Thinking of getting a Halifax mortgage? One of the first and most important questions is how much you can borrow. This guide explains everything you need to know about Halifax mortgage affordability and how you can improve your chances of securing the amount you need.
General mortgage affordability limits
How much do mortgage providers lend? There are many factors in determining how much you can borrow, all of which we’ll cover in this guide. However, most lenders generally offer 4.5 times your gross annual income. It is possible to secure 5.5 times or more your income, although these are usually reserved for those with higher incomes and big deposits. Conversely, it’s also possible that you may be able to secure significantly less than 4.5 times your income or not qualify for a mortgage at all.
Factors that Determine Mortgage Affordability
Several factors affect mortgage affordability, and these can vary by lender:
Deposit
Having a larger deposit can increase the income multiples lenders are willing to offer.
Sub-15% deposits are often limited to 4.5 times your income, although there are exceptions.
Income
Those on lower incomes may be limited to lower borrowing amounts. For example, individuals earning below £40k-£50k may be limited to 4.5 to 4.75 times their income.
Those earning above this range may be eligible for 5 times their income. Individuals earning £75k-£100k may be eligible for multiples above 5 times with some lenders.
Outgoings/Dependents/Debt
Higher outgoings, dependents, and existing debts can reduce the amount you can borrow.
Credit Score
A higher credit score can improve your chances of securing a higher multiple of your income.
Term
Shorter mortgage terms can result in lower borrowing amounts.
Product Choice
Some mortgage products may offer more affordability. For example, fixed rates of 5 years and above can yield better borrowing amounts.
Each lender has its own criteria and policies, so it’s essential to check with them directly for specific requirements and offerings.
Halifax borrowing limits
Halifax has specific borrowing limits that vary based on the borrower’s income and other factors. High earners, generally those with an income above £100k, may be eligible to borrow up to 5.5 times their gross annual income. For those earning £40k or below, the borrowing limit is usually capped at 4.5 times their gross annual income or less. Additionally, buyers using schemes such as shared ownership are limited to borrowing 4.5 times their gross income.
Halifax accepts 100% of most forms of guaranteed income, which includes salaries and other fixed earnings. However, for variable pay like bonuses, overtime, and commission, Halifax typically only accepts 60% of these amounts. Understanding these limits and criteria is crucial for planning your mortgage application and ensuring you can secure the amount needed.
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Employed vs self employed
Halifax generally offers higher income multiples to employed applicants compared to self-employed individuals. For self-employed applicants, Halifax typically takes a two-year average of the borrower’s income, considering both salary and dividends. This average is then used to determine the borrowing amount, which may result in lower borrowing multiples compared to employed applicants who often benefit from higher income multiples. Understanding these differences is important for planning your mortgage application and ensuring you can secure the desired loan amount.
Halifax shared ownership affordability
Like all lenders, Halifax has different affordability models for shared ownership versus normal purchase. The cost of rent is factored into the affordability calculation, and it’s usually the case that you can borrow significantly less on a shared ownership property. It’s important to factor in the expected rent when calculating shared ownership affordability. Additionally, borrowing for shared ownership properties is usually capped at 4.5 times income. Understanding these differences is crucial for planning your mortgage application and ensuring you can secure the desired loan amount.
Process of calculating Halifax mortgage affordability
The process of calculating Halifax mortgage affordability involves several key steps:
- Book an Appointment with a Broker: Start by scheduling a meeting with a mortgage broker who can guide you through the process.
- Gather Documents: Collect all necessary documents, including proof of income, bank statements, identification, and any other documents required by the broker.
- Run Affordability Check: With the broker, run an affordability check using Halifax’s mortgage calculator. This helps determine how much you can borrow based on your financial situation.
- Secure an Agreement in Principle (AIP)Once the affordability check is complete, secure an Agreement in Principle (AIP) from Halifax. This is a conditional offer stating how much Halifax is willing to lend you, subject to further checks and approval.
- Update Broker on Changes: It is important to keep your broker updated on any changes in your financial situation between securing the AIP and submitting the full application. The final mortgage offer will be based on your income and circumstances at the time of the full application, not the AIP.
Following these steps ensures that you have a clear understanding of your mortgage affordability and helps streamline the application process with Halifax.
Types of Mortgages Offered by Halifax
Halifax offers a wide array of products to all types of borrower. Here are a few.
- Fixed-Rate Mortgages: Fixed interest rate for 2 to 10 years, providing stable monthly payments.
- Tracker Mortgages: Interest rate linked to the Bank of England base rate, causing monthly payments to vary with rate changes.
- Mortgage Schemes: Help to Buy: Equity loan for first-time buyers and movers.
- Shared Ownership: Buy a share of a property and pay rent on the rest.
- New Build Mortgages: Special terms for newly built homes.
How Can Strive Help?
Lenders’ criteria and affordability vary enormously. At Strive, we can help you navigate these complexities and identify which lenders will offer you the most favourable terms. By comparing the best rates and guiding you through the application process, we can save you time and give you the best chance of success with your mortgage application.
FAQ’S
- Can I get 5 times income with Halifax?Yes, Halifax may offer up to 5 times your income, especially for higher earners and those meeting specific criteria.
- Can I get 5.5 times income multiples with a Halifax mortgage? Yes, Halifax can offer up to 5.5 times your income, typically reserved for clients earning above £100k and meeting other stringent criteria.
- Are Halifax a good lender? Yes, Halifax is considered a reputable and reliable lender, known for offering a range of mortgage products with competitive rates and good customer service.
Contact us today, and we’ll work hard on your behalf to find you a competitive mortgage.
For more information on mortgages for contractors, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.
