Seeking a £200k mortgage with the most competitive interest rates? Look no further. Now is a great opportunity for prospective home-owners, whether you’re a first-time buyer, looking for a second home or a buy-to-let investor.
Read on where we’ll be discussing the various factors that affect your ability to obtain a £200,000 mortgage. We’ll also provide you with some useful tips to help you secure the most competitive rates and favourable terms for your individual circumstances.
How much do I need to earn to get a £200,000 mortgage?
In most cases, mortgage providers cap what they’re willing to lend you at 4.5x your annual salary. In some situations this will exceed to 5x your income and a minority to 6x - in exceptional circumstances.
So, based on a lender cap of 4.5x your income, you would need to earn £44,445 a year to be eligible for a £200k mortgage - although this does not take into account other variables mortgage providers take into account when assessing affordability.
Some lenders have minimum income requirements or minimum taxable income thresholds - especially for self-employed mortgage applicants.
How does my affordability impact my £200k mortgage?
Although income is important to mortgage providers, affordability can be the make or break when determining your eligibility.
Lenders calculate affordability by looking at your monthly income versus your outgoings.This is referred to as your ‘debt-to-income’ (DTI) ratio. The lower your DTI the better, because it means you have more disposable income.
When you apply for a mortgage, you will need to provide proof that your earnings can comfortably cover your mortgage (including capital and interest payment) alongside any other outgoings, such as:
Outstanding debts, including loans, credit cards or car finance payments.
Other outgoings such as travel costs or childcare.
Affordability can be tricky to get your head around, so if you’re uncertain as to how your financial situation will affect your ability to get a mortgage, you’re best placed seeking advice from a broker - a rejected mortgage may negatively impact your credit score.
How much deposit do I need for a mortgage of £200,000?
Finding a lender who is willing to provide 90% loan-to-value mortgages can be difficult in the current market, especially if you have a history of adverse credit or low affordability, but that’s not to say that it’s impossible - especially if you enlist the help of a broker.
The industry standard deposit requirements for a £200k mortgage is around 20 - 30%. Although there are a number of other factors affecting lender requirements, you should prepare to have a minimum of £40,000 set by if you want access to the most competitive rates.
What’s more, if you’re able to put down a larger deposit you’ll own more equity in the property up-front meaning you’ll end up repaying less interest in the long run.
The table below illustrates the relationship between deposit size and mortgage amount for a property with a market value of £200,000:
Deposit size as a percentage
Deposit size in GBP
Can I get a £200,000 mortgage if I’m self-employed?
What you do for a living can have a significant impact on your mortgage eligibility. When lenders review applications, they want to be assured that the applicant(s) can comfortably afford their repayments.
If you’re self-employed the nature of your work poses a greater risk, which could ring warning bells for mortgage providers’ affordability requirements. Be prepared to provide evidence that your income is both regular and substantial enough to make your mortgage payments alongside any other outgoings.
To assess whether or not you can afford a £200k mortgage, lenders will likely request:
Two or more years' worth of certified accounts.
A tax year overview (from HMRC) for the past two or three years.
If you have an unconventional job type, don’t panic; working with a mortgage broker means they’ll only recommend suitable lenders (there are a number of specialist self-employed mortgage providers on the market), and secure you a deal to match your requirements.
Can I get a £200,000 mortgage on a buy-to-let property?
If you’re looking for a £200k buy-to-let mortgage, the requirements are quite different than that of a residential mortgage. While some lenders may allow you to use other property as security for your loan, the majority ask for large deposits of 40%+.
What’s more, affordability is calculated not by income alone, but rather your estimated earnings from letting out the property. Many BTL lenders will want reassurance that your purchase is a sound investment, so they may want to know how you plan to find tenants and ask what your prospective exit strategy is.
Based on the benchmark 40% requirement, for a £200,000 BTL mortgage in the current UK market you can expect to fork out around £80,000 - and have a viable backup plan in place in the event that you’re unable to secure tenants.
Will I be able to get a £200k mortgage with bad credit history?
If you’ve previously been declined a mortgage due to your credit history, don’t lose faith. All lenders have different rules about what they deem as bad credit, so just because you’ve been rejected by one it doesn’t mean this will be the case across the board.
Usually, the more recent and more severe the credit issue, the lower the chance of approval - but that’s not always the case. Some lenders are still happy to consider bad credit applicants against other factors, such as your income, affordability or deposit size.
There are also some providers that specialise in bad credit mortgages, so if you’re keen to get on the property ladder but have a history of adverse, our brokers can point you in the direction of those most likely to lend to you - get in touch for assistance.
What other factors affect my £200,000 mortgage eligibility?
If you decide to proceed with a £200k mortgage application, lenders will also consider the below factors before coming to a decision as to your for their mortgage terms:
How long you’ve been in your current job.
The type of property you want to buy.
Speak to a mortgage broker about your £200k mortgage
If you’d like help with your mortgage application or have any other questions surrounding your eligibility, don’t hesitate to get in touch.
Our brokers can recommend the most suitable lenders and check your eligibility on your behalf before you apply. Call us o or fill out our online contact form and one of our advisors will be in touch.