If you’ve ever looked for a mortgage, you might have noticed a recurring theme. Most lenders will lend 4.5 times an annual salary whether you’re employed, a freelancer, contractor or limited company director.
Wherever your income stems from, this guide has been written to explain how a mortgage works with a 4.5 income multiple, what you need to apply and how much mortgage you can borrow.
In a hurry and want to know now? Contact a reviewed mortgage broker.
What is a 4.5x salary mortgage?
Can I get a mortgage for four and a half times my income?
How much can I borrow with a 4.5x salary mortgage?
How does a 4.5x income multiple work if I want a joint mortgage?
How much deposit do I need for a 4.5 times income mortgage?
Is it better to have a bigger deposit for a 4.5x salary mortgage?
Can I get a 4.5x salary mortgage with bad credit?
Can I get a mortgage for 4.5x my income for a property built out of non-standard build materials?
Can self-employed borrowers use a 4.5x income multiple?
Speak to a broker about applying for a mortgage for 4.5x your income
What is a 4.5x salary mortgage?
An income multiple of 4.5 is pretty standard in the mortgage industry and even those on lower incomes may be able to qualify for mortgages of this kind, depending on their other circumstances.
If you were eligible for a 4.5x income mortgage and you had a hypothetical annual gross salary of £20,000, you could potentially borrow £90,000.
Annual gross income x multiple income used by the lender = Maximum mortgage amount
£20,000 x 4.5 = £90,000
If your circumstances allow for it, you may be able to qualify for a mortgage with a lender that uses a higher income multiple. If you’d like to apply for a larger mortgage than is possible on a 4.5x income multiple with your salary, this could be an option.
Some lenders provide mortgages up to 5x, 5.5x or even 6x an annual income.
However, mortgage products with higher income multiples tend to have tighter lending criteria and some will have minimum income requirements.
Always calculate your affordability carefully either yourself or preferably with a mortgage broker.
Can I get a mortgage for four and a half times my income?
A mortgage lender will want to know that you can afford the mortgage amount you are applying for, so be prepared to have evidence for your income in the form of payslips or SA302’s if you’re self-employed.
It’s not just your income that affects whether you can get approved for a 4.5x income loan though, your credit score, level of debt, age and even the type of property you want to buy can affect your ability to qualify for any given mortgage.
Below are some of the numerous factors that lenders consider when deciding to approve your mortgage.
Income - Some lenders have minimum income requirements
Monthly outgoings - Lenders look at your debt-to-income to decide if you can afford your financial commitments plus a mortgage of 4.5x your salary
Loan to value (LTV) - How much you want to borrow in relation to your deposit.
Source of deposit - Is it yours from savings or is it a gifted deposit. If it’s the latter, you’ll need the person giving you the deposit to sign a gifted deposit letter.
Credit history - Usually, a higher credit score and a good history of credit and money management is preferred
Age - Borrowers nearing retirement may find they have fewer lenders to choose from if they want to borrow larger amounts
Job type - Lenders usually prefer borrowers to have stable jobs with an income that doesn’t fluctuate though there are exceptions
How much can I borrow with a 4.5x salary mortgage?
The following table illustrates how the loan size will vary based on income but as mentioned, the amount you can borrow will be based on a variety of factors.
Annual income | 4x salary mortgage | 4.5x salary mortgage |
£20,000 | £80,000 | £90,000 |
£40,000 | £160,000 | £180,000 |
£60,000 | £240,000 | £270,000 |
£80,000 | £320,000 | £360,000 |
£100,000 | £400,000 | £450,000 |
How does a 4.5x income multiple work if I want a joint mortgage?
Applying for a solo 4.5x salary mortgage might not provide you with the budget you’re hoping for, especially given that house prices rose by 10% in some areas in the UK in 2021.
If you were to apply for a mortgage with another person, or even up to another 3 people, you could benefit from being able to borrow more.
That’s because both incomes can be included as part of the income calculations.
For this example, we’ll base the maximum borrowing amount on two incomes. Imagine person 1 earns £20,000 a year and person 2 also takes home £20,000.
As a single applicant, the maximum amount person 1 could borrow for a 4.5x salary mortgage is £90,000. With the addition of applicant 2, the combined mortgage size increases to £180,000.
Applying for a mortgage with family might be an option to consider too and it’s not uncommon for siblings to buy together as trios or quartets.
If 3 people were to apply together, each with incomes of £20,000 a year, they may be able to borrow up to £270,000 which could provide them with enough to buy a decent, spacious property as opposed to individually buying smaller, cheaper properties.
How much deposit do I need for a 4.5 times income mortgage?
The minimum deposit you’ll need for a mortgage in the UK is 5% but if you have a guarantor who is willing to use their savings or property as security for your mortgage, you may be able to get onto the property ladder with a zero cash deposit.
That won’t be a possibility for everyone but there are mortgage lenders in the UK with 5% deposit requirements.
A 5% deposit requirement can make buying a home more achievable for lots of buyers as saving for a larger amount just isn’t possible for many, whether that be because of low income or high outgoings like rent or child care.
Government-backed 95% mortgages are available for mortgages with 4.49 and 4.5x income multiples and there are also additional mortgage products with 5% deposit requirements, separate from the scheme.
Many UK lenders still require deposits of 10% and higher and although saving a chunk of cash like that can be a big hurdle and delay the process slightly, it might be worth it in the long run depending on your circumstances.
Is it better to have a bigger deposit for a 4.5x salary mortgage?
Having a larger percentage of the property’s value as a deposit upfront means you reduce the amount of money you need to borrow on a mortgage and own a larger equity stake. If house prices fall shortly after you get a mortgage with a low deposit, you could end up owing more money to the bank than your house is worth.
That’s called negative equity and is something you’ll probably want to avoid, especially if you plan to move in the future as usually, having a larger amount of equity can help you access better interest rates for a remortgage.
You don’t necessarily need a larger deposit to get a mortgage for 4.5x your annual income and there is no way of knowing for certain what will happen to house prices in the future. A 5% deposit mortgage can help lots of people get a home without the need for a long stretch of saving and there are still great deals to be had.
Ask a broker to compare the current mortgage market and present you with the options that might be of interest to you. If a small deposit mortgage is what you’re looking for, they’ll know where to look and how to prepare your mortgage application so that you have the best chance of approval.
Can I get a 4.5x salary mortgage with bad credit?
Bad credit is defined differently between lenders but usually, it means your credit report reflects one or more of the following:
Missed payments for utility bills, phone contracts or loans
Debt
Negative repayment histories
Rejections for credit applications
A CCJ
An IVA
Bankruptcy
Risky borrowing behaviour
It’s certainly not impossible to get a mortgage with bad credit and there are even niche lenders in the UK for bad credit borrowing, including mortgages for debt consolidation.
What are the biggest disadvantages of having bad credit if you want a mortgage for 4.5x your income?
You might be considered too much of a risk with some mainstream lenders and banks depending on the severity of the credit issue and how recent it occurred
That could give you fewer lenders to choose from
You could pay more interest for your mortgage
You might have to pay a higher deposit
Can I get a mortgage for 4.5x my income for a property built out of non-standard build materials?
The type of property you plan on buying with your 4.5x salary mortgage will affect your ability to get approval. While houses made from standard construction materials can be perfectly fine to mortgage, some lenders will not provide loans for those that are not.
Properties with walls made from any material other than brick such as glass, metal, wood and even concrete, can be difficult to mortgage because some lenders will worry about your ability as a borrower to pay for the specialist materials and labour needed to repair and maintain such a unique property.
And it’s not just the walls. The roof, windows and even whether or not the property is an officially listed building, can all reduce your choice of lenders.
If you have hopes of living in an eco-dome, buying a modular home or restoring a dilapidated building, you may still be able to get a mortgage for 4.5x your income but you will likely need a specialist lender.
If you’re unsure about where to find these lenders, ask a mortgage broker. Not all lenders advertise on comparison sites and others can only be contacted via a mortgage broker.
Can self-employed borrowers use a 4.5x income multiple?
If your income is earned through self-employment then lenders will need to see your SA302’s to confirm that you earn the amount that you say you earn and can afford to repay your mortgage.
More than 2 years of books is preferable but if you only have 1, don’t worry as there are a handful of lenders in the UK that can accept that.
Ideally, your accounts need to be signed off by a chartered accountant and to put yourself in the best position for applying for a mortgage worth 4.5x your income, you should aim to save at least a 5% deposit, although 10% may be required if you want to get a cheaper interest rate, which can make your loan cheaper in the long run.
Work out the best solution for you with a mortgage broker. They can carefully look at your situation and compare the best options out there to help you get approved with a lender that’s more likely to have criteria that are open to you.
Call us on 02380 980304 or submit an online enquiry today.
