House prices in the UK have been steadily increasing for years and securing a large enough mortgage to buy a house can be a significant challenge for many people in today’s housing market.
4-4.5 times your salary is the average income multiple used by most high street lenders.
However, for some people, this may not be enough to buy the home they want, especially in areas where housing prices are high. In such cases, borrowers may need to explore other options to increase the amount of financing they can obtain.
The good news is, it is possible to secure income multiples higher than 4.5 times income. In this guide we explain what you’ll need to apply and how to get the best deal.
See how Strive Mortgages helped a client get a mortgage 5.5 times their income.
What is a 5.5x salary mortgage?
A multiple for mortgage is a term used to refer to the amount of money a lender is willing to lend you based on your income.
Typically, lenders use a multiple of your income to determine how much they will lend you for a mortgage. The multiple is usually expressed as a number, such as 4.5 or 5 times your income.
For example, if you earn £40,000 per year and the lender is offering a mortgage at a multiple of 4.5 times your income, they may be willing to lend you up to £180,000.
At 5.5 times income, you may be able to borrow £220,000. The mortgage you can borrow to buy a property is combined with the deposit you can provide to make up the full purchase price.
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Can I get a mortgage five and a half times my income?
Mortgages with a loan-to-income ratio of 5.5 times or higher are generally reserved for those with higher incomes.
They are typically available to those earning over £75,000 – £100,000 per year, although it is still possible to borrow 5.5 times your salary on lower incomes.
If a borrower has of 5% or 10% deposit, they can usually borrow up to 4.5 times- 5 times.
For example, if someone earns £30,000 per year and has a 5% deposit, they could borrow up to £135,000 (4.5 x £30,000).
If a borrower has a deposit of 15% or more, they may be able to unlock higher income multiples. Whilst it is still possible to borrow more than 4.5 x income with less than 15% deposit, your options will be limited.
Each lender will have its own lending criteria and affordability assessments that take into account various factors beyond just the borrower’s income.
How much can I borrow with a 5.5x salary mortgage?
Here are some examples highlighting the difference the increased multiples make:
5x salary mortgage
5.5x salary mortgage
How does a 5.5x income multiple work if I want a joint mortgage?
If you are applying for a joint mortgage in the UK, the lender will typically use the income of both applicants to calculate the maximum amount that you can borrow.
The income multiple used by the lender will depend on a variety of factors, including your credit history, employment status, and overall financial situation.
How much deposit do I need for a 5.5 times income mortgage?
Whilst the minimum deposit to borrow 5.5 times your income is 5%, you will be very limited on options.
At the time of writing, only one lender will consider lending 5.5 times income with less than 10% deposit and this is only available for first time buyers. If you have 15% deposit you will have a lot more options.
How to improve your chances of getting a mortgage 5.5 x income
Focusing on these points can greatly improve your chances of getting a bigger mortgage:
- Shop around: It’s always a good idea to compare different lenders and mortgage products to find the one that best suits your needs. By shopping around, you may be able to find a lender that offers more favourable terms and conditions, which could help you get approved for a bigger mortgage.
- Improve your credit score: A good credit score is crucial to getting approved for a bigger mortgage. Take steps to improve your credit score, such as paying off outstanding debts, keeping your credit utilisation low, and making sure that all bills are paid on time.
- Put down a bigger deposit: A larger deposit can lower the amount you need to borrow, which may make it easier to get approved for a bigger mortgage. By putting down more money upfront, you may also be able to negotiate more favourable terms and conditions with the lender.
- Reduce your debts: Lenders consider your debt-to-income ratio when determining how much you can borrow. By reducing your debts, you can lower your debt-to-income ratio, which could increase your chances of getting approved for a bigger mortgage.
By focusing on these key areas, you can greatly improve your chances of getting a bigger mortgage.
Can I get a 5.5x salary mortgage with bad credit?
While it may be more challenging to find a lender that will offer a mortgage with a 5.5 times income multiple if you have adverse credit, it’s not impossible. There are lenders who specialise in offering mortgages to borrowers with bad credit, and they may be more flexible in their lending criteria than traditional lenders.
It is generally true that mortgage rates for individuals with bad credit may be higher than those with good credit. In addition, applying for a mortgage at 5.5 times your income may also result in a higher interest rate, as lenders may consider this level of borrowing to be high risk.
Can older borrowers get a mortgage 5.5 times their income?
It’s possible for mortgages for older borrowers to get a mortgage at 5 times their income in the UK, but it may be more difficult than for younger borrowers.
Lenders are required to assess a borrower’s ability to repay the loan, and for older borrowers, this may be more challenging if they are nearing retirement age or have retired already.
In recent years, many mortgage lenders in the UK have become more flexible and have started to consider lending to older borrowers, with some even extending the maximum age at the end of the mortgage term to 75 or even 80 years old.
This increased flexibility can help with affordability for older borrowers, as it allows them to spread the cost of the mortgage over a longer period of time.
Can self-employed borrowers use a 5.5x income multiple?
Self-employed borrowers may be able to obtain a mortgage loan with a 5.5x income multiple if they can provide sufficient documentation to demonstrate a stable and consistent income stream.
Many self-employed individuals run their businesses in a tax-efficient manner, which can complicate the process of qualifying for a mortgage loan.
For example, if a self-employed borrower has a lot of deductions that lower their taxable income, this could make it more difficult to meet a lender’s income requirements.
Overall, while self-employed borrowers may face some additional challenges when applying for a mortgage loan, it is still possible for them to obtain a loan on similar terms to employed applicants as long as they can provide sufficient documentation of their income and creditworthiness.
How can Strive Mortgages help?
Working with a mortgage broker like Strive Mortgages can provide several ways to help you secure a mortgage with a loan-to-income ratio of 5.5 times income:
- Identify suitable lenders: With their expertise, a mortgage broker can help identify lenders who are most likely to consider your mortgage application with a loan-to-income ratio of 5.5 times income. As different lenders have varying policies on this, they can help you find the right one that meets your needs.
- Enhance your application: A mortgage broker can assist you in presenting your case in the best possible way to lenders. They can provide advice on which documents and evidence to provide to demonstrate your income and affordability, along with other factors that may strengthen your application like a good credit score, stable employment history, or a high deposit.
- Negotiate better terms: A mortgage broker can negotiate with lenders on your behalf to obtain a better mortgage deal. They can discuss the interest rate, mortgage terms and conditions, as well as any additional charges or fees to get you the best possible deal.
- Offer expert guidance: A mortgage broker can provide expert advice on various types of mortgages available, the pros and cons of each, and which options suit your circumstances best. They can also guide you through the costs associated with purchasing a property like legal fees, survey costs, and stamp duty.
- Manage the entire process: A mortgage broker can take care of the entire mortgage application process on your behalf. This includes filling out the necessary paperwork, communicating with the lender, and ensuring that everything is submitted on time. By managing the process for you, a mortgage broker can reduce the stress and complexity of buying a property, particularly for first-time buyers or those unfamiliar with the mortgage market