5.5x Income Mortgages - Can I Get One?
5.5x Income Mortgages
With house prices on the rise in the UK for another year running, many property buyers are struggling to secure a mortgage that reaches the levels of their ideal property budget.
Most mortgage lenders typically cap their loans at 4.5 times your salary to keep their risks low. However, depending on where you’re buying, 4.5 times the average salary in the UK doesn't get you anywhere near to the average house price.
So, unless your salary is significantly above average, you’re buying in a cheaper area, or you have some help from family and friends, you’ll need your income to go as far as possible.
Getting your income multiplied one more time to 5.5x can make a huge difference to your property budget.
If you’re earning £50k a year jointly with your partner, it could mean adding another £50k to your maximum loan size – and in terms of your property, it might get you that spare bedroom or garden you’ve had your heart set on.
So, is there a 5.5 times salary mortgage available? What are the lending criteria for them? Do they charge higher interest rates and fees, and how do I get one?
What 5.5x income mortgages are available?
Lenders are generally less willing to lend 5.5x income mortgages to customers because it’s higher risk, so the first thing to keep in mind is that you have a smaller lending pool to choose from when applying for a 5.5 times salary mortgage.
This means you’ll have fewer products to select from in terms of interest rates, term types, and your loan to value, and if you have any complexities with your application, you might struggle to get accepted.
That being said, some mortgage providers are willing to lend 5.5 times income to the right borrowers, but they may reserve these for the best applicants, and you might need:
A higher deposit than usual
A reliable form of income (for example, self employed income might be more difficult)
A good credit score
To be willing to pay higher interest rates
How much of a deposit do I need for a 5.5 times salary mortgage?
You’ll likely need a greater deposit towards your house purchase if you need to borrow 5.5 times your salary, and a good starting point is to have at least 15% of your property value as cash.
However, there are some lenders that we work with who can make exceptions, and it’s always worth making an enquiry with one of our mortgage brokers to see if you’d be accepted with a higher Loan to Value (LTV) of 90% for example.
In fact, we currently work with one bank that is offering a 95% LTV first time buyer mortgage at 5.5 times salary.
This means you only need to put down a 5% deposit towards your first home and you can leverage your income 5 and a half times towards your loan size – we think it’s one of the best mortgage products on the market currently.
How much does a 5.5 times income mortgage cost?
Firstly, you’ll likely be paying a higher rate of interest compared to low income multiplier mortgages. However, you might consider that the benefits of getting on the property market earlier, at the right time for you, outweigh the additional costs.
And although you’ll be paying higher interest initially, you can always remortgage after 2, 3 or 5 years (or after the end of your fixed term if applicable to avoid early repayment charges) to get a better mortgage deal.
You’ll likely have built up more capital by that time to get a better LTV and lower rates; or, you might be earning more through a promotion or career progression so that you can take out a standard 4.5 times salary loan instead, and pay less interest that way.
How to get a mortgage for 5.5 times your income
The easiest way to find out if you’re eligible for a higher loan value mortgage is by speaking to a mortgage adviser.
A good mortgage broker will consolidate your application and take it to the best lenders suited to your specific situation.
Some lenders are more likely to accept a higher income mortgage application from a mortgage broker than directly from customers, because they know that liaising with a mortgage broker will be a quicker and smoother process compared to dealing with a customer.
If you need to borrow at a higher income multiple and want to know if you’d be eligible, speak to us today to book a free telephone consultation with our team.
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