But what about the lenders that offer higher income multiples? Where can they be found and would you meet their eligibility criteria?
This guide explains what a 5.5x salary mortgage is, what you’ll need to apply and how you can go about getting the best rates.
- What is a 5.5x salary mortgage?
- Can I get a mortgage five and a half times my income?
- Is it harder to get a mortgage for 5.5x your salary?
- How much can I borrow with a 5.5x salary mortgage?
- How does a 5.5x income multiple work if I want a joint mortgage?
- How much deposit do I need for a 5.5 times income mortgage?
- Is it better to have a higher deposit for a 5.5x salary mortgage?
- Can I get a 5.5x salary mortgage with bad credit?
- Can I get a mortgage 5.5 times my income if I’m an older borrower?
- Can self-employed borrowers use a 5.5x income multiple?
- Speak to a broker about applying for a mortgage for 5.5x your income
What is a 5x salary mortgage?Lots of lenders are stepping away from traditional income multiples. You might have heard of these if you’ve ever skimmed the T&Cs of a mortgage agreement.
An income multiple is a figure based on a multiple of your annual salary, so if your annual gross salary was £25,000 and your lender used an income multiple of 5.5, you could potentially borrow £137,500.
Annual gross income x multiple income used by the lender = Maximum mortgage amount
£25,000 x 5.5 = £137,500
The larger the income multiple, the larger your maximum loan amount.
Being able to borrow more on a mortgage is a reason why many borrowers try and aim for a 5.5x salary mortgage but if you decide to apply for a loan that’s 5.5x your income, be cautious, and always calculate your affordability carefully either yourself or preferably with a mortgage broker.
Can I get a mortgage five and a half times my income?An income multiple of 5.5 is fairly high so this type of mortgage contract is regarded as one reserved for people with higher incomes, like professionals, limited company directors and so on.
UK banks and lenders will look at numerous factors that affect your ability to repay your loan on time and in full including your:
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 5.5x 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
Is it harder to get a mortgage for 5.5x your salary?It’s not necessarily more difficult to get a mortgage for 5.5x your salary because your ability to get any mortgage regardless of the income multiple, is reliant on your circumstances.
There are fewer lenders in the UK with criteria for this type of mortgage because the level of risk is higher for a lender if they provide a larger loan in relation to your income. That being said, there are a handful of lenders that provide mortgages for 5.5x a salary.
When assessing your affordability for a mortgage lenders will likely ask for:
Your payslips or at least 1 year’s worth of SA302s if you’re self-employed
3 month’s bank statements
Details of all current and future debts
Having issues like a low deposit, an unstable job and fluctuating income can cause concern for lenders who want to feel confident that you can meet your financial obligations.
The good news is that despite the added risk that some circumstances bring, there may still be a lender happy to approve a loan based on 5.5x your salary. It’s all about finding a lender with criteria that is open to your situation and applying for a loan that is affordable for you.
You can either enquire or give us a call and we’ll refer you to one of our brokers with experience in securing mortgages for 5.5x an income.
How much can I borrow with a 5.5x salary mortgage?
If you meet your chosen lender’s criteria you should be able to successfully get a mortgage for 5.5x your annual salary, however, with lending criteria typically tighter for larger lending mortgages, be prepared to potentially need to meet very specific requirements.
There are so many factors that can affect your ability to get a mortgage for 5.5x your income, so seeking specialist advice is a route that many take when searching for a lender. They’ll check your eligibility for the mortgage amount you want to apply for and let you know where the lenders are that can offer you a loan under terms that fit in with your plans for the future.
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.
5x salary mortgage
5.5x salary mortgage
How does a 5.5x income multiple work if I want a joint mortgage?If you apply for a mortgage with another person like a partner, relative or close friend, you will likely be able to borrow more because both incomes can be included as part of the income calculations. You might not be aware that some lenders allow up to 4 people on a joint mortgage application which can further increase your borrowing power.
For this example, we’ll base the maximum borrowing amount on two incomes. Imagine person 1 earns £30,000 a year and person 2 also takes home £30,000.
As a single applicant, the maximum amount person 1 could borrow for a 5.5x salary mortgage is £165,000. With the addition of applicant 2, the combined mortgage size increases to £330,000.
How much deposit do I need for a 5.5 times income mortgage?That depends on the type of mortgage you’re looking for. Residential mortgages typically have lower deposit requirements in comparison with buy-to-let mortgages which can require deposits upwards of 20%.
If you’re buying a property to live in as your main residence and you don’t plan on letting it out, you’ll need a residential mortgage. It used to be a rarity to get a mortgage with a 5% deposit but more lenders have increased availability for low deposit mortgages.
Government-backed 95% mortgages are available with UK lenders but many will still require deposits of 10% and higher. The amount of deposit you’ll need will vary between different lenders because each agreement has different terms and conditions - some more financially advantageous than others.
Is it better to have a higher deposit for a 5.5x salary mortgage?Having a higher deposit can help you to access better interest rates which could make your mortgage cheaper overall. In addition, some mortgages have higher mortgage fees, which can also affect the amount you pay for your mortgage in the long run. That’s why a 5% deposit mortgage isn’t necessarily the way forward for everyone.
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.
This can reduce your risk of falling into negative equity if house prices sharply decline. While that might not happen, as a buyer at the start of their mortgage with the majority of their loan to pay off, it could be a relief if that were to happen and you made the decision to save more
You don’t necessarily need a larger deposit to get a mortgage for 5.5x your annual income but having a larger deposit can help you access a wider pool of lenders and better interest rates.
If you have a low deposit but a high income, you’re not excluded from homeownership and there may be lenders with criteria that fits your circumstances perfectly. Ask a broker where you can find these UK lenders.
Can I get a 5.5x salary mortgage with bad credit?What’s classed as bad credit with one lender will be completely different with another lender, so even if you’ve been rejected because of credit issues in the past, it could still be possible to get a mortgage for 5.5x your income.
Severe issues like recent bankruptcy and IVAs can result in some lenders instantly declining an application but there are a small group of lenders that will still approve mortgages for borrowers with bad credit.
It might be the case that to meet the eligibility criteria for a 5.5x salary mortgage lender, you’ll need a larger deposit or will need to meet a minimum income threshold, though this will vary between lenders.
Don’t get rejected for a mortgage when you can check your eligibility beforehand and prevent it from happening. Credit rejections can remain on your credit report for up to six years for other lenders to see and recent or multiple rejections can negatively impact your ability to get approved with some 5.5x salary mortgages.
Can I get a mortgage 5.5 times my income if I’m an older borrower?It’s not impossible but some lenders do cap lending for borrowers if they’re approaching retirement and due to experience a dip in income.
Age caps vary but typically they range from 70 - 85 but that won’t be the case for every lender.
If your mortgage term takes you into your retirement but your income is still enough to comfortably repay your mortgage, then you may be able to get approved for a mortgage based on your current income.
You’ll need evidence of how much you currently earn as well as how much you expect to have as income once you retire. Payslips, bank statements from your current account and any savings accounts including a private pension or documents evidencing your state pension can be included as part of the affordability assessment for a mortgage.
Get advice from a reviewed expert who can help you weigh up the pros and cons of a 5.5x salary mortgage. They can calculate your repayments with various lenders under different terms and conditions, to provide you with an accurate reflection of your options.
Can self-employed borrowers use a 5.5x income multiple?Having 2-3 years of accounts is preferable by many UK banks and mortgage providers because they have more information about your financial behaviour to base their decision.
However, provided you have at least a minimum of one years’ worth of accounts and you meet your chosen lender’s criteria, there’s no reason you shouldn’t be able to get a 5.5x salary mortgage as a self-employed worker or professional.
Speak to a broker about applying for a mortgage for 5.5x your incomeCall us on 02380 980304 or submit an online enquiry to speak directly to a mortgage broker about your eligibility for 5.5x income mortgages.
If you’re eligible to apply, they can manage the application on your behalf, saving you the hassle of chasing the relevant professionals you’ll encounter during the mortgage process including lenders, surveyors, solicitors and estate agents.