Should I borrow five times my income?

In years gone by, you might have struggled to find a mainstream mortgage lender willing to lend more than three-and-a-half times your income.

If you were part of a couple, you might have pushed it to three-and-a-half times the higher income plus once the second, or three times your joint earnings.

But, with so many lenders now competing for your business, it isn't difficult to find one willing to give you five times your annual earnings (and two or three will even consider giving six).

So whereas before, someone on £30,000 would have been limited to borrowing £105,000, they could now quite easily get £150,000.

But borrowing this much is very expensive.

The monthly payment on a £150,000 repayment mortgage at an interest rate of 6 per cent is more than £966 a month.

That's an awful lot of money to part with out of a take-home income of around £1,900, especially when you have council tax, insurance, utility and food bills to pay.

It's also very risky.

If the interest rate on your loan rose to 6.5 per cent, the monthly payment would increase to £1,013.

At 7 per cent, it would be £1,060; at 8 per cent £1,158, and at 10 per cent it would be £1,363.

You may think mortgage interest rates could never rise that much, and let's hope they don't – but no-one can know for sure.

As anyone who had a mortgage in 1989-90 will tell you, in those days people were paying interest rates of 15 per cent and above.

But even if rates don't rise, what if you lost your job or were too ill to work? How would you manage then?

State mortgage help is very limited – and if you can't keep up the repayments, your mortgage lender can take possession of your home.

To find out more about state help, read What if I get into financial difficulties?

Read enough? Just want a quote? To get your best mortgage quote quickly and easily we can put you in contact with a recommended mortgage adviser. It's free, completely confidential and there's no obligation at all. Simply fill out the form below

Read on about Mortgages for First time Buyers

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Important note about your credit rating

Many websites don't make it clear that filling in their mortgage enquiry form means you might be credit checked.

This can put you at risk.

UK Mortgage lenders may assume an enquiry you have aleady made to another lender means you were turned down - and not that you are in fact carefully shopping around and rejecting the bad deals.

The best way around this significant problem is to ask an independent mortgage adviser to make anonymous enquiries for you.

Without risking your credit score an adviser can find you the best available mortgage deal. They will also know how likely you are to be accepted by the lender if you decide to make a formal application.

If you would like a recommended adviser to check out the best deals for you, anonymously, simply fill in the quick form below.

" Hmm..." You might think; "Won't I be hounded by a salesman hungry for my business? "

This is the most common question we hear from our users.

The answer is no you won't.

Firstly your enquiry is only passed to ONE person on a carefully vetted list of independent advisers.

Secondly, these mortgage advisers are professionals. Even when the market is slow they are busy people. There many people who need to move homes, or get a remortgage and are looking for advice all the time. Regardless of the state of the property market, life goes on.

So the advisers don't have time to hassle people. It just doesn't work like that. No one is gong to be forced into taking out a mortgage unless they really need one.

The advisers are very used to talking with people, perhaps like yourself, who are only "dipping their toes" into the water.

Many people just want an initial quick chat and if they feel comfortable will ask the advisor to contact them again later - often in several weeks or months. As a professional, the adviser will simply diarise this and call back at the appropriate time. There is no obligation at all.

(In the unlikely event that you ever feel at all "hassled" by someone on our list please let us know immediately. We have never heard of this. But if it happened we would definitely want to know).

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Mortgage Guide
Click for Full Contents

First time Buyers Guide
Click for Full Contents

Should I borrow five times my income?

Read on about Mortgages for First time Buyers

Read On / Mortgage Guide

Read On

Important note about your credit rating

Guide to your First Mortgage and Home

Full Mortgage Guide

Mortgage GuideClick for Full Contents

First time Buyers Guide Click for Full Contents

Should I borrow five times my income?

Read on about Mortgages for First time Buyers

Read On / Mortgage Guide

Read On

Important note about your credit rating

Guide to your First Mortgage and Home

Full Mortgage Guide

Mortgage Guide
Click for Full Contents

First time Buyers Guide
Click for Full Contents