Anyone who is interested in getting a mortgage will typically want to know how much they need to be earning in order to be likely to qualify for a specific mortgage amount, and what the repayments would be if they are accepted. Each lender will have different criteria, so there isn’t really a set answer to these questions. Lenders will assess your other circumstances, as well as your income, before determining what an acceptable salary would be for a £250,000 mortgage and what the likely repayments will be.
The good news is our expert advisers at Finance Advice Centre are highly knowledgeable in this area and can offer professional advice to suit your individual circumstances. This article will give you a rough idea of the minimum income requirements for a £250,000 mortgage and the possible monthly repayments you might expect to repay each month.
How does your income affect your mortgage application?
Your income is one of the main factors lenders will consider as it gives them a good indication of whether your salary will allow you to keep up with your regular mortgage repayments. Lenders work out affordability by looking at your monthly income against your outgoings to find your debt-to-income ratio. The lower the ratio the higher your creditworthiness is likely to be rated because it means you will have more disposable income available to pay off a mortgage.
Why do income requirements vary by lender?
Some lenders can be more generous than others. Whilst the majority of lenders will impose a cap on a mortgage at 4-4.5x your salary, there are some that are willing to stretch to 5x your income, and a few might even go to 6x.
If you are intending to use a secured loan as collateral for a mortgage, a small handful of lenders could stretch to 10x your income or more, meaning you are able to borrow a much higher amount than you could on a mortgage or remortgage.
How much do you need to earn to get a mortgage of £250,000?
If you (and your partner, if applicable) earn an annual salary of £85,000, just over 3x your combined incomes equal £255,000. This, in theory, should open you up to a wide variety of mortgage lenders because your salary falls within the bracket most lenders will consider.
However, if you earn £45,000 a year, you would need to find a lender that is open to loaning you almost 6x your income, which is often much more difficult to come by.
How much is a £250,000 mortgage a month?
It is important to think about the different mortgage rates and term lengths of a £250,000 mortgage, as these are factors that a lot of mortgage calculators will take into account. Knowing how much the monthly repayments on a £250,000 mortgage will be could affect your decision as to which mortgage you choose to go for.
What other factors can affect the likelihood of being approved for a £250,000 mortgage?
Property LTV (Loan to Value)
A larger deposit, meaning a lower LTV, can be very helpful when you’re applying for a £250,000 mortgage, as it can give you a wider range of lender options and access to more competitive mortgage deals. A lot of residential mortgage lenders offer up to 85% LTV, which means you are able to borrow this percentage of the property’s value. Some are happy with 90% and a few will accept 95%.
This means a few lenders could be willing to loan you the money for a £250,000 mortgage with as little as £12,500 (5%) deposit saved, as long as you pass the other eligibility criteria. Normally though, you will be offered better rates the more deposit you are able to provide as it gives lenders extra reassurance of your commitment.
What you do for a living can have a big effect on mortgage finance applications as certain jobs or contract types are deemed riskier than others. For instance, if you’re self-employed or are looking for a mortgage with a temporary contract, mortgage companies could approach you with more caution than a borrower who has been in a stable, full-time position for a long period of time. However, there are a lot of other variables involved so don’t worry if you have an unconventional job as this won’t automatically rule you out for a mortgage.
Bad credit issues
As previously mentioned, every mortgage lender has its own requirements and eligibility criteria and the same applies when it comes to bad credit. Some lenders won’t accept anyone who has experienced any forms of bad credit, whereas some are willing to accept those who have had serious financial problems like repossessions or bankruptcies. In general, however, it will depend on how recent and/or the severity of the issue was.
Contact Finance Advice Centre today if you’re looking for any guidance relating to mortgages. Our advisers have extensive experience in the sector and are best placed to help you find the right mortgage product for you.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.