Looking to purchase a property and estimate you need a mortgage in the realms of £240k? You’ve come to the right place.
Even in the current Covid-consumed climate, it’s still possible to take a step onto the property ladder. But with mortgage providers’ terms more stringent than ever, it’s important to understand what you’re up against before applying.
This guide will explain lenders’ expectations of mortgage applications in 2020, including income and affordability requirements, and how much deposit you'll need. If you’re keen to get the ball rolling, contact one of our brokers for expert advice tailored to your needs.
Am I eligible for a £240k mortgage?
No matter what size mortgage you’re seeking, your eligibility is based on a number of factors, including your income, affordability, how much deposit you have, your job type, age, credit history and the type of property you want to buy - to name a few.
What’s more, every lender has their own eligibility criteria - meaning that while one provider would be happy to consider your mortgage application based on the information you provide, others could immediately reject it.
For a rough idea as to how much you may be able to borrow, you could use a mortgage calculator which allows you to simply input your income and deposit amount for an instant estimation. However, for a more accurate idea of your £240k mortgage eligibility, you’re best off speaking to a broker.
Our expert advisors will consider your specific circumstances and, using their existing knowledge and ability to scour the extensive mortgage market, suggest lenders who are best placed to approve your £240,000 mortgage application.
How much do I need to earn to get a mortgage of £240,000?
How much you earn is one of the key considerations for mortgage providers because it gives a good indication as to whether your income is sufficient to keep up with your repayments for a home loan.
Many providers cap how much they’ll loan you using an income multiple, with the current benchmark around 3.5 - 4.5x your salary. Some are more generous, so working with a broker is particularly advantageous in the current climate because they know where to look for the best deals.
Using a 3.5x income multiple as an example, for a £240k mortgage the applicant(s) would need to earn a minimum of £68,572 a year to be considered by the lenders that impose a lending cap - provided other eligibility requirements are met.
That being said, your overall affordability has to meet additional criteria if you stand a chance of being approved. Affordability is established by calculating your debt-to-income (DTI) ratio, which compares your monthly income versus your outgoings.
Lenders want to be confident that you can afford monthly mortgage repayments alongside your other expenses, which could include (but are not limited to) the following:
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.
Can I get a £240,000 mortgage if I’m self-employed?
If you’re self-employed you may find that your choice of mortgage providers is limited in comparison to the range of lenders available to employed applicants with regular income.
That being said, lenders tend to be more interested in your overall affordability than your job type. If you’re self-employed and can prove your earnings are sufficient for a £240k mortgage, there’s no reason you shouldn’t be considered if you meet additional criteria.
Having proof of future work can help to prove the reliability of your income as this is something lenders will be particularly interested in. This could be in the form of an ongoing contract or official letter. You’re also likely to be asked for:
Two or more years' certified accounts
SA302 forms
A tax year overview from HMRC for the past two or three years
Some lenders may require a larger deposit if you’re self-employed, but that’s not always the case. Contact a broker for free and they’ll suggest the best lenders for self-employed mortgages, with your individual circumstances front of mind.
How much deposit do I need for a £240k mortgage?
While it is still possible to secure a 90% loan-to-value (10% deposit) deal, they are more difficult to come by nowadays. At this point in 2020, the standard deposit requirement for a residential mortgage is between 20 - 30% of a property’s value.
So for a home loan of £240,000, the average down payment sits at roughly £48,000 - £72,000. If you are able to pay a larger deposit, you’ll likely get access to a wider range of providers and more competitive rates - meaning you’ll probably pay less in the long-run.
Of course, deposit criteria is very much dependent on other factors; requirements for buy-to-lets and commercial mortgages tend to around the 40% mark.
If you’re a first-time buyer, there may be cheaper incentives available - get in touch to discuss your specific situation.
How does my age affect my eligibility for a £240k mortgage?
Being an older borrower can negatively affect your eligibility for a mortgage, especially a pretty substantial £240,000.
But even if you’re in or approaching retirement, it’s important to remember that not all lenders impose age limits, and with the right advice, it’s still possible to secure favorable deals.
You’re typically deemed as higher risk when you’re of retirement age because you no longer have a regular salary coming in. And for lenders 55+, many lenders will impose a maximum loan period or age limit because they want the reassurance that loans will be repaid in full.
However, there are mortgage schemes available specifically aimed at pensioners, such as equity release, with arrangements including lifetime mortgages and retirement interest-only mortgages. Why not speak to an expert to get a better understanding of your options?
Can I get a mortgage of £240,000 if I have bad credit?
Been declined for a mortgage due to bad credit in the past?
Applicants with bad credit may still meet the requirements of some UK lenders, as each one has varying rules about what they deem as ‘acceptable’ when it comes to adverse - you just need to know which providers to approach.
Usually, the more recent and more severe the credit issue, the lower the chance of approval - but that’s not always the case. Lenders also consider a number of other factors, such as income, deposit size and general affordability, before reaching a decision.
How do I find the best deals for a £240,000 mortgage?
Finding a lender to approve a £240k mortgage can be a daunting prospect, especially if you’ve never applied for a mortgage before or have other factors counting against you.
However, even in this unpredictable market, there are professionals on hand to guide you through the process. Not only can you save money from working with a broker, it can also help you to avoid unnecessary rejections.
Give us a call or send us a message so we can get a better understanding of your £240,000 mortgage needs.
