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?
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 are 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.
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.