How Much Can I Borrow - Mortgage Income Multiples Explained

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Borrowing Limits

If you are an employee, the majority of mortgage lenders will calculate the maximum size of a mortgage loan based on your salary.

Traditionally, for single applicants, most lenders have been prepared to offer an amount up to three times salary. In the case of joint applicants, the offer has been either:

Up to three times the larger salary, plus one times the other salary, or
Up to two and a half times the combined salaries.

For example, if Mr Smith earns Ł40,000 per annum and his wife earns Ł20,000 then they could expect to borrow either:

3 x Ł40,000 + Ł20,000 = Ł140,000, or
2.5 x Ł60,000 = Ł150,000

The definition of salary is usually your full basic salary plus 100% of guaranteed bonuses or 50% of regular bonuses/over time. Before applying the multiples shown above the lender will deduct from your salary the annual payments to any existing loans, but if a loan finishes within the next year it will normally be ignored.

Nowadays, higher multiples are available from some lenders. Loans of up to four times salary are not uncommon, and some will even go as high as five times salary for certain occupations.

Whatever maximum amount you are offered, it is very important to make sure you can afford the mortgage repayments. You need to consider the situation as it is now, and also what would happen in the future if interest rates were to increase.

A mortgage calculator can give you an idea of the figures, or you can talk things through with one of our mortgage advisers.

As fully qualified mortgage advisers and independent financial advisers, the members of our panel of experts can help you to look at your whole financial situation to determine a sensible level of borrowing, taking into account your present requirements and the likely impact of any future rises in interest rates.

If you would like to know more, we would be happy to hear from you. Just complete our online enquiry form and an adviser will contact you.

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