Getting onto the property ladder could become more achievable for some first-time buyers following the introduction of mortgage lending of up to 6.5 times income with as little as a 5% deposit.
It sounds like big news, and for the right applicant, it could be.
However, being allowed to borrow up to 6.5 times your income does not automatically mean that everybody will qualify for that amount. Your income is only one part of a lender’s calculation.
Your committed expenditure, debts, dependants, credit history, mortgage term and the interest rate available to you will all influence how much you can actually borrow.
At Oak Mortgages, we can assess your circumstances and compare options across the market to establish what may be realistically affordable before you begin making offers on properties.
What does borrowing 6.5 times your salary mean?
Mortgage lenders have traditionally used an income multiple as one part of their affordability calculation. Many applicants might be offered somewhere around four to 4.5 times their annual income, although this can be higher or lower depending on the lender and the individual application.
A mortgage at 6.5 times income could potentially look like this:
| Annual income | Potential mortgage at 6.5 times income |
| £30,000 | £195,000 |
| £35,000 | £227,500 |
| £40,000 | £260,000 |
| £50,000 | £325,000 |
| Joint income of £60,000 | £390,000 |
These figures are illustrations, not guaranteed borrowing amounts.
A lender will complete a full affordability assessment and apply its own eligibility rules. It may offer less than the maximum income multiple if you have loans, credit cards, childcare costs or other regular financial commitments.
How could a 5% deposit mortgage work?
A 5% deposit mortgage allows you to borrow up to 95% of the property’s value.
For example:
- Property price: £250,000
- 5% deposit: £12,500
- Mortgage required: £237,500
To borrow £237,500 at 6.5 times income, an applicant would need an income of approximately £36,540.
However, meeting that income calculation alone would not guarantee acceptance. The lender must still be satisfied that the monthly mortgage payment is affordable now and under its affordability stress testing.
You will also need to budget for the other costs of buying a home, which could include solicitor’s fees, a survey, removals, mortgage fees and insurance.
Does 6.5 times income mean I can definitely borrow more?
Not necessarily.
“Up to 6.5 times income” is a maximum, not a standard amount offered to every borrower. The actual amount available will depend on the lender’s criteria and a detailed assessment of your circumstances.
A lender may consider:
- Your basic salary and any overtime, bonus or commission
- Whether you are employed or self-employed
- How long you have been in your current job
- Loans, car finance and credit card balances
- Student loan deductions
- Childcare and maintenance costs
- The number of financially dependent children or adults
- Your regular household expenditure
- Your credit history
- The size of your deposit
- The mortgage term
- The type and value of the property
- The interest rate attached to the mortgage
This is why two people earning exactly the same salary could receive very different borrowing figures.
How does your credit history affect the calculation?
Your credit file can have a significant effect on both the lenders available to you and the interest rate you may be offered.
Someone with a clean credit history may have access to a wider selection of high-street mortgage products. A borrower with missed payments, defaults, County Court Judgments, a Debt Management Plan or other recent credit problems may have fewer options or need to use a specialist lender.
That does not necessarily mean you cannot get a mortgage. It does mean the maximum income multiple, deposit required and interest rate could be different.
For example, a specialist lender may be willing to consider your circumstances but might:
- Offer a lower maximum borrowing amount
- Require a larger deposit
- Charge a higher interest rate
- Ask for more information about previous credit problems
- Assess how recently the issue occurred
- Check whether debts have been settled
- Consider the reason behind the credit difficulty
At Oak Mortgages, we regularly help people whose circumstances do not fit neatly into a standard lender’s criteria. Understanding the complete story behind your credit history can be just as important as looking at the credit score itself.
Is borrowing 6.5 times your salary a good idea?
Being able to borrow more can help bridge the gap between your deposit, income and local house prices. However, the maximum amount a lender is prepared to offer is not always the amount you will feel comfortable repaying.
Before committing, consider:
- How the monthly payment fits your normal household budget
- Whether you could manage the payment if other costs increased
- How secure and predictable your income is
- Whether you plan to have children or make other major life changes
- How long you expect to remain in the property
- The effect of a longer mortgage term
- How your payment could change when an initial fixed rate ends
- Whether you will still have emergency savings after completing
A mortgage should be sustainable as well as achievable.
Our advisers can help you look beyond the maximum borrowing figure and understand what the payments could mean for your monthly budget.
Could I qualify if I am self-employed?
Self-employed first-time buyers may still have mortgage options, but lenders calculate income differently.
Depending on your business structure, a lender might consider your salary and dividends, share of net profit, retained profit or an average taken from your accounts. Some lenders can consider applicants with only one year’s accounts, while others require a longer trading history.
The lender offering the highest income multiple may not necessarily be the lender offering the most suitable calculation for your type of income.
A mortgage broker can compare how different lenders assess your accounts rather than relying on one generic online calculator.
What if I have a 5% deposit and bad credit?
A 5% deposit combined with adverse credit can make the options more limited, particularly if the credit issue is recent or remains unpaid.
However, each lender treats credit problems differently. The outcome could depend on:
- The type of credit issue
- The amount involved
- When it was registered
- When it was satisfied
- Whether it was an isolated event or part of a pattern
- The reason the problem occurred
- How you have managed your finances since
It is sensible to have your circumstances reviewed before making repeated mortgage applications. Multiple applications with unsuitable lenders could create additional credit searches without improving your chances of acceptance.
How can Oak Mortgages help first-time buyers?
Headlines about borrowing 6.5 times your salary can be encouraging, but finding out whether you qualify requires much more than multiplying your income by 6.5.
At Oak Mortgages, we can:
- Assess your income, commitments and deposit
- Review how lenders may view your credit history
- Compare first-time buyer mortgages across the market
- Help with complex or self-employed income
- Consider options if you have defaults, CCJs or previous missed payments
- Calculate the likely monthly repayments
- Help you obtain a Decision in Principle
- Support you from your first enquiry through to completion
Whether you have a straightforward application or a few complications in the background, speaking to an adviser early can help you understand your realistic budget and avoid looking at properties outside your borrowing range.
Find out how much you could borrow
Have you saved a 5% deposit but feel your income may be restricting how much you can borrow?
You may have more options than you realise.
Speak to Oak Mortgages for a personalised first-time buyer affordability assessment. We will look at your income, deposit, commitments and credit history before identifying the lenders whose criteria best match your circumstances.
Contact Oak Mortgages today to arrange your initial consultation.
Frequently asked questions
Can a first-time buyer borrow 6.5 times their salary?
Some lenders may allow eligible first-time buyers to borrow up to 6.5 times their income. This is subject to the lender’s eligibility criteria, affordability assessment and credit checks. Not every applicant will qualify for the maximum amount.
How much can I borrow with a £30,000 salary?
At 6.5 times income, the headline calculation would be £195,000. Your actual borrowing amount could be higher or lower depending on your deposit, credit history, debts, expenditure, mortgage term and the lender selected.
Can I get a mortgage with a 5% deposit?
Yes, a range of 95% loan-to-value mortgages may be available to eligible borrowers. Rates and criteria vary, and having a larger deposit can sometimes provide access to lower interest rates.
Can I borrow 6.5 times my income with bad credit?
It may be more difficult. Lenders offering the highest income multiples will normally apply specific credit and eligibility requirements. If you have adverse credit, a different lender, larger deposit or lower borrowing amount may be necessary.
Does a bigger deposit improve mortgage affordability?
A bigger deposit reduces the amount you need to borrow and may provide access to lower loan-to-value products and more competitive interest rates. This can reduce the monthly payment, although the lender will still assess your income and expenditure.
Do loans and credit cards reduce how much I can borrow?
They can. Lenders normally include monthly repayments and outstanding credit commitments within their affordability calculations. In some circumstances, repaying or reducing debt before applying could improve affordability, but you should take advice before making significant financial decisions.
Can joint applicants borrow 6.5 times their combined income?
Potentially, if they meet the chosen lender’s requirements. The lender will assess both applicants’ incomes, debts, expenditure and credit histories. A credit issue belonging to either applicant could affect the options available.
Should I get a Decision in Principle before viewing properties?
Obtaining a Decision in Principle can give you a clearer indication of potential borrowing and show estate agents that you have started preparing your mortgage application. It is not a mortgage offer or a guarantee of lending.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The information in this article is for general guidance only and does not constitute personalised mortgage advice. Mortgage products, interest rates and lending criteria can change. The amount you can borrow will depend on your individual circumstances and the lender’s affordability assessment.
