Mortgage Borrowing
How much can I borrow is one of the most common asked questions! Whether you’re a first-time buyer, moving home or looking to fund home improvements, how much you can borrow is paramount to your latest housing adventure.
Each UK lender has a different policy on how much they are willing to lend individuals which means you could borrow more with one lender and less with another. That said, lenders typically will lend you 4.5x to 4.75x your household income. There are however some lenders that may lend as much as 6-7x income!
There is no doubt there is a huge disparity between the average UK wage and the average UK house price. Often making it difficult to borrow the amount you may require.
If we put that into perspective, the average UK full time wage is £31,285 (Fennell, 2022). Applying a standard income multiplier of 4.5x, this means that you could borrow up to £140,782. However, the average price for a semi detached property in the UK is £269,856 (GOV.UK, 2021). So unless you have c£130k deposit it may prove difficult to buy the property you want.
Here are some options that may enable you to borrow more:
Bonus, Commissions and Overtime Income
Lenders have differing criteria requirements when it comes to assessing non-guaranteed income like bonuses, commissions and overtime. Some will use 100% of your overtime, bonuses & commission whereas other lenders may only use a smaller percentage towards affordability. If you are in receipt of any non-guaranteed income such as bonus, commissions or overtime then I would recommend you speak with a mortgage professional who can find a lender that will treat this income more favourably.
Helping Hand Mortgages
A high street lender has recently launched a First Time Buyer product that enables you to borrow up to 5.5x your income. There are some conditions attached to this such as the products available are 5–10-year fixed rates and you will need a minimum of a 10% deposit for houses and 15% for flats and apartments. Furthermore, the lender requires sole applicants to earn a minimum of £31k per annum and joint applicants to earn £50k per annum.
Joint Borrower/ Sole Proprietor
The Joint Borrower Sole Proprietor Scheme is aimed at applicants that have a family member who would be willing to be added as a mortgage borrower to boost affordability. Both borrowers are jointly liable for the repayment of the mortgage but only the occupier will be named on the title deeds. This means the occupier has all of the independence of owning their own home and the second borrower is not liable for stamp duty.
Please see my Joint Borrower/ Sole Proprietor blog post for more information on this scheme.
Professional Mortgages
Many UK lenders offer mortgages to applicants that work in certain industries. They will offer a more preferential interest rate and potentially lend them more than a non-professional applicant. Some lenders enable professionals to borrow up to 6x their annual income.
Lenders consider key workers, medical care staff, teachers, accountants and surveyors as professionals. These professions often earn an income that increases annually and therefore the lenders will lend more accordingly.
Next Steps
When researching your mortgage options, reaching out to a mortgage professional like a broker will often be beneficial. The broker can give you an accurate mortgage budget and they can also search the market for the most suitable mortgage deal.
Mortgage advisors are trained to recognise the opportunities for the above-mentioned schemes and recommend them where possible. Please feel free to get in contact.
