2021 marks the end of the stamp duty holiday and the furlough scheme, and with the addition of lockdown 3.0, many sources have revised their previous forecasts and are predicting a more subdued housing market this year.
What will happen remains to be seen, but if you’re in a position to buy, this could pose a fruitful investment opportunity if the market returns to growth as expected in 2022.
This guide will be explaining lender requirements in 2021, and prepare those seeking a £350k mortgage for the application process. Keen to get the ball rolling? Give us a call on 02380 980304 or submit an online enquiry.
Will I be approved for a £350,000 mortgage?
When it comes to assessing an application, every high street bank and independent mortgage provider will work to different eligibility criteria. This means that some will be happy to consider lending to you, others may not.
Many people base their expectations on the results of a mortgage calculator, and while this can give a rough indication as to how much you may be able to borrow, they don’t tend to take all variables into consideration.
The majority of mortgage providers will take all of the following into account before coming to a decision:
What sets lenders apart is how much weight each of these factors carry. For example, some may be happy to approve a higher loan to value (LTV) mortgage if your other circumstances tick the boxes, whereas others have minimum deposit requirements.
Similarly, some providers may be willing to consider you if you’ve had bad credit in the past, but others may have stricter rules surrounding a history of adverse. This is why it’s important not to feel disheartened if you’ve been declined a mortgage in the past.
That being said, an application rejection can negatively impact your credit score, which is why working with a broker can be so beneficial; our team of experts have access to over 100 UK banks and niche lenders, and recommend those most likely to accept.
How much deposit do I need to get a £350,000 mortgage?
While there isn’t a set deposit requirement for all lenders, in the current market most residential mortgage providers ask for a minimum of 15% - 20%. This can fluctuate depending on your other circumstances and their criteria.
Using the standard 15% - 20% requirements as an example, this would mean that borrowers seeking a mortgage of £350k would need to have saved a minimum of £52,500 - £70,000.
Now more than ever before, mortgage providers want the reassurance that borrowers are able to repay their loans on time and in full. If you have circumstances that hinder their confidence, a larger deposit may help to alleviate these concerns.
Some products are deemed by lenders as higher risk, such as commercial loans or buy-to-let mortgages, because repayments are dependent on rental income received from tenants. Therefore deposit requirements are usually higher - typically between 25% - 40%.
Can I get a £350k mortgage with a 5% deposit?
5% and 10% deposit options are increasingly hard to come by, and as such the terms of these agreements are often very strict, and you are unlikely to be offered a mortgage with the most competitive rates.
However, there is a new Help to Buy scheme available for first-time buyers. Those eligible will be required to save a minimum of 5% deposit, which the government will top up with an equity loan of up to 20% (40% in London) of the property’s value to put towards the down payment on your home.
However, the new scheme does have regional lending caps in place, so whether or not you’re eligible will depend on where you’re looking to buy. Speak to a broker to find out more about the Help to Buy equity loan scheme 2021 - 2023.
How much do I need to earn to get a mortgage of £350k?
Again, rules also vary between lenders when it comes to income requirements, but many use income multiples as a starting point. Most cap the amount you can borrow at 4x - 4.5x your annual income.
For a £350,000 mortgage, this would mean that you would need to be earning a minimum of £87,500 - £77,778 a year. If you’re applying for a joint mortgage, this will be the sum of your combined incomes.
However, income alone isn’t enough to satisfy lenders. What they’re really interested in is your affordability. This figure (referred to as your ‘debt-to-income ratio’ or ‘DTI’) is calculated by dividing your fixed monthly outgoings by your monthly income, multiplied by 100, and expressed as a percentage.
36% and below is considered a healthy DTI, although lenders are likely to stress Test how your affordability will be affected with the addition of a mortgage.
Can I get a £350,000 mortgage if I’m self-employed?
Some lenders deem the self-employed as higher risk and may be more wary of lending - especially if your monthly earnings fluctuate. For example, they may require a larger deposit or be more stringent when it comes to affordability or instances of adverse credit.
However, providing you have evidence to prove that your earnings are consistently sufficient to cover your repayments and your other circumstances check out, our team of experts are more than capable of helping you find a suitable lender with favourable rates.
What’s more, we can even point you in the direction of specialist self-employed mortgage providers.
I have bad credit history: will I be approved for a £350k mortgage?
In an ideal world, all borrowers would have a good credit score and clear credit history. But we all know that’s easier said than done - plenty of us are guilty of the odd late payment.
But what about the more severe types? Major issues such as bankruptcy, CCJs and IVAs can be a big no-no - but there are some lenders who will consider you, especially if the instance happened some time ago. What’s more, most will take your other circumstances into consideration, and there are even specialist bad credit lenders out there.
Working with a broker is recommended if you have bad credit history. Our advisors know which lenders are most likely to accept you, and under what circumstances. This not only saves you time, it lessens the likelihood of a rejected application.
Will my age impact my ability to get a mortgage of £350,000?
If you’re 55+ and approaching retirement age, it can be more difficult to get a mortgage as you are typically deemed higher risk. To alleviate this, many lenders impose lending caps or cap mortgage term lengths.
This is usually due to the impact on your affordability when you’re no longer bringing in a regular salary, and/or the fact that older borrowers are more prone to poor health and may not survive the 25-year mortgage term length.
But don’t let this put you off; if you seek the right advice, you may be able to land yourself a favourable deal that works for you - and with their extensive market access, our brokers know exactly where to look.
Check your £350k mortgage eligibility
If you already have a mortgage provider in mind, why not speak to an advisor who can check your eligibility before you apply? They can also compare other options to see if there is a more suitable lender. The process is quick, free and won’t damage your credit report.
Our goal is to fix you up with a mortgage deal with terms you’re comfortable with, and save you money wherever possible. Call us on 02380 980304, or submit an online enquiry and we’ll be in touch to discuss your options.