Despite the fact that property prices are predicted to drop by 14% in 2021, the average cost of a house in the UK still exceeds £237k. And in the current climate, lenders’ eligibility criteria are stricter than ever in order to compensate for the economic downturn.
So if you’re looking to take a step up onto the property ladder, whether you’re a first-time buyer, seeking a second home or looking to invest in a buy-to-let (BTL), you’ve come to the right place.
This guide will give you a good idea as to how much you’ll need to be earning, what deposit is required and various other factors that could impact your eligibility for a competitive £220,000 mortgage deal.
How do I know if I’m eligible for a £220,000 home loan?
For a rough indication of how much you may be able to borrow, you could try out our mortgage calculator. Simply input a few details, including your annual income and deposit, and you’ll be able to find out if a £220k mortgage is a realistic venture at this time.
If you want a more accurate idea, why not speak to a broker? Our team of experts will conduct a thorough assessment of your finances and personal circumstances, and explain the different variables on mortgage lenders’ radars when determining eligibility.
Having this understanding before applying for a home loan can prevent you from applying to an unsuitable lender and getting rejected. If you get declined for a hefty £220,000 mortgage it could appear on your credit history, which is something you want to avoid if possible.
What factors impact my eligibility for a £220,000 mortgage?
When assessing applications, mortgage providers consider a number of factors. Although how much weight they bear will be lender-dependent, all of the following will have some impact on your eligibility:
Employment status, job type and how long you’ve been in your current role.
How much you earn.
Your fixed monthly expenses.
Your age.
How much deposit you have.
Your credit history.
The type of property you want to buy.
Being a first-time buyer.
Buy-to-let investors.
If you’re buying a second home.
How much deposit do I need for a £220k mortgage?
While some lenders do offer 90% loan-to-value mortgages, 10% deposit deals are hard to come by in the current climate - especially if you’re after the most competitive deal on the market.
At this time, you should expect to have to save between 20 - 30% of a property’s value as a deposit. Of course, this is only a guide: first-time buyers may receive more affordable incentives, whereas deposit requirements for buy-to-lets and commercial mortgages tend to be higher.
If you can put down a larger deposit, it’s advisable to do so; applying for a low loan-to-value (LTV) mortgage will usually give you access to a wider range of providers, and access to better rates - meaning you’ll usually pay less in the long-run.
This table illustrates how much deposit you’ll need to save for a property valued at £220,000 depending on the LTV ratio:
Property value | Deposit size (%) | Deposit size (GBP) | Mortgage size | LTV ratio |
£220,000 | 10% | £22,000 | £198,000 | 90% |
£220,000 | 15% | £33,000 | £187,000 | 85% |
£220,000 | 20% | £44,000 | £176,000 | 80% |
£220,000 | 25% | £55,000 | £165,000 | 75% |
£220,000 | 30% | £66,000 | £154,000 | 70% |
How much do I need to earn to get a mortgage of £220,000?
Every lender has a different set of criteria they work to when deciding how much they’re willing to lend you, but it’s commonplace to use income multiples as a starting point. In 2020, the majority of providers will cap how much they’ll loan you at 3.5 - 4.5x your annual salary.
That being said, some are more generous than others; depending on other factors, such as your affordability, credit history and how much deposit you have, you may be offered a home loan of up to 5.5x your income, or 6x in exceptional circumstances.
Using the benchmark income multiple of 4x, in order to be accepted from a £220k mortgage you (and your partner, if applicable) would need to earn a combined income of at least £55,000 a year. And of course, you’ll need to meet the additional lending criteria.
How is affordability calculated for a £220,000 mortgage?
As with any mortgage application, your chosen lender will want assurance that you can comfortably afford your monthly repayments in time and in full, alongside your other monthly expenses.
Your affordability is calculated by looking at your income versus your monthly outgoings to establish your debt-to-income (DTI) ratio. The lower your DTI, the more disposable income you have, and the more favourably you’ll be looked at by lenders.
For a better understanding of affordability, get in touch with one of our brokers who can explain the concept in more detail and give you an idea as to how your current circumstances may impact your £220k mortgage eligibility.
How does my job affect my eligibility for a £220k home loan?
Your job and terms of employment can have a big impact on mortgage applications. If you’re a contractor or self-employed, many lenders may be more wary about lending to you - especially if your takings are inconsistent and unpredictable.
However, provided you take home enough every month to comfortably afford mortgage repayments alongside any additional outgoings, there’s no reason a lender shouldn’t consider your application.
If you are a self-employed applicant, be prepared for mortgage providers to ask for evidence of how much you’ve earned in previous years. In most circumstances, you’ll need to provide:
Two or more years' certified accounts.
SA302 forms /
A tax year overview (from HMRC) for the past two or three years.
If you opt to work with a broker, they can advise which lenders are most lenient when it comes to self-employed mortgages, and negotiate the most favourable deals on your behalf.
Can I get a £220k mortgage with bad credit?
Been rejected for a mortgage in the past due to credit issues? Fortunately, every lender has varying rules about what they deem as ‘bad credit’, so just because you’ve been declined a mortgage by one provider, doesn’t mean another won’t consider you.
Generally speaking, it can be more difficult to get a mortgage if you’ve experienced some of the more severe forms of adverse suchs as bankruptcies, CCJs or IVAs - especially if they’ve occurred recently.
That being said, some lenders will consider approving mortgages for people with bad credit because they look at other factors, such as your affordability, how high your income is or your ability to save, before making a decision.
Our brokers can advise you on how to improve your credit score, and highlight the most
suitable lenders for your individual circumstances.
Where can I find the best £220,000 mortgage deal?
If you’re hoping to secure a £220,000 mortgage, speak to one of our expert advisors who will check your eligibility on your behalf ahead of application. They can scour the market to identify the best rates with the most favourable terms to suit your needs.
Give us a call on 02380 980304 or fill out our contact form to get the ball rolling with your £220k mortgage application.
