Best Buy Mortgages Glossary - Income Multiples
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Income Multiples
Your 'income multiple' is used as a guide to how much a
lender will be prepared to advance you on a mortgage. As a
very rough rule of thumb, the maximum amount you are
normally able to borrow to purchase a property will be three
times your annual salary. Alternatively, it tends to also be
2.5 times your 'joint income' if you are buying with a
partner.
As an individual, this would mean on a salary of £25,000, you
could expect to raise a mortgage of £75,000. As a couple, with
one earning £25,000 and the other £20,000, you would be able
to borrow up to £112,500.
The above is not set in stone. There will be occasions when
you'll be lent more.
The above 'income multiple' rule of thumb may be useful for
the lender as a guide but it will tell you little about how
much you can actually afford to repay. The reason is because
mortgage rates are a key factor in determining the
affordability of houses. The lower the rate the less a given
mortgage is going to cost you but if interest rates rise the
actual cost to you each month will also rise.
See also:
Mortgage Calculators
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