How do salary multiples determine the amount you can borrow on a mortgage?
Mortgage lenders use salary multiples as a way of checking your affordability for the mortgage amount you wish to borrow. This varies between lenders as some will offer larger salary multiples than others based on their lending criteria and your financial circumstances. Although other factors will also affect the maximum amount of money you can borrow, your income is one of the foremost factors in determining how much you can borrow when applying for a mortgage.
Do mortgage lenders use gross or net income to work out how much they will lend?
Generally, mortgage lenders will use your gross salary to work out what is known as the 'loan-to-income ratio'. The loan-to-income ratio is determined by dividing the loan amount by what you earn before tax is deducted. If you are self-employed then usually, your net profit amount will be used in place of the salary to determine how much you can borrow.
What income can be used to qualify for a mortgage?
Your earnings from either employed or self-employed work are most commonly understood to be your income but there are a number of other payments that can be included to boost your income to work out how much you can borrow. Here are some income sources that could be included:
- Salary
- Bonus payments
- Commissions
- Overtime
- Freelance income
- Net profits (self-employed)
- Pension income
- Investment income
- Child maintenance
- Ex-spousal maintenance
Mortgage lenders may vary in what types of income they will consider when carrying out their specific affordability assessments so it is beneficial to speak with a mortgage specialist who will have market insights to help you. Independent mortgage specialists* have in-depth knowledge about lending criteria across the market and will make recommendations based on your specific needs and circumstances to maximise your borrowing ability.
What is the average salary multiple you can borrow?
Salary multiples offered by each mortgage lender in the market change from time and time and although 2022 saw 7 times salary offers appear on the market, at least one of these has already been withdrawn. Your outgoings and other financial details will have a bearing on the final amount offered on your mortgage and could reduce your borrowing ability.
The maximum average salary multiple offered by most lenders is around 4 to 4.5 times your annual income.
How many times joint salary can you borrow?
The average salary multiple offered when you combine two salaries for a joint mortgage is less than if you are using one salary and will usually be a maximum of around 3.5 to 4 times your joint income. Some lenders will offer a higher multiple of the primary salary and a reduced multiple of the second salary for joint applications and combine these figures to come up with the maximum amount that can be loaned to you.
How much can I borrow based on my salary?
The amount that you can borrow based on your salary is determined by the maximum salary multiple that a mortgage lender will offer to you. Although, you can work out crudely how much you are likely to be able to afford to borrow based on your salary, do remember that lenders use other criteria alongside salary multiples when working out how much they are willing to lend to you and this may either increase or reduce the amounts described in the table below.
Mortgage borrowing based on salary and salary multiples
| 3.5 x salary | 4 x salary | 4.5 x salary | 5 x salary | 5.5 x salary | 6 x salary | |
| £20,000 | £70,000 | £80,000 | £90,000 | £100,000 | £110,000 | £120,000 |
| £30,000 | £105,000 | £120,000 | £135,000 | £150,000 | £165,000 | £180,000 |
| £40,000 | £140,000 | £160,000 | £180,000 | £200,000 | £220,000 | £240,000 |
| £50,000 | £175,000 | £200,000 | £225,000 | £250,000 | £275,000 | £300,000 |
| £60,000 | £210,000 | £240,000 | £270,000 | £300,000 | £330,000 | £360,000 |
| £70,000 | £245,000 | £280,000 | £315,000 | £350,000 | £385,000 | £420,000 |
| £80,000 | £280,000 | £320,000 | £360,000 | £400,000 | £440,000 | £480,000 |
| £90,000 | £315,000 | £360,000 | £405,000 | £450,000 | £495,000 | £540,000 |
| £100,000 | £350,000 | £400,000 | £450,000 | £500,000 | £550,000 | £600,000 |
If you are asking yourself 'how much do I need to earn to get a £600,000 mortgage?' or 'how much do I need to earn to get a mortgage of £250,000?', the above table indicates that the answer is at least £100,000 per annum and £40,000 per annum respectively. Stress tests, however, will be used to determine exactly how much you can borrow and could impact the final figure that you would need.
Which mortgage lenders offer the highest income multiples?
Income multiples offered by lenders change regularly as mortgage lenders come up with new offers and withdraw others. The mortgage market is rapidly changing and so it would be wise to enlist the help of a mortgage broker* who can keep pace with the number of mortgage offers coming to and leaving the market.
As I write this article, lenders including Santander, Halifax and Barclays can offer up to 5.5 times your salary for a mortgage but there are caveats to these offerings. Some lenders will require at least one of the salaries to be at least £60,000 per annum - sometimes higher. A multiple of salary of 5 to 6 times your income could also require you to present a deposit that is at least 15% or more of the property price at which you wish to purchase. You may also qualify for higher income multiples if at least one of the mortgage applicants is a qualified professional such as a doctor, accountant, lawyer or dentist. First-time buyers may find that the offers they can access vary from those who are moving home or buying a second home.
Some mortgage lenders do not advertise the salary multiples they will extend to and instead assess a salary-multiple cap based on your overall financial circumstances including your outgoings and other financial responsibilities.
Navigating the mortgage market's lending criteria to maximise how much you can borrow whilst securing a good rate of interest on your mortgage is tricky, so enlist the help of a mortgage expert to get the best deal more easily.
Does my deposit amount affect how much salary I need?
Yes, as mentioned earlier in the article, a higher multiple of your salary could be offered if your deposit amount is at least 15% or more of the property purchase price. Loan-to-value ratios play a large part in how much a lender will allow you to borrow as larger deposits reduce the risk levels undertaken by the lender.
What affects mortgage eligibility apart from salary?
Your mortgage eligibility is assessed by a number of factors besides your salary. When you apply for a mortgage your outgoings play a large part in this and can include:
- Credit card payments
- Loan payments
- Current rent/mortgage payments
- Travel costs
- Childcare or school fees
- Child or spousal maintenance payments
- Utility bills
- Insurance payments
Your overall credit score and details from your credit report will be used to assess your mortgage eligibility as well. Poor or bad credit history may affect your eligibility even if you earn enough to meet the income multiple criteria with your mortgage lender. Some lenders will also look at your personal circumstances to establish whether anything is likely to change your ability to afford the monthly repayments for your mortgage in the immediate future.
How to check how much you can borrow based on your salary
The table in this article is a good starting point to work out how much you may be able to borrow based on your salary lenders. However, affordability is key with lenders assessing what is likely to be affordable now and into the future, so that the risks are minimised.
The best way to check how much you can borrow based on your salary and the best mortgage deals in the market is to speak with a mortgage broker who specialises in this area. Mortgage brokers vary in quality as well as the type of deals they can access and so it is worth reading our article, "How to find a mortgage broker you can trust".
Alternatively, you can enlist the expertise of online mortgage specialists, Habito*. It can provide help by searching the whole mortgage market for your and offers tailored advice and guidance to help mortgage customers secure the best deals. We have vetted the services offered by Habito and found that it offers a quick and easy process to get to the best rates in the markets as well as specialist advice to secure the mortgage you need.
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. The following link can be used if you do not wish to help Money to the Masses or take advantage of any exclusive offers - Habito, VouchedFor
