In a season which is typically pretty quiet for the property market, the events of 2020 have resulted in many people seeking new, more spacious accommodation in remote areas with plenty of outdoor space during winter 2020.
The repercussions of the coronavirus pandemic teamed with the fact that Stamp Duty relief is due to come to an end on 31st March 2021, it’s no wonder we’re rushed off our feet helping prospective homeowners secure mortgages of £300,000 and above.
If you find yourself in this situation, you’ve come to the right place. In a hurry to get the process started? Give us a call on 02380 980304 or submit an enquiry. In the meantime, this guide covers all you need to know about securing a £300k mortgage.
How do mortgage providers decide whether they want to lend to you?
While every bank and independent lender works to different eligibility criteria, each of the following factors will have some bearing on whether or not they decide to offer you a mortgage, and on what terms.
Before you submit an application, ask yourself the following questions:
How much deposit do I have?
How much disposable income do I have each month?
Does my job make me less likely to be accepted for a mortgage?
What type of mortgage do I want?
Will my age hinder my application?
What is my credit score?
Are there any instances of adverse credit on my record?
If you don’t know the answer or are uncertain about any of these questions, we suggest you seek advice from a broker - because the answers could be the make or break for some mortgage providers.
Even if you have your heart set on a lender, we can help you fill out your mortgage application. And because we have access to over 100 UK banks and specialist lenders, we may even be able to find you a more favourable deal for your circumstances.
How much deposit do I need for a £300k mortgage?
Deposit requirements have shot up this year due to economic uncertainty, but are also lender-specific and dependent on the numerous other factors mentioned above.
But as a ballpark figure in 2020, the majority of providers ask for approximately 15-20% of the property’s value for a residential mortgage. So if a house is on the market for £300,000, you would need between £45 - £60k as a down-payment.
And that’s just for a standard residential mortgage - some products, such as BTL mortgages and commercial loans are deemed higher risk as they rely on rental income to cover the mortgage repayments. Deposit requirements are usually between 25 - 40%.
These figures may seem steep, but after a tough year lenders want even more assurance that borrowers can keep up with their repayments. A larger deposit can help alleviate this concern, therefore opening you up to a greater range of lenders and better rates.
Plus, you’ll own more equity in your home, so if you can afford to put down a higher deposit, it’s advisable to do so.
Why is affordability so important?
When a lender is assessing a mortgage application, they will want to know how much you earn as this is a good indication as to whether your earnings are sufficient to cover your repayments.
Most providers are prepared to lend up to 4 - 4.5x your annual income, which in this instance means that you will need to bring home a minimum of £66,667 - £75,000 a year (combined incomes will be used if you’re applying for a joint mortgage).
But it’s not just income that lenders are interested in; what it really comes down to is your affordability. This figure is calculated by dividing your monthly outgoings by your monthly income, multiplied by 100, and is expressed as a percentage. A ‘healthy affordability’ is below 36%.
For example, if you take home £6,500 a month (solely or joint) and pay out £2,100 on expenses, your affordability would be 32.3%. But before coming to a decision, lenders may also stress-test how your affordability will be affected with the addition of your mortgage repayments.
Can I get a £300k mortgage if I’m self-employed?
It’s certainly possible to secure a mortgage if you’re self-employed or a contract worker. While many lenders do prefer applicants with a consistent form of income, there are plenty of niche providers with more flexible criteria, and some even specialise in self-employed mortgages.
Even if your monthly earnings fluctuate, providing your affordability is consistently sufficient for a £300,000 mortgage there’s no reason lenders shouldn’t consider you - but you will be required to provide the evidence.
If you’re self-employed, lenders will scrutinise your financial records across previous financial years. Most will request at least one of the following:
Two or three years’ certified accounts.
An HMRC tax year overview for the previous two to three years.
Our brokers have extensive, up-to-date knowledge of the mortgage landscape, and can point you in the direction of lenders most likely to consider applicants in your circumstances. Get in touch to speak to an expert.
Will my age impact my mortgage eligibility?
If you’re 55+ and / or approaching retirement, it can be more difficult to get a mortgage. Many lenders impose lending caps or shorter mortgage term lengths for older borrowers, as they are typically deemed as higher risk.
This is usually due to the fact that your affordability may be affected if you no longer have a regular salary coming in post-retirement. Older borrowers are also more prone to poor health, and may be less likely to survive the standard 25 year mortgage term length.
However, if you seek the right advice you may be able to land yourself a favourable deal suited to your needs - and our brokers have access to over 100 UK banks and specialist lenders and know exactly where to look.
I have bad credit history - can I get a £300k mortgage?
As already established, every lender works to different criteria when assessing mortgage applications. The same is true of bad credit. Some are unwilling to accept anyone with marks on their credit history, whereas others are willing to consider the bigger picture.
For example, those with more severe credit issues such as CCJs, IVAs or repossessions can find it difficult to find a willing lender (although there are always options), whereas less severe forms such as the odd late payment may be deemed acceptable.
How long ago the incident occurred is also an influencing factor; instances of adverse stay on your credit file for six years and are visible to mortgage providers, but if happened some time ago and / or your circumstances are vastly different now, some lenders may be lenient.
If you have a poor credit score or a history of adverse, it’s important to avoid submitting a mortgage application without checking your eligibility beforehand as a rejection can further negatively impact your credit score.
Where can I find the best £300,000 mortgage deals?
If you’re looking to get a £300k mortgage in the near future, your best chance of securing a fast, competitive deal that suits your individual circumstances is to get in touch with one of our brokers, either via our contact form or by calling 02380 980304.
Our expert advisors will match you with the most suitable lenders and check your eligibility on your behalf if you wish. This not only saves you the time and hassle of submitting multiple applications, but also the implications on your credit file if one is rejected.