Getting a mortgage based on salary sounds straightforward – but there are lots of ins and outs that can impact how much you can borrow.
Ideally, you’ll have been in your job for over two years, have a steady income rather than a low base salary with commissions or bonuses, and not have taken a long leave such as maternity leave. However, most
people don’t have this kind of straightforward employment situation – and that makes it harder to know how much you can borrow for your mortgage.
A fluctuating income, for example with lots of overtime, may look like you can afford a larger mortgage. In reality, mortgage lenders look at your base salary minus any deductions such as your pension or salary sacrifice schemes. They’ll also look at your current employment status: are you employed and working, or on furlough? A reduced furlough income will be considered for a mortgage – but the amount you can borrow will be less, too.
There are other types of salary lenders accept when assessing a mortgage application, too. You could work via an umbrella agency, get paid in foreign currency, or want to use the income from a second job to increase your mortgage affordability.
With so many varying factors in getting a mortgage based on salary, it’s important to find experts who can help. Rather than attempting a mortgage application yourself – and risk rejection – call us today. Our dedicated experts have whole-of-market access, meaning they know which providers offer the best deals for your salary circumstances.
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Let’s say you have been in the same job for a few years, have a basic salary and only income tax and national insurance are deducted. In this case, lenders will calculate how much you can borrow based on your salary. Simple.
However, most employees tend to have a bit more complex pay structure.
For example, you may also
- receive allowances, commission, bonus, overtime
- see deductions for pension, student loan, insurance, union fees
Additionally, you may receive income from benefits, maintenance, rented property or some other source. These will all influence how much you can borrow and, dependent on the lender, some elements may or may not be used to calculate the maximum mortgage amount you can borrow.
In short, lenders can potentially lend up to 6 times your income. However, dependent on the details of your income as well as other factors, such as your age and outgoings, you may find that the maximum mortgage based on your salary will be far less than this.
An often-overlooked aspect is that the deductions appearing on your payslips will also influence the mortgage amount you can borrow. (We don’t mean tax and national insurance here.)
The items in question may include pension, student loan, childcare voucher, employee benefits or company share purchase scheme deductions among others. Naturally, all lenders assess these differently too.
Lenders assess your mortgage affordability based on salary and deductions. For this reason, we normally ask for a few months’ payslips to see the different items on them and any variations month-on-month so that we can accurately calculate your maximum borrowing.
From time to time, everything happens at once. You may change jobs just when you find your ideal home. As long as you have a satisfactory work history, even if you’re moving from self-employment to employment, there may be a mortgage option for you.
The good news is that you can get a mortgage even before your new job starts or during your probationary period.
However, lending criteria differ in these cases as well. While some lenders will accept your new job’s income even ahead of your start date. Others would need you to start the new job, while some require that you are out of the probationary period before you can apply for a salary based mortgage.
So yes, you can get a mortgage with a new job and while on probation, but we’ll need to select the lender carefully. Don’t worry, this is exactly what we’re good at.
Clients often ask if it’s enough to have a new job for 3 months in order to get a mortgage.
Let’s go through some scenarios and what lenders usually ask for in each case. If you
- Are taking a new job as a second job, then most lenders ask for 12-24 months history of you working in two jobs. This is because they’d like to see that you can do it long term.
- Are starting your very first job after university, then yes, some lenders will accept it, others would like to see 6-12 months’ work history.
- Have been out of work for some time (typically for a year or more), then lenders would normally like to see you back at work for 6-12 months before accepting your income. Except when returning to work after parental leave, when your new job income may be accepted sooner.
- Have just moved (back) to the UK and started a new job, then some lenders will accept you even during the first 3 months. However, the majority of lenders will want to see 1-3 years UK residency before you apply for a mortgage. By then, you will have had longer employment history anyway.
- Have been self-employed and now you start a new employed job in the same line of work, then you could be accepted even from day 1.
Sometimes people try to take a temporary job to show a certain income in their mortgage application. This would count as mortgage fraud. Instead, there are various mortgage schemes to help people on small income or with limited deposit buy a property.
In short, the answer to “How long do you have to be in a job to get a mortgage?” will depend on your situation and the lender. So give us a call so we can give you an exact answer.
Being a new parent is very exciting, but it also brings new challenges. One of them is managing the family finances.
While the mother (and/or the father) takes parental leave, their income will reduce temporarily. Lenders recognise the transient nature of this period and are normally willing to consider the return to work income.
As income proof, you may need to supply payslips before the maternity leave and a letter from the employer about the expected return date and salary.
However, getting a mortgage while on maternity leave also requires you to consider childcare costs once you return to work. Lenders will normally use this extra cost as part of your affordability assessment to make sure that you budget for both the mortgage and the childcare.
This type of mortgage was more readily available a few years ago, while nowadays only a few lenders consider it. Even those lenders who accept it, do it mostly on an exceptional basis.
As a key worker, you would greatly benefit from a professional mortgage broker’s help in terms of both identifying a suitable lender and arranging the mortgage.
Sometimes housing associations prioritise key workers when allocating properties under the Help to Buy and Shared Ownership schemes.
Some lenders offer deals specifically for certain professions, like doctors or teachers, while members of the armed forces could use the Forces Help to Buy scheme to buy a property.
For further information, get in touch and we can check your eligibility for special schemes and mortgage deals as well as discuss other options for you.
You may have a second job, a fixed-term contract or a zero-hour contract, you may work through an umbrella company or have income paid in a foreign currency.
All these income types can be used in your mortgage application, although subject to lending criteria of each lender. This means that there is no universal rule and each case has to be assessed on its own merit.
As a whole of market broker, we have access to all kinds of lenders, so we’re best placed to find one who can accept your income and give you a suitable mortgage. Get in touch so we look into your options.
As mentioned above, most employees don’t have a straightforward payslip and a single income source. Furthermore, your outgoings, your credit history and the property you’d like to buy can all complicate matters.
With access to over a hundred lenders, we have the tools and experience to identify the suitable ones for you, answer any questions you may have and arrange the best mortgage deal for you.
You can certainly compare deals and read some information online, but whether the cheapest lender will give you the mortgage, if you go direct, will be a matter of luck. Instead, we take luck out of the equation and get you the cheapest deal that you qualify for. After all, this is what we do day-in, day-out.
To find out more and see how we can make a difference, contact our advisors for a free assessment.
If you buy a house, then building insurance will be mandatory to ensure that in case the structure is damaged (e.g. by fire, flood or movement), the insurance will cover at least the mortgage amount.
Nothing else is compulsory, but of course, it makes sense to cover costly unexpected events.
Contents insurance can pay for replacing your personal belongings if someone burgles your home, there is fire, you accidentally drop your new flat screen TV…and the list goes on.
If you’re planning to buy to let purchase then you should consider getting landlord insurance. Landlord insurance protects you as a landlord from risks associated with your rental property. It usually includes buildings and contents insurance, but can also include rental-property specific covers such as protection against loss of rent, and tenant default. It can also cover legal fees and compensation for damage or injury to the tenant due to the property.
Life insurance is a one-off payment if you were to die during the mortgage term, so the insurance can settle your mortgage. This would allow your family to stay in the property without worrying about mortgage payments at an already stressful time.
Critical illness cover
Critical illness cover would give you a lump-sum if you had a serious illness like cancer, heart attack or stroke as well as dozens of other conditions. This payment may or may not settle the mortgage, but it can help pay for treatment, let you take time off work while recovering or alter your home, if necessary.
Income protection is designed to give you a monthly income for some time in case you can’t work due to an accident or a long term illness. This covers mental health issues as well.
As an employee, your policy provider may pay your full or partial salary for some time. However, do check the terms and conditions, as you may revert to statutory sick pay sooner than you think.
Of course, all the insurances come with terms and conditions, optional features and your medical history can influence your options.
To find the right insurance cover that fits within your budget, speak to our team today. We can compare the whole market, find the most suitable cover and apply on your behalf free of charge.
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