Following the Coronavirus outbreak, a number of high-street banks have attached new stipulations to their mortgage deals, meaning some individuals could find themselves priced out of properties they may have been eligible for pre-pandemic.
We’re dedicated to equipping prospective homeowners with up-to-date advice and the know-how required to secure their dream property. So whether you’re a first-time buyer, buy to let investor or seeking a commercial mortgage, we’re on hand to help.
This guide will be explaining what mortgage providers expect of applicants in 2020, including income and affordability requirements and how much deposit is expected for a mortgage of £230,000.
How do I know if I’m eligible for a £230k mortgage?
Using a mortgage calculator can be useful if you’d like a rough estimation as to how much you could borrow, but to really understand whether you’ll be eligible for a £230,000 loan under your chosen provider’s terms and conditions, why not speak to a broker?
Our team of advisors will consider your individual circumstances and, using their extensive market knowledge, point you in the direction of lenders who may be most likely to approve a £230k mortgage application for someone in your position.
To source appropriate lenders and to prepare you for the questions that most lenders will need answering before they can accept you as a borrower, our brokers will ask for information surrounding:
How much deposit you have.
Your annual income.
Current employment status, job type and how long you’ve been in your role.
Details surrounding your fixed monthly expenses.
Your age.
The type of property you want to buy.
It is essential that you provide a mortgage broker with accurate, up-to-date information, especially in the current market, because erroneous information could be the make or break for some lenders.
Can I get a £230k mortgage if I’m a first-time buyer?
Providing you can prove your affordability and meet the additional lender requirements, there’s no reason you shouldn’t qualify for a mortgage of £230,000 as a first-time buyer.
That being said, there were far more incentives for first-time buyers pre-pandemic, including 5% deposit options. Nowadays, 90 and 95% LTV mortgage deals are increasingly hard to come by, so you may have a harder time securing a deal if your savings aren’t sufficient.
However, the Prime Minister has recently promised to create more 5% deposit opportunities for first-time buyers in a bid to “transform ‘generation rent’ into ‘generation buy’”, as levels of home-ownership among under-40s continues to plummet.
Get in touch to discuss your options with a broker. Our team of experts will take the time to understand your situation and point you in the direction of the most suitable lenders for first-time buyers, taking into consideration your personal circumstances.
How much do I need to earn to get a mortgage of £230,000?
When you apply for a mortgage, how much you’ll be able to borrow is usually capped at a multiple of your annual income.
Before COVID hit, the majority of lenders allowed you to borrow around 4 - 4.5x your annual salary, with some stretching to 5.5 or 6x - in exceptional circumstances. In the current climate, a more realistic expectation is between 3.5 - 4.5x borrowers’ annual earnings.
Using a 4x income multiple as an example, for a mortgage of £230k the applicant (or applicants) would need to earn a minimum of £57,500 a year to be considered by the majority of lenders - assuming, of course, that additional requirements are met.
That being said, there are still a number of providers out there offering more favourable terms - you just need to know where to look. Why not save yourself the hassle and let one of our brokers do it on your behalf?
Not only will they recommend lenders most likely to lend to you given your individual circumstances, they will also endeavour to secure the most competitive rates.
How do I provide evidence of my income for a mortgage of £230,000?
If you’re a full- or part-time employee, your lender will likely ask for evidence of your income in the form of bank statements and pay slips.
Lenders can be wary about lending to contractors or self-employed mortgage applicants, especially if your monthly earnings fluctuate. However, provided you can prove you earn enough to afford the repayments there’s no reason lenders shouldn’t consider you.
If you are self-employed, you should expect to provide evidence of your earnings during previous years. Most mortgage providers will request at least one of the following:
Two or three years’ certified accounts.
SA302 forms.
An HMRC tax year overview for the previous two to three years.
How is affordability calculated for a £230k mortgage?
Affordability requirements have become particularly stringent in the last few years, and even more so in 2020. However, all lenders have their own criteria, so even if you’ve been declined a mortgage previously due to your affordability, there may still be options available.
Affordability is determined by calculating your debt-to-income ratio, which assesses your income versus your outgoings. The lower your DTI, the more favourably prospective lenders are likely to view you as it means you have disposable income available for a mortgage.
So, while income is an important factor when it comes to eligibility, lenders will want to be assured that you can afford monthly repayments for a £230,000 mortgage alongside your other expenses, such as:
Outstanding debts, such as loans, credit cards or car financing.
Household bills.
Other outgoings such as travel or child care costs.
Your personal spending habits.
How much deposit will I need for a £230k home loan?
While it varies by lender, the standard deposit requirements for residential mortgages in the current market is between 20 - 30% of the property’s market value.
While there may be a handful of lenders out there who are happy to consider lower deposits, if you have the savings available it may open you up to a wider range of lenders, and therefore more competitive rates for lower loan-to-value (LTV) loans.
The following table illustrates the relationship between deposit size and mortgage amount for a residential property valued at £230,000:
Property value | Deposit size (%) | Deposit size (GBP) | Mortgage size | LTV ratio |
£230,000 | 10% | £23,000 | £207,000 | 90% |
£230,000 | 15% | £34,500 | £195,500 | 85% |
£230,000 | 20% | £46,000 | £184,000 | 80% |
£230,000 | 25% | £57,500 | £172,500 | 75% |
£230,000 | 30% | £69,000 | £161,000 | 70% |
It’s important to note that this is only a guide; if you’re looking to secure a £230k mortgage on a business premises or for a buy-to-let investment, deposit requirements are usually higher - roughly around 40%.
Where can I find the best deal on a £230,000 mortgage?
If you’re looking for a £230k mortgage and want the best chance of securing a competitive deal that suits your individual circumstances, speak to one of our brokers who can check your eligibility ahead of you making an application.
Give us a call on 02380 980304, or contact us here and one of our advisors will be in touch to discuss your £230k mortgage plans.
