5%. The deposit matters since the higher the deposit, the less risky the application, and the more generous the affordability assessment is likely to be.

Professional Support with Mortgage Affordability

If you're unsure what mortgage you can afford or would like to ensure you apply to the right lender for your circumstances, get in touch with the independent team at mortgage brokers.

As a whole-of-market broker, we help applicants in any scenario to negotiate the most competitive lending. Give the team a call on 0330 304 3040, or drop us a message to [email protected].

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

twitter  linkedin  

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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