One of the things we look to cover with our clients during our initial consultation with them is to give an estimate on what they can expect their lending amount to be ahead of taking the process further to carry out a decision in principle to get a more exact figure.
So how is this worked out?
Lenders will typically work of a certain income multiple which gives us an estimate on how much they are willing to offer as a lending amount. The majority of lenders would work on an income multiple of 4.5x – 4.75x. Below is an example of how that could look –
Combined income – £50,000 x 4.75% = £237,500 estimated lending amount
Of course these figures and how they are calculated is vague and a lot more factors come into play to get your final lending amount, such as –
- Credit scoring
- Type of employment (permanent, contract, self employed etc…)
- Credit commitments (HP, credit cards, personal loans)
Can you ever borrow more than the standard income multiples?
In certain circumstances some lenders will look to lend you more on a higher income multiple. Examples of this are below –
Higher income – depending on the lender you would need a minimum income of £60,000.. some lenders have a minimum of £100,000 income. If you are in this category you may be eligible for up to 5.5x your income, although you would usually expect a slightly higher rate in these instances.
Key workers – we have access to lenders who offer a higher lending amount to keyworkers. On this range clients may be able to get up to 5.5x the annual salary. As with the higher income option, clients may expect to pay a slightly higher rate to these lenders. Find out more on the keyworker range here – www.capitalmortgageuk.co.uk/edinburgh-key-worker-mortgage
Decision in Principle
While the income multiples we have detailed above give us and our clients an initial estimate of what they may be able to lend, we would need to carry out a decision in principle to give you a more accurate figure. The decision in principle is an initial credit check and full affordability assessment which takes into consideration your income, credit rating and credit commitments. This process is your first major step to getting a mortgage.
*** This article should not be taken as mortgage advice. For mortgage advice please speak with your mortgage adviser ***
