As a starting point, mortgage lenders typically use an income multiple to work out how much they would be willing to lend to you. In other words, when calculating the maximum loan they can offer you, they will multiply your income by a certain number.
If you’ve heard that a mortgage is 3 times your salary and you’re wondering if that’s how much you can borrow, we have some good news – the most common income multiple today is between 4 and 4.5 times your salary. Some lenders offer even higher income multiples of 5 to 6 times your salary, and some don’t use an income multiple at all.
In this guide, we’ll explain why 3x income mortgages were briefly the norm and what’s changed since, and provide some insight into the most common income multiples today and other factors that may influence your mortgage offer.
Are All Mortgages 3 Times My Salary?
No, as mentioned above, most mortgages today are around 4.5 times your salary. The likely reason you may have heard about 3 times salary mortgages is that after the financial crisis, mortgages were temporarily capped at 3 times income to try to get a hold on risky mortgage lending. However, other regulations have since been put into place to reduce mortgage risk, such as tighter affordability checks and a ban on 100% mortgages. Due to these changes, the cap was lifted and it has now been standard for homeowners to borrow 4.5x their income or higher for many years.
Can I Get a Mortgage That’s 3 Times My Salary?
It’s definitely possible to get a mortgage 3 times your salary as long as you pass the lender’s affordability and credit checks. As mentioned above, a 3x salary mortgage is actually below the standard income multiple that many lenders work from, so if your income allows it and your credit score is good, you shouldn’t have a problem borrowing 3 – 4.5 times your salary, and perhaps even more.
If your income is complex and/or you have bad credit, you may still be able to borrow 3 – 4.5 times your salary, but you’ll likely have fewer deals available to you. To check your credit score, you can download a detailed credit report from Check My File.
No matter what your situation, speak to one of our friendly advisors and we’ll search the market to see what deals are available to you.
No matter how much you borrow, in most cases, it’s recommended you take out Life Insurance with Critical Illness Cover or Income Insurance. Having the right insurance policies in place will allow you and your family to pay off the mortgage if your income was ever lost due to illness or injury. To find out more about protecting your mortgage, please use our FREE Insurance Service – our insurance team can help you find and set up the right policies free of charge.
How Do Lenders Decide How Much I Can Borrow?
When deciding how much to lend to an applicant, lenders will look at your affordability and credit history. This involves a thorough assessment of your income, debts and expenses to work out how much you can afford to repay month to month. Lenders will also stress test your affordability to make sure you’d be able to handle monthly repayments even if your circumstances were to change slightly or interest rates were to increase. In terms of your credit history, how responsible you’ve been with previous loans and debts is likely to affect how much you’ll be able to borrow on your mortgage. You can find out all about your credit history at Check My File.
Are Different Income Multiples Used for Joint Mortgages?
When applying for a joint mortgage, lenders typically include both of your incomes when determining your affordability, allowing you to borrow significantly more than you could as an individual applicant.
Typically, the income multiples used are the same whether you’re applying for a sole income or joint mortgage. However, it can be less the lower the income due to there being less disposable income for other bills and living expenses. For example, a sole applicant with a £20k salary may be able to borrow around £60k at 3x their salary, however, a joint application with two £20k salaries may be offered around £194k at a 4.85x income multiple. This is another reason why it’s so important to speak to a whole of market mortgage broker, as some lenders could let you borrow considerably more than others.
How Many Times My Salary Can I Borrow if I’m Self-Employed?
As long as you have at least two years’ worth of accounts and you meet the lending criteria, you should be able to achieve the current standard of 4-4.5x your income. Self-employed people often worry about being rejected for a mortgage, but as long as you provide adequate proof that you can afford your mortgage and your credit is good, you should have most of the same options as an employed person. If you have less than two years’ worth of accounts, inconsistent income, or bad credit, you may still be able to get a mortgage but it might have to be through a specialist lender.
No matter what your situation, speaking to a mortgage advisor who understands the criteria of each lender is important so you don’t damage your credit score by applying for a product you’re unlikely to be accepted for.
The Bottom Line
3 times salary mortgages were briefly the norm when there was a temporary cap put in place after the financial crisis. However, 4-4.5 times salary mortgages are now the norm and have been for many years. As long as you meet the lender’s affordability and credit checks, you should be able to secure a mortgage that’s 4-4.5 times your salary. Some lenders may let you borrow 5x or 6x your income.
The offers you receive from lenders will likely vary greatly in terms of the amount you can borrow, the interest rate you pay, and the flexibility of the product. For this reason, it’s important to speak to a whole of market mortgage broker to ensure you get the right deal and to protect your credit score.
At Michael Usher Mortgage Services, we’ve been helping our local community for over 30 years! As whole of market mortgage brokers, we search thousands of products to find a deal that suits your needs. We’ll guide you through the process and liaise with your lender, estate agent and solicitor to ensure your application goes smoothly, and we can also help to protect your mortgage with our FREE Insurance Service.
Talk to one of our friendly mortgage advisors for free to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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Think carefully before securing any other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage.
