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Limited Income

Over recent years, with mortgages being harder to obtain, there has been a perception that you need to be earning big money to even dream of getting a toe on the property ladder.

That does not necessarily have to be the case. What lenders are largely looking for is a borrower’s ability to pay their mortgage, which means that even if you have a relatively low income organising a mortgage can be a real possibility.

How will a Lender calculate what they will lend to you?

Lenders will each have their own calculation to determine how much they will be prepared to lend to a borrower.

Our advisors can help you to find the best mortgage for your situation. By using a mortgage adviser you will be sure that you are borrowing the most that you can, but also that you are working with the best lender for your circumstances. This also means that you are not running unnecessary applications, which can impact on your credit score. This is critical at a time when mortgage lenders can be selective about who they do business with.

Traditional methods for working out your mortgage amount

Some lenders still work on the basis of four times a joint income (see example 1 below). There is a little variation available in this calculation, where excellent credit ratings are rewarded with a larger loan amount.

Example

Income 1: Mr Jones £22,000
Income 2: Mrs Jones £16,000
Income multiple from lender 4 x income
Maximum mortgage amount £152,000*

*Other factors will also determine your maximum borrowing amount including a lenders affordability calculations

With some lenders, single applicants can borrow up to five times their salary (see example 2 below).

Example

Income 1: Mr Jones £22,000
Income multiple from lender 5 x income
Maximum mortgage amount £110,000*

*Other factors will also determine your maximum borrowing amount including a lenders affordability calculations

Mortgages based on affordability

Lenders will often also calculate the amount they will loan to you based on affordability. Lenders will assess a person’s income and outgoings to determine if the person is able to pay their mortgage or not. This could either increase or decrease the actual amount you can borrow, but as some lenders are prepared to consider other forms of income towards your actual income (for example Child Benefit or Child Maintenance payments) it is possible that your borrowing ability might be higher than first expected.
Each lender is different which is why it is recommended that you speak to an experienced independent mortgage adviser.

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