The Question
I’m 25 and considering buying a home in the next few years. I have around £3,000 in savings but I am hoping to put more away over time.
I wondered if you could advise me, however, on how much money I would need to earn to qualify for a mortgage. I currently receive £26,000 from my main job and around £2,500 from a freelance business I run on the side.
Is this enough or should I be looking at improving my salary in the next few years too?
Darren’s Answer
Looking at your deposit, this is a great start. It depends on what property value you are looking to purchase but in some cases a deposit as low as 5% is acceptable with certain lenders.
For example, a £100,000 value property would require a £5,000 deposit with some lenders – this depends on your personal circumstances.
If you purchase higher than the value of the property, any additional amount will need to be covered by you.
In addition, it is wise to earmark some of the funds for your legal fees relating to the purchase of the property. A solicitor can give you a quote for this so you can be prepared.
Regarding your earnings, again this comes down to the value of the property you are looking to buy.
Lenders use different multipliers, but a general rule for sole applicants is around four to 4.5 times your income.
If you are going to apply for a joint mortgage, lenders may use a different multiple, such as 3.5 to four times income.
And there are some lenders that will offer a mortgage five, or even six, times your salary!
Remember that lenders will ask for income evidence. As you have some income from self-employment, this will require a tax return as evidence in addition to your payslips for your employed income.
With the above in mind, the question isn’t necessarily about increasing salary, but more about looking at what property value is within reach for you and what deposit this will require.
The first step to take is to speak to a broker and arrange a Decision in Principle, which will help check how much you can borrow.
Please note, there are other qualifying aspects to a mortgage (not just earnings). It is advisable to speak to a mortgage broker who can support you on your journey.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
