5x Income Mortgage - How to Get One
If you’re struggling to afford the property you’ve set your hopes on with your mortgage, you’ll need your income to go as far as possible towards the size of your loan, and getting a 5x income mortgage can make a massive difference.
And with the relentless rise of house prices combined with the stagnation of the average salary over the last few decades, it’s becoming more and more common for people to borrow more than 4.5 times their salary, despite most lenders ordinarily capping their mortgages at this limit.
But how do you get a mortgage for 5 times your income? Why are they harder to get? And how much do they cost?
Purchasing a home is a significant financial milestone for many people, and getting a mortgage is an essential part of the process. However, the amount of money a lender will be willing to lend you will depend on your income and creditworthiness. This article will explore how to get a 5x income mortgage, including the factors lenders consider when evaluating your application and how to increase your chances of getting approved.
Lenders
When you apply for a mortgage, a lender will look at several key factors to determine your eligibility. One of the most important things they will consider is your salary and financial stability. Lenders will want to see that you have a stable job and a steady income stream, as this will help ensure that you can make your monthly mortgage payments on time.
Additionally, your occupation can also play a role in your mortgage application. Some occupations, such as doctors and lawyers, are more financially stable and, therefore, more attractive to lenders. However, this does not mean that people in other occupations cannot get a 5x income mortgage; it just means that you may need to put in a little extra effort to convince your lender of your financial stability.
Another factor that lenders will consider is your credit score. Your credit score is a measure of your creditworthiness, and lenders use it to gauge your ability to repay a loan. If you have a high credit score, there is a greater likelihood you are more likely to be approved for a mortgage and may even be able to secure a lower interest rate.
When it comes to getting a mortgage, money is a crucial factor. Lenders will want proof of your income and financial stability to ensure that you can make your monthly mortgage payments. If you can provide evidence of a high salary or other sources of income, this will help your chances of getting approved for a 5x income mortgage.
Salary
Your salary is an essential factor that lenders will consider when evaluating your mortgage application. The higher your salary, the more likely you will be approved for a 5x income mortgage. Lenders want to see that you have job stability and a steady income stream, as this will help ensure that you can make your monthly mortgage payments on time.However, it is more than just your salary that lenders will consider. They will also look at your overall financial picture, including your debts and expenses, to determine your ability to take on a mortgage. It is vital to have a robust financial foundation, including a good credit score, to enhance your chances of getting your mortgage approved.
In addition to your salary, lenders will also consider other sources of income when evaluating your mortgage application. This may include rental income from properties you own, dividends from investments, or even alimony or child support payments. If you have multiple streams of income, this can be a help in increasing your chances of getting approved for a 5x income mortgage.
It is also a good idea to speak with a mortgage broker to better understand the mortgage process and what you need to do to get approved. They can provide valuable guidance and help you navigate the sometimes complex world of mortgages.
How can you get a mortgage for 5 times your salary?
The most common route people take when they need a mortgage for 5 times their salary, is: speak to a mortgage broker.
Not all lenders offer larger income multiple mortgages like this, but a good mortgage adviser will know which ones do. They can take your application to the right lenders straight away.
Mortgage brokers often have access to better rates and exclusive products that aren’t available to customers going direct.
This is because banks prefer to liaise with brokers than directly with customers – it's quicker and more efficient saving them money, which allows them to offer you a better mortgage deal for going through an adviser.
Why are 5 times salary mortgages harder to get?
Firstly, the higher loan to income ratio (LTI) that a bank lends you money at, the higher risk there is that you may default on your mortgage repayments. This will cost them money, so they want to keep the number of 5 times mortgage loans they have to a minimum.
In addition, regulations from the Bank of England limit the number of mortgages that lenders can have on their books at over 4.5 times income.
This means that they have to pick and choose between applications for who can be approved for larger mortgage income ratios.
So, how can you make your application more appealing to banks to get a loan for 5x your income?
Top Tips for getting a mortgage at 5 times your salary
1. Improve your credit score
Getting your credit score as high as possible looks great on your mortgage application and could be the difference between getting a bigger loan.
2. Put down a larger deposit
A 5 times salary mortgage at 90% loan to value (where you put down a 10% deposit) is harder to get than 5 times salary mortgages at 85% loan to value (with you putting down 15%). It’s an obvious point, but the more deposit you can put down, the greater your chances are of being accepted.
3. Speak to a mortgage broker
Even if you have a poor credit history, or can only muster a small deposit, speak to a mortgage broker to see if they can help you reach your loan size.
4. Income
You’re also more likely to be accepted if you have secure, contracted income through employment as opposed to self employed income. If you have clear career prospects and progression ahead of you, banks may also be able to take this into account to offset a portion of the risk in lending to you at a higher rate.
Is a 5x salary mortgage more expensive than normal?
You’ll likely be paying a higher interest rate if you’re borrowing over 4.5 times your income.
However, it’s important to factor in the benefits of getting a mortgage approved at the right time and at the right level in comparison to the costs.
Getting on the property market early with a higher loan to income ratio mortgage could save you a year’s worth of rent, for example, and you can always remortgage further down the line to get better rates.
After a few years of owning a home, you may have built up capital in savings as well as having paid off a portion of your loan already, meaning you could now take out a new loan at a better loan to value ratio.
Or, you might have got a pay rise since taking out your mortgage and could now qualify for a cheaper mortgage at just 4.5 times your salary.
Just make sure to check if you’ll be paying any early repayment charges for ending your existing mortgage prematurely – and check with a mortgage adviser if you are unsure.
