When you are considering buying a house, working out how much you can afford to borrow on your mortgage and how likely you are to be accepted for the loan are key considerations. With the Halifax House Price Index showing the average house price in the UK standing at £276,759 in February 2022, it is not uncommon for people to be looking to get a mortgage of around £250,000.
In this article, we look at how to apply for a £250,000 mortgage, how much you need to be earning to afford it and how much your monthly repayments are likely to be on a loan this size.
What income do you need to get a £250k mortgage?
In the past, mortgage lenders tended to use quite a basic formula to decide how much they were prepared to lend to a potential house buyer, which was mostly based on a standard income multiple. This means they would simply take your income (or your combined income in the case of joint mortgages) and multiply it by 3-4 times to give a maximum figure. However, since the Mortgage Market Review in 2014 a focus has been put on affordability and stress testing. Lenders now take a more sophisticated approach, taking into consideration your existing financial commitments, spending habits, as well as whether you could afford the repayments if interest rates by a significant amount - around 3% - during the lifetime of the loan.
However, while lenders take a more holistic approach to considering your mortgage application, your income still plays a key part in determining how much you are likely to be allowed to borrow. The multiple varies from lender to lender, but tends to be between 4-4.5 times income. This means to secure a £250,000 mortgage, you would need to be earning between £55,556 and £62,500, either solely or together with another applicant for a joint mortgage.
Some lenders are prepared to offer higher income multiples, particularly for first-time buyers or for those in certain professions that have a clear salary rise trajectory, such as a doctor or solicitor. For details of the lenders that offer higher income multiples and the criteria they impose, read our article "How much can I borrow on my my mortgage?"
Income multiples for a £250k mortgage
In the table below, we show you the income required - either solely or joint - to secure a mortgage of £250,000.
| 3.5 times income | 4 times income | 4.5 times income | 5 times income | 5.5 times income | |
|
Income required |
£71,428 | £62,500 | £55,556 | £50,000 | £45,454 |
How much deposit do you need to get a £250k mortgage?
While 2020 proved difficult for house buyers and movers, with many lenders increasing the minimum deposit they'd accept from 5% to 10%, the introduction of the mortgage guarantee scheme by the government in April 2021 resulted in more 95% loan-to-value (LTV) products being made available. This means that, for a £250,000 mortgage, you would require a deposit of at least £12,500.
It is worth noting that 95% LTV mortgages have higher interest rates than lower LTV alternatives, which will mean you end up paying more on your monthly repayments. You will also be subject to more stringent affordability assessments as a 5% deposit represents a higher level of risk to the lender than a larger amount. If you can afford to do so, putting more into your deposit to lower the LTV will help you secure a better deal.
£250k mortgage - Deposit and loan-to-value comparison
In the table below, we show you the amount of deposit you need to qualify for mortgages at different LTVs on a £250,000 mortgage loan:
| Mortgage loan-to-value | Deposit amount needed for £250k mortgage |
| 95% | £12,500 |
| 90% | £25,000 |
| 80% | £50,000 |
| 75% | £62,500 |
| 50% | £125,000 |
| 40% | £150,000 |
For the best and cheapest 95% LTV deals, read our article "Which are the best 95% LTV mortgages - and should I get one?".
How much will a £250k mortgage cost?
The amount you end up paying on a monthly basis for your mortgage will be determined by the interest rate you secure, as well as the mortgage term. Spreading your mortgage over a longer time frame (say, 30 years rather than 25 years) will mean your monthly repayments will be lower. However, you will pay significantly more over the lifetime of the mortgage as a large proportion of the amount you pay back is made up of interest, which you will pay more of the longer the loan lasts.
It is essential to ensure you can afford to make the repayments on the mortgage, not just in the initial introductory period, when the rate is lower, but also in a situation where interest rates have increased and you can no longer get such a competitive deal. Indeed, mortgage lenders now stress test the affordability of a loan for borrowers if interest rates were to rise by 3%, which would move them back in line with where they were before the financial crisis in 2007. The optimum is to strike a balance between the shortest mortgage term possible with a monthly repayment that is still easily affordable.
£250k mortgage cost comparison
In the table below, we show you the estimated monthly repayments on a £250,000 repayment mortgage, taken out different mortgage terms, not including fees.
| 1% | 1.5% | 2% | 2.5% | 3% | 3.5% | 4% | 4.5% | 5% | |
|
15 years |
£1,496 | £1,552 | £1,609 | £1,667 | £1,726 | £1,788 | £1,849 | £1,912 | £1,977 |
|
20 years |
£1,149 | £1,206 | £1,265 | £1,325 | £1,386 | £1,450 | £1,514 | £1,581 | £1,650 |
|
25 years |
£942 | £1,000 | £1,060 | £1,122 | £1,185 | £1,252 | £1,319 | £1,389 | £1,462 |
|
30 years |
£804 | £863 | £924 | £988 | £1,054 | £1,123 | £1,193 | £1,266 | £1,343 |
|
35 years |
£705 | £765 | £828 | £894 | £962 | £1,034 | £1,106 | £1,183 | £1,262 |
£250k mortgage repayment comparison
In the table below, we show the total you will repay - including interest - on a £250,000 mortgage over different mortgage terms. It assumes a rate of 2.5% for the life of the mortgage.
| Mortgage term | Monthly repayment | Total repaid over full term | Total interest paid |
| 35 years | £894 | £375,433 | £125,433 |
| 30 years | £988 | £355,662 | £105,662 |
| 25 years | £1,122 | £336,506 | £86,506 |
| 20 years | £1,325 | £317,975 | £67,975 |
| 15 years | £1,667 | £300,079 | £50,079 |
How to find the best £250k mortgage for you
A good place to start when trying to find the best mortgage for your circumstances is our mortgage best-buy table, powered by Habito*, which will highlight the cheapest deals currently available. You can also contact online broker Habito directly to help you find a tailored solution for your individual needs, including working out which lenders are most likely to approve your application. To facilitate this process it pays to work out in advance whether you are likely to meet the income requirements for a £250,000 mortgage based on the information provided above, as well as preparing the documents you will need to make your application, which generally includes two or three months' bank statements and payslips, as well as proof of identity.
If a link has an * beside it this means that it is an affiliated link. If you go via the link Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. But as you can clearly see this has in no way influenced this independent and balanced review of the product. The following link can be used if you do not wish to help Money to the Masses - Habito
