Despite a decrease in the number of sales this year and predictions that the value of property will decrease in 2021, house prices remain relatively static, and demand for those with plentiful outdoor space and greenery is rife.
If you’ve got your eye on your dream home in the candescent countryside and want to snap up a mortgage in the realm of £260k, you’ve come to the right place. Why not contact one of our brokers for instantaneous, up-to-date advice tailored to your needs?
This guide will explain what mortgage providers expect of applicants in the current market, including deposit, income, and affordability requirements for a £260,000 mortgage.
Am I eligible for a £260k mortgage?
While using a mortgage calculator can give you a rough estimation of how much you may be able to borrow, you can only get a definitive answer by submitting a mortgage application - or by letting a broker check your eligibility with a range of suited providers on your behalf.
Our advisors will ask you a number of questions surrounding your finances and other personal factors in order to establish which lenders are most likely to approve a £260k mortgage for someone in your position.
To source the most appropriate providers and to prepare you for what to expect, have information on the following at hand:
What type of mortgage you require.
Evidence of your income and expenditure.
How much deposit you have.
Your current employment status.
Your credit history.
The type of property you want to buy.
Our brokers have extensive market knowledge and will only suggest lenders who are most likely to approve your mortgage application, so it’s important that you provide us with accurate, up-to-date information.
How much do I have to earn to get a mortgage of £260,000 in the UK?
Often, mortgage providers work to income multiples when determining how much they are willing to lend. Most lenders allow applicants to borrow up to 4.5x their annual salary (or annual income for contractors or the self-employed).
For a £260k mortgage, this means that you will need to earn just shy of £58,000 a year in order to be considered by the majority of lenders. That being said, if you’re applying for a joint mortgage then both incomes may be considered.
But not all providers work to the same criteria; depending on the lender and your circumstances, some may cap at 3.5x your earnings (£74.3k), whereas others may consider extending to up to 5.5x (£47.3k) - usually only in exceptional circumstances.
What is my mortgage affordability?
While income is a key factor when you apply for a mortgage, lenders also want the reassurance that your earnings are sufficient to cover your repayments alongside any other outgoings. This is referred to as ‘affordability’.
Affordability is calculated by dividing your monthly income by your fixed monthly outgoings and multiplying by 100, and is expressed as a percentage. Most lenders will look for a DTI of 35% or below, although this will vary depending on the provider.
Fixed monthly outgoings include things like:
Outstanding debt, including loans, credit cards and car finance.
Household bills & maintenance.
So for example, if you earn £5,000 a month (solely or joint) and have monthly expenses amounting to £1,650, your debt-to-income ratio would be 33% - putting you in a fairly strong position in terms of affordability.
How much deposit do I need to save to get a £260,000 mortgage?
There are many factors that influence how much deposit a lender will require for a £260k mortgage, although there are ballpark figures depending on the type of loan you’re seeking.
Some mortgage products, such as commercial mortgages, second homes or buy-to-let investments are deemed as higher risk than standard residential mortgages, as repayments are dependent on additional external factors.
As such, the typical deposit requirement brackets are as such for a £260,000 mortgage:
15 - 20%
39,000 - 52,000
25 - 40%
65,000 - 104,000
25 - 40%
65,000 - 104,000
If you can afford to put down a larger deposit then it is usually advisable to do so. The smaller your deposit, the more your repayments will be - and you’ll likely build up more interest in the long-run.
Can I get a mortgage for £260,000 if I’m self-employed?
Many people are under the impression that it is more difficult to secure a mortgage if you’re self-employed or a contract worker. While some providers do prefer applicants with a consistent, reliable form of income, no job is guaranteed and there are plenty of providers with more flexible criteria - some even specialise in self-employed mortgages.
If your monthly earnings fluctuate, providing your affordability is consistently sufficient for a £260k mortgage there’s no reason lenders shouldn’t consider you - but expect to have your financial records scrutinised.
If you work for yourself, you will need to prepare your tax records ahead of making a mortgage application. Most mortgage providers will request one or more of the following:
Two or three years’ certified accounts.
An HMRC tax year overview for the previous two to three years.
Don’t lose faith if you’ve been declined a mortgage due to your job in the past - there are specialist lenders out there, the trick is knowing where to look.
Our brokers have extensive, up-to-date knowledge of the mortgage landscape, and will be able to point you in the direction of lenders with terms most suitable for you and your circumstances. Get in touch to speak to an advisor.
I have a history of bad credit: can I get a £260k mortgage?
If you have a history of bad credit, such as late loan payments, IVAs or CCJs, or a low credit score, it can inhibit your ability to get a mortgage. This is because some lenders are not prepared to loan to people who have a bad track record when it comes to managing money.
This can be frustrating, especially if it happened a long time ago or your situation has dramatically changed, but instances of adverse stay on your file for up to 10 years. Fortunately, many providers take this into consideration, and some lenders actively specialise in bad credit mortgages.
All lenders work to different eligibility criteria, and often the severity of the bad credit and the circumstances surrounding it will impact a decision. So even if you’ve experienced one of the most severe forms - perhaps a bankruptcy or repossession - all hope isn’t lost.
That being said, you may be required to put down a higher deposit as security, affordability requirements may be different, or there may be additional stipulations attached to your agreement.
This is where working with an experienced broker becomes invaluable; they know which lenders are most likely to accept a borrower in your circumstances and help identify the most affordable, realistic plan that works for you.
Where can I find the best £260,000 mortgage deals?
If you’re looking for a £260,000 mortgage, your best chance of securing a competitive deal that suits your individual circumstances is to have a chat with one of our brokers.
They will match you with the most suitable lenders in the current market and check your eligibility on your behalf - saving you the time and energy (not to mention potential credit implications) of submitting applications yourself and getting rejected.
Give us a call on 023 8098 0304, or contact us and one of our advisors will be in touch to discuss your £260k mortgage plans.