5 Times Salary Mortgage: A Comprehensive Guide for Homebuyers

Are you looking to purchase a home but are worried that your current annual salary won’t allow you to do so? A 5 times salary mortgage could be the solution!

The majority of mortgage providers lend up to a maximum income ratio of 4-4.5 times salary. However certain high street lenders do this 5x mortgage deal, this article will show you the benefits, drawbacks and mortgage basics so you can decide with complete confidence.

What is a 5-Times Salary Mortgage?

Quick answer: A 5 times salary mortgage lets you borrow up to five times your gross annual income, for example £250,000 on a £50,000 salary. Fewer lenders offer it than standard 4.5x lending, and approval usually depends on a minimum income level, a sufficient deposit, a clean credit record and an affordability check on the monthly repayments.

This type of loan involves the mortgage lender offering a much larger sum than a traditional mortgage product does. This increases borrowing power – allowing borrowers to purchase more expensive properties. The higher loan amount is predicated on the borrower’s basic salary, which must be able to cover the monthly mortgage payments. Additionally, a mortgage lender will also take into account other factors such as credit history and your credit rating on the credit report .

What Are the Benefits of Taking Out a 5X Income Mortgage?

Taking out a 5x income mortgage can provide you with numerous benefits, especially if you are looking to purchase a more expensive home. The main advantage is that it gives borrowers access to larger loan amounts that may not be available with other types of mortgages. This allows them to purchase with a higher residential property price without having to save for years.

In addition to the higher loan amount, a 5 times salary mortgage is also beneficial due to the shorter period of time it takes to pay off. This type of loan usually has a much lower mortgage interest rate than traditional residential mortgages and can be paid off faster, helping you save money in the long run. Another benefit of this type of loan is that it allows borrowers to purchase more expensive properties with their current salary.

What Are the Drawbacks of Taking Out a 5X Income Mortgage?

Although a 5x salary mortgage can both help you purchase a more expensive home and reduce the amount of time it takes to repay your loan, there are some risks associated with taking out this type of mortgage loan. For instance, if you find yourself in an unstable financial situation then repaying the loan could become difficult.

If you are unable to make your monthly payments, the lender may be able to pursue legal action if they believe you have defaulted on the mortgage. This could lead to the repossession of your property and a bad credit rating.

Furthermore, due to the larger mortgage size, the interest rate attached to a 5x mortgage can be higher than other types of mortgage borrowing.

Additionally, it’s important to make sure that your current financial situation can handle the larger loan amount. Finally, always remember to factor in the mortgage interest rate and other mortgage costs associated in the mortgage budget, such as deposit savings.

Before taking out a 5X salary mortgage, it’s important to do an affordability assessment. Mortgages of this size may be difficult to manage if the borrower’s regular income isn’t adequate or isn’t a steady income that is stable enough to make monthly repayments over the mortgage term. Therefore, it’s important that you consider your current financial situation and assess whether or not taking out a 5 times income mortgage is the right solution for you.

A 5X income mortgage can be a great way to purchase a more expensive home if you’re looking for a larger loan and are confident that your current financial situation can handle it.

How Do Lenders Calculate Your Maximum Mortgage Amount?

You need to determine your gross annual income. This is the amount of money you make before taxes are taken out.

Once you know your gross annual household income, a mortgage provider will typically allow you to borrow up to five times that amount. For example, if your gross annual income is £40,000 then the mortgage borrowing capacity on a 5X income mortgage is £200,000.

If you are interested, you can also read our article on High Multiple Mortgages.

Does the size of my deposit make a difference?

Yes, the size of your deposit can make a difference when taking out a 5X income mortgage. The amount you need to put down as a deposit will depend on the lender, but generally speaking a more substantial deposit will reduce the size of the loan required and may also help secure a better mortgage interest rate. It is important to note that mortgage providers will normally require a minimum 20% deposit for this type of loan program.

A larger deposit will also lead to an increased chance of mortgage approval on your loan application and likely more borrowing potential with a lower borrowing limit.

A larger deposit may also reduce the amount of money you need to borrow. For example, if you have a £25,000 deposit for a property worth £200,000 then the maximum mortgage amount would be £175,000 instead of £200,000.

What is the role of credit score in getting a 5 times salary mortgage?

Firstly, a good credit score is crucial whilst making a loan application, as it shows that you are a responsible borrower who will make regular mortgage payments on time. This can lead to better mortgage rates – a lower interest rate deal on your mortgage. A good credit record can save you thousands in mortgage repayments over the life of the mortgage agreement.

Secondly, a good credit history can also help you qualify for a larger mortgage, as mortgage providers are more likely to trust you as a potential borrower if you have a proven track record of responsible borrowing. Making debt repayments on time will increase your chances of approval in a mortgage application process.

Finally, having a good credit history can also give you more bargaining power when negotiating with lenders, as you can use your good credit score as leverage to negotiate better terms and the lowest rates.

The mortgage lending criteria are based upon multiple things, such as an initial assessment, an in-depth assessment, the lender’s risk appetite, and affordability checks. The mortgage applicants’ level of income and personal circumstances and a wide range of checks will be made. They are more likely to give higher mortgage rates to those who don’t make credit card payments on time and have poor credit scores. This inherits a higher level of risk which is the key aspect of the mortgage lending criteria.

As a rule of thumb, the best way to achieve lower monthly payment charges on a mortgage is to achieve a strong credit rating by paying off your outstanding debt.

Overall, having a good credit card history can be a valuable asset when it comes to securing a better mortgage deal.

5x Salary Mortgage: How Much Could You Borrow?

The table below shows the maximum loan at 4.5, 5 and 5.5 times gross income. These are income multiples only. The figure a lender will actually offer also depends on your outgoings, credit file, deposit and its own affordability model.

Joint applications: most lenders apply the multiple to combined income. Two applicants earning £35,000 and £25,000 have a joint income of £60,000, so 5x would be £300,000, before any reduction for outgoings.

Deposit check: the multiple sets the loan, the deposit sets the price you can pay. A £50,000 earner borrowing £250,000 at 5x would need a deposit of about £27,800 to buy at £277,800 (90% loan to value), or £62,500 to buy at £312,500 (80% loan to value).

Who usually qualifies for 5x income lending?

• Income above a lender threshold: many lenders only offer 5x once gross income passes a set minimum, which differs between lenders and between single and joint applications.
• Professional schemes: some lenders offer higher multiples to qualified professionals, such as doctors, solicitors and accountants, based on future earning potential.
• Lower loan to value: higher multiples are often limited to applicants with a larger deposit than standard lending requires.
• Clean recent credit: missed payments, defaults or CCJs usually rule out the highest multiples.
• Low committed outgoings: car finance, credit card balances, student loan deductions and childcare all reduce the amount a lender will calculate as affordable.
• How your income is paid: basic salary is normally counted in full, while bonus, overtime and commission may be averaged or only partly counted.

Why 5x lending is harder to find

The Bank of England’s Financial Policy Committee restricts the share of new mortgages that lenders can write at 4.5 times income or more. Because that capacity is limited, lenders ration 5x lending to the applicants they see as lowest risk and may withdraw or tighten the criteria at short notice. An independent, FCA-regulated broker can check which lenders currently offer 5x for your income type before an application goes in.

Next Steps

Getting a 5 times salary mortgage is complicated and requires lots of research. To make sure you get the best deal, we recommend finding a qualified mortgage specialist to help guide you through the process. They will be able to provide advice on what type of mortgage is available and which options are right for you.

Related Mortgage Guides

• How many times your salary can you borrow for a mortgage?
• Mortgages at 5.5 times your salary
• 6 times salary mortgages
• How much can a couple borrow for a mortgage?
• Mortgage and property advice hub
• Needing Advice: independent, FCA-regulated mortgage broker

Reviewed by Damian Youell CeMAP, Senior Mortgage Broker at Needing Advice.