Are you considering a mortgage for a £700,000 property? Making mortgage payments can be a substantial financial commitment, so it’s important to understand the qualifying criteria and factors that can affect the cost. In this article, we’ll explore everything you need to know to make informed decisions. From income requirements to payment reduction strategies, let’s delve into the world of mortgage payments.

Strive Mortgages are experts in all things mortgages and specialise in arranging mortgages of high value.  We offer bespoke, high quality, award winning advice. 

If you’re a interested in exploring your mortgage options get in touch with one of our expert brokers on 01273 002697 or email [email protected] 

Qualifying for a £700,000 Mortgage

When it comes to qualifying for a mortgage, there are a few key criteria to consider. Typically, lenders require a minimum 10% deposit, and the amount you can borrow is usually 4.5-5 times your income. In some cases, lenders may be willing to lend up to 5.5 times your income. Additionally, having a good credit history is crucial. Other factors that lenders consider include the mortgage term, your age, and your level of indebtedness.

It’s important to note that the interest rate on your mortgage can also impact your ability to qualify for a loan. Lenders will assess your ability to afford the monthly repayments based on the interest rate offered. A higher interest rate means higher monthly repayments, which could affect the amount you are able to borrow. Therefore, it’s essential to shop around for the best interest rates and terms that suit your financial situation.

Furthermore, your employment status and stability play a significant role in the mortgage approval process. Lenders prefer borrowers who have a steady source of income and a secure job. Self-employed individuals may face additional scrutiny and may be required to provide more documentation to prove their income stability. It’s advisable to have at least two years of consistent income history to demonstrate to lenders that you have the financial capacity to repay the loan.

Key Criteria 

Employment stability, income versus outgoing expenses, credit history, age, and property type are the key factors that lenders take into account when approving a mortgage. Having a stable employment history demonstrates your ability to make consistent payments. Lenders also evaluate your income and outgoing expenses to ensure you can comfortably afford the mortgage repayments. Your credit history plays a significant role in determining your eligibility, and factors such as your age and the type of property you’re purchasing can also influence the lender’s decision.

Employment stability is crucial because it shows lenders that you have a reliable source of income to make timely mortgage payments. A longer employment history with the same employer can strengthen your application, as it indicates job security. Additionally, a higher income in relation to your outgoing expenses gives lenders confidence that you have the financial capacity to meet your mortgage obligations without strain.

When it comes to credit history, lenders typically look at your credit score, payment history, and debt-to-income ratio. A good credit score demonstrates your ability to manage debt responsibly, while a positive payment history reassures lenders of your reliability in meeting financial commitments. Moreover, your age can impact mortgage approval, as younger applicants may have less established credit histories compared to older individuals. The type of property being purchased is also considered, with factors such as location, condition, and property value influencing the lender’s risk assessment.

How Much Do You Need to Earn?

The amount you need to earn to qualify for a mortgage depends on various factors. Typically, lenders consider a multiple of your income, usually ranging from 4.5 to 5 times. However, in some cases, this multiple can be as high as 5.5. Therefore, for a £700,000 mortgage, you would generally need to earn between £127,272 and £155,555, depending on the deposit amount.

Factors That Affect Mortgage Cost

Several factors can influence the overall cost of your mortgage. The mortgage term, product type, repayment type, and interest rate all play a role. Depending on your age, you may be able to borrow for a term ranging from 5 to 40 years. The longer the term, the lower the monthly payments, but keep in mind that it also means you’ll pay more interest over time. Different product types, such as fixed or variable rates, offer distinct advantages and disadvantages, depending on your financial goals.

How much will the repayments be? 

The monthly repayments will depend on the term & interest rate & repayment type. 

The graph below illustrates payments based on various terms and interest rates. 

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Lowering Your Mortgage Payments

If you’re looking to lower your mortgage payments, there are several strategies you can consider. Firstly, increasing your deposit can help reduce the amount you need to borrow, resulting in more manageable monthly payments. Extending the mortgage term is another option, but this might mean paying more interest over time. Some lenders have maximum age limits at which the mortgage must be repaid, typically around 70 to 75 years. Shopping around and comparing different lenders can also help you secure the best rates. Finally, improving your credit score can make you more eligible for lower interest rates.

Understanding Mortgage Product Fees

Mortgage product fees can vary and are often tiered based on the loan amount. Some lenders may not charge any fees, while others may have fees ranging from £999 to £1,999 or a percentage of the loan amount. In some cases, opting for higher fees might secure you a lower interest rate. It’s important to consider these fees when calculating the overall cost of your mortgage.

Assessing Affordability

Assessing mortgage affordability goes beyond the income and deposit amount. Consider your current level of outgoings and any potential future plans, such as having children or career changes. These factors can impact your monthly budget and your ability to meet mortgage payments comfortably. A thorough evaluation of your financial situation will ensure that the mortgage is sustainable in the long run.

Available Mortgage Rates

The mortgage rates available to you will depend on the deposit amount and the prevailing rates at the time of your application. Typically, lenders offer fixed-rate options for 2, 3, 5, or 10 years, providing stability and predictability in your payments. Alternatively, you can opt for variable or tracker rates, which fluctuate with the market. It’s crucial to carefully consider your financial goals and risk tolerance when choosing the right mortgage rate.

How can Strive Mortgages help 

Working with a mortgage broker can be highly beneficial when navigating the mortgage landscape. They often have access to exclusive rates and established relationships with lenders, which can help you secure a better deal. Brokers have extensive knowledge and understanding of the mortgage market, assisting you in choosing the most suitable product for your needs. They can guide you through the paperwork and provide valuable advice throughout the entire mortgage process.

When it comes to mortgage payments for a £700,000 mortgage, understanding the qualifying criteria, assessing affordability, and exploring various strategies to lower your payments are all essential. By carefully considering these factors and potentially working with a mortgage broker, you can make informed decisions and secure the best mortgage terms for your needs. Remember, a mortgage is a long-term commitment, so taking the time to research and evaluate your options is key to ensuring financial stability in the future.

Strive Mortgages are experts in all things mortgages and specialise in arranging mortgages of high value.  We offer bespoke, high quality, award winning advice. 

If you’re a interested in exploring your mortgage options get in touch with one of our expert brokers on 01273 002697 or email [email protected] 

FAQ’s

How much deposit do I need for a £700,000 mortgage?

Typically, you’ll need a deposit ranging from 20% to 25%, which amounts to £140,000 to £175,000. However, this can vary depending on your financial profile and the lender’s criteria.

How much do I need to earn to get a £700,000 mortgage?

Generally, you should earn between £140,000 to £175,000 annually to secure a mortgage of this size. Lenders typically calculate affordability based on your income, expenses, and other financial obligations.

Can I get a £700,000 mortgage on interest only?

Yes, it’s possible with a deposit of at least 25% and a suitable repayment vehicle, such as another property or investments equivalent to the interest-only portion.

Do lenders accept commission?

Yes, some lenders do consider commission as part of your income. The percentage they accept can vary, often averaging your commission over the last three, six, or twelve months.

Can I get 5.5 times income?

Yes, it’s feasible, especially for individuals earning above £75,000 to £100,000 annually. Lenders may extend your borrowing capacity up to 5.5 times your income, depending on your financial circumstances and creditworthiness.

  • Number of dependents
  • Child care costs if applicable 
  • Details of any credit commitments – Loan’s, credit card balances, finance agreements – If applicable, confirm provider, balance and monthly payment. 
  • Monthly commute costs if applicable

Contact us todayand 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.