How to get the best £280,000 mortgage deal?

After a pretty bleak 2020, many hope that 2021 will bring with it positivity and opportunity. Boris Johnson has spoken out about his plans to “end Generation Rent” by making mortgage deals more affordable with longer-term fixed rate deals.

Whether this plan comes to fruition remains to be seen, but if you’re looking to buy and have predicted you’ll need a mortgage of £280,000, this guide is worth the read if. Whether you’re a first-time buyer or buy-to-let investor, we’ve got you covered.

Keen to get the ball rolling? You can contact us here for a call-back from one of our expert advisors, or give us a ring on 02380 980304.

While it’s impossible to say for certain whether you’ll be approved for a mortgage of this size at first glance, there are tools such as our mortgage calculator which will give you a quick rough idea of how much you may be able to borrow - simply input your income and likely deposit amount.

However, this is only meant as a guide because online calculators don’t take into consideration your other personal circumstances which can be the make or break of an application. For the most accurate idea as to your £280k mortgage eligibility, speak to an advisor who will assess all the influencing factors.

To help prepare you for what to expect, you’ll likely receive questions surrounding the following: 

• Income and expenses (including outstanding debt) - lenders want to know that you have sufficient affordability to cover mortgage repayments as well as your other monthly outgoings.

• Deposit size - lenders typically have minimum deposit requirements, although this will also be dependent on other factors.

• Deposit source - mortgage providers may favour those who have proven that they have the ability to save large sums of money, over someone who has been gifted a deposit.

• Your credit history - options may be limited if you have a low credit score and / or a history of adverse credit - although some forms carry more weight than others.

• Job type (including contract type and length of time in your current role) - the self-employed are typically seen as higher risk and may need additional affordability assurance.

• Your age - over 60s may be capped on how much they can borrow or be offered shorter mortgage terms than younger applicants.

• The type of property you want to buy - a higher deposit is usually required for buy-to-lets due to the associated risk, and some lenders are wary of lending on non-standard construction types (i.e. those not brick walled and tile roofed).

That being said, there are lenders out there who specialise in providing mortgages for all of the above. The trick is knowing where to look - and that’s where we can help.

In today’s market, while there are a few 5% and 10% deposit deals, the majority of residential mortgage providers ask for between 15% - 20% of the property’s market value as a deposit. But if the PM is true to his word, there will soon be many more affordable options available to first-time buyers. 

That being said, if you are able to pay a larger deposit it’s advisable to do so; a bigger down-payment is likely to give you access to a wider range of lenders, and therefore more competitive rates. It also means that, in most circumstances, you will be paying less interest in the long run.

What are the income and affordability requirements for a £280k mortgage?

Most lenders impose a cap based on income multiples when deciding how much they are willing to lend you. The majority of providers cap at 4x - 4.5x your annual salary - although in exceptional circumstances this may be extended up to 5.5x your earnings.

Using these figures as an example, to be accepted for a £280,000 mortgage by a lender using an income multiple of 4x, you would need a minimum income of £70,000. If another lender capped at 5.5, the expectations would be significantly lower, at £51,000 p/year.

But much like using a mortgage calculator, it’s not as black and white as purely using income multiples to estimate what size loan you’ll be offered. What mortgage providers are really interested in is your affordability.

Affordability is established by looking at your debt-to-income ratio (DTI). It is calculated by dividing your monthly debt payments (including rent / mortgage repayments, loans, car finance, household bills, groceries and property maintenance) by your monthly income, timesed by 100, and is expressed as a percentage.

For example, if you take home £6,000 a month (solely or joint) and pay out £1,950 on expenses each month, your affordability would be 32.5%. While 36% and below is deemed a healthy DTI, lenders may still want to stress Test how your affordability will be affected with the addition of a mortgage.

Can I get a mortgage of £280k if I have bad credit?

Ideally, mortgage providers want to see a good credit score and clear credit history. 

A ‘good’ credit score is anywhere between 881 and 960. If yours falls just below the mark, you might benefit from Experian Boost - a scheme that’s recently been rolled out in the UK, which takes council tax and some streaming services into consideration when calculating your score.

If you’re seeking a mortgage and have bad credit history you may find it difficult finding a lender to approve your application, especially if you’ve experienced one of the more severe types such as a CCJ, repossession or bankruptcy - but there are always options.

Our experienced advisors are able to quickly compare hundreds of UK lenders, and use their expertise to point you in the direction of those most likely to consider your application.

If you do have a history of adverse, we can’t stress the importance of running your mortgage application past a broker before submitting it. A rejection can further negatively impact your credit score - something you definitely want to avoid if possible.

If you’re seeking a £280k mortgage for a buy-to-let (BTL) investment, the rules are quite different than for standard residential mortgage products. For starters, you should be prepared to cough up a deposit in excess of 40% (that’s a whopping £112,000!)

BTLs are generally deemed higher risk as they are taking a gamble on you and your ability to find tenants to cover the repayments. To mitigate this, BTL mortgage providers may want to know how you plan on getting tenants, and even what your exit strategy is.

As well as this, lenders will also be looking at the usual factors, including your affordability, credit history, age and property type, etc. to establish eligibility.

How to secure the best £280,000 mortgage deal

If you’re keen to get on the property ladder in 2021 and have a mortgage provider in mind, it’s well worth speaking to a broker who can check your eligibility on your behalf before you apply. They may even be able to point you in the direction of a more suitable lender. 

Our team of advisors can scour the UK market for the most competitive deals, and know exactly where to look if you require a specialist provider. Our goal is to fix you up with a mortgage deal with terms you’re comfortable with, and save you money at every opportunity. 

Give us a call on 02380 980304, or submit a request and we’ll be in touch to discuss your plans.