House prices have fluctuated over the years but according to the UK house pricing index, data from May 2020 shows on average, house prices in England have risen by 0.2% since April 2020.
This price rise of 2.9% takes the average property value to £251,973, so it’s not surprising that so many people are curious about how they can get a mortgage for 250k.
How do lenders decide to approve a mortgage for 250k?
There are lots of factors that affect the likelihood of you getting a mortgage for this amount but prominent points that lenders focus on are your:
Income and expenditure
The size of your deposit
Credit history
The type of property you want to buy
Age
The type of mortgage you want
When a lender receives an application for a mortgage, they look at these circumstances to decide if you meet their criteria and if you present a higher risk for defaulting on your repayments.
How much do I need to earn to get a mortgage of £250,000 in the UK?
Affordability rules also vary between lenders although typically, most lenders allow their borrowers to apply for mortgages up to 4.5 x their annual salary or annual income for self-employed or contract workers.
As a single applicant, that would mean you need to earn a minimum of £55,000 a year.
However, if you decide to apply for a joint mortgage, in theory there would be two incomes on the application to combine so between you, you would need to meet this annual figure. For example, you may earn £30,000 a year and your partner earns £25,000 a year.
How much deposit do I need for a 250k mortgage?
There really isn’t a typical deposit size for a mortgage amount as there are so many factors that influence the amount that a lender will require you to put down.
Some mortgage products are deemed by lenders as higher risk, such as commercial mortgages or buy-to-let mortgages that have repayments dependent on rental income from tenants.
Lenders like to feel certain that borrowers can repay their loans on time and in full and if you have circumstances which hinder this confidence, a larger deposit can sometimes help to alleviate the risk of greater loss to the lender.
That’s because a larger deposit means owning more equity and therefore you only need to apply for a smaller loan.
Deposit requirement variations
Type of mortgage product | Deposit amount |
Residential mortgage for £250,000 | 15 - 20% |
Buy-to-let mortgage for £250,000 | 25 - 40% |
Commercial mortgage for £250,000 | 25 - 40% |
Can I get a 250k mortgage with a 5% deposit?
The number of lenders in the UK offering mortgages with 5% deposit requirements is low and usually the terms and conditions of these agreements require the borrower to have high affordability, little to no bad credit and an income sufficient enough to comfortably repay their mortgage, even in the event of a fluctuation of income or loss of job.
A handful of lenders may consider lending you 95% of the property’s value but it’s important to be aware that many lenders will only be prepared to offer loans with an 80 - 90 % LTV (loan-to-value) ratio.
A low loan-to-value ratio usually means you can borrow more of the property’s market value, whereas a high ratio will be more restrictive.
That being said, not all lenders have the same criteria so check with a mortgage broker ahead of applying so you know how much deposit you’ll need based on your circumstances and where you can find the best deal.
Can I get a mortgage for 250k with bad credit?
Credit issues such as CCJs or missed loan payments can affect your choice of mortgage lenders because many UK lenders won’t be prepared to loan large sums of money to a borrower without good affordability or a track record of managing money.
This can seem harsh, especially if your bad credit occurred a long time ago or had been repaid but thankfully there are banks and lenders that take other factors, like the above, into consideration.
The severity of the bad credit can also affect a lender’s decision about whether to approve your £250,000 mortgage. All lenders have their own set of criteria but in some instances if other conditions are met, it may be possible to get a mortgage despite credit issues including bankruptcy.
The expertise that a mortgage broker can provide in instances as such can be invaluable as they know the lenders that are more likely to accept you as a borrower and under what circumstances.
They can calculate how much deposit you’ll need as often having bad credit can result in lenders requiring higher deposit requirements. This can save a lot of time and can also help you find the most affordable agreement that works for you.
Can I get a mortgage for £250,000 if I’m self-employed?
While it’s true that there are lenders that prefer borrowers to have steady, predictable sources of income, there are a handful of lenders in the UK that have criteria that are more flexible or open to self-employed applicants or freelancers.
Contractors and self-employed workers need to prepare their tax records ahead of applying for a mortgage as lenders will look closely at the amount of income you earn as well as how often it dips.
You might need a larger deposit of up to 30% but that certainly isn’t always the case as your other circumstances will weigh in on a lender’s decision to accept you or not.
Check your eligibility today
It can be tempting to apply to multiple lenders in hope of getting approved but this can negatively impact your credit score which is something you want to avoid. After all, lenders look at recent credit applications to determine your risk level as a borrower and recent credit rejections don’t help to build your case.
To find out if you’d get approved for a £250,000 mortgage ask a broker to compare your options and then check on your behalf.
It’s quick, free and won’t damage your credit report.
Alternatively, if you have questions about how you can get a mortgage for 250k or any other amount, speak to one of our advisors and they can help you find the answers you’re looking for.
