6 Things You Need To Know About Income Multiples When Applying For A Mortgage

When it comes to getting a mortgage, your income can have a big influence on how much you are allowed to borrow. Most lenders use a multiple of your annual income to limit the amount of money they will lend to you. Knowing what income multiples are is important for anyone looking to purchase property with a mortgage, whether you are a first-time buyer, a home mover, or an investor. Read on to find out everything you need to know about income multiples and how they impact mortgage borrowing. 

• Income Multiples Indicate How Much You Could Borrow 

Simply put, an income multiple is a multiple of your yearly income. Lenders use income multiples to get an idea of how much you could borrow after taking into account your deposit. All lenders take a slightly different approach to the income multiples they offer, and there is no fixed rule to what income multiple you might be offered. The average lenders tend to offer, however, is 4 or 4.5 times annual income. This applies to single and joint mortgage applicants. For example, if you earn £55,000 a year and a lender used a 4.5 income multiple, the most that lender would be willing to lend you would be £247,500. It’s important to note that income multiples are the absolute maximum that a lender will let you borrow, and you’ll need to work out if repayments are realistically affordable for you. 

• Income Multiples Are Used For Your Mortgage In Principle 

Income multiples give you a clear idea of how much you can borrow in relation to your salary. They are used when lenders work out your mortgage in principle, which is an illustration of how much you can borrow. When this is confirmed, it can help you narrow down your house search to ensure you’re only viewing properties that you can afford. 

• Higher Earners Sometimes Get Access To Larger Income Multiples 

If you are a higher earner, you might be able to access higher income multiples for a bigger mortgage. Some lenders offer higher income multiples to high earners and even doctors specifically, but this is at their discretion. Depending on the lender, you might be able to access 5, 5.5, or 6 times your annual salary, allowing you to purchase a higher-value property. Occasionally, lenders offer 6.5 or 7 times annual income, but with these high income multiples, you may have to pay a slightly higher interest rate compared to market leading rates, which means it will cost you more to borrow. 

• Your Mortgage Term Could Impact How Much You Can Borrow 

If the thought of higher interest rates puts you off the larger income multiples, then there are other ways that you can borrow more. The term of your mortgage allows you to stretch your borrowing further, as it gives you more time to repay it. Longer-term mortgages over 30, 35, or even 40 years will allow you to borrow more money than if you were to take out a 10-year mortgage term. 

• A Lower Loan-to-Value (LTV) Can Help You Borrow More

Your deposit determines the LTV ratio of your mortgage. The larger your deposit, the more attractive you will be to lenders, which means you may be able to get access to better interest rates and terms. You may even be able to borrow more when all other factors, like your salary, existing debts, and committed spending, are taken into account. It also means that you’ll have a bigger share of equity in your home. You usually need to put down a minimum of 5% or 10% of the property price as a deposit. However, a larger deposit would give you a better LTV and access to more benefits. 

• Other Factors Can Impact How Much You Can Borrow 

When it comes to measuring how much you can borrow, lenders don’t just look at your income. As already touched on, they consider the size of your deposit, your credit score, your outgoings, and any existing debts that you may have. All of these can affect your affordability and have a knock-on effect on what they are willing to lend you.  

Our Team Is Here To Help 

If you are a doctor looking for a clear picture of how much you can borrow for a mortgage, our friendly and professional team is here to help. We have built up relationships with lenders that can offer higher income multiples to doctors. Individual circumstances can vary, but our team has the experience to package your application in the right way. Contact us today.