Income
Multiples
Income Multiples are nothing more than the lenders way of calculating how
much they are going to lend you. For example, if the lenders criteria is
3 times your yearly income and your earning £20k a year, then £60k
is the maximum they are going to lend you.
Unfortunately the number of times the lender will multiply your weekly or
monthly salary depends on which lender you choose. In addition to this,
remember, if you have regular outgoings such as loans, credit cards or maintainence
the yearly total of the outgoing will be deducted from your income.
Important bits to remember!
Lenders will need proof of earnings, for those of us who are employed,
they need the last three months payslips, P60, last three months bank
statements and sometimes a reference from your employer. For self-employed
they will need certified accounts, bank statements or even the last Inland
Revenue assesment.
Self-Certification.
Some lenders will allow you to certify that you earn enough money to pay
the mortgage. You sign a declaration on the mortgage application form,
that says exactly that. Some lenders will require permission to contact
your employers to establish if you are employed and if your job is reasonably
secure. In addition they will request copies of the last six months bank
statements so that they can see the balance of the account, from month
to month and assess if you can afford the payments. In certain cases a
lender will make no checks at all and will take you at your word. Always
remember we are here to help and guide you through this. If your not sure
or need to talk it over either e-mail or ring us, its our job to help
you in every way we can.
Below is a couple of examples
for you to look at, these show you what we mean, always remember though,
we are here to help, if your not sure email or ring us, we will be pleased
to talk it over with you.
If there is a partner involved in the application the lender will usually
take his or her income into account. The diagram below shows how this
is done by the major lenders.
| If
there is a partner involved in the application the lender
will usually take his or her income into account. The
diagram below shows how this is done by the major lenders. |
|
Income
|
Partner
one |
£15,000 |
X
3 |
= |
£45,000 |
|
Partner
two |
£7,000 |
x1 |
= |
£7,000 |
| |
Amount
for mortgage
|
= |
£52,000 |
|
|
|
>
2.5 times joint income diagram |
|
| If
it is in the interest of the client, some lenders will
use a different calculation, i.e. 2.5 times the joint
income. The diagram illustrates this. |
|
Income
|
|
Partner
one |
= |
£15,000 |
| |
|
Partner
two |
= |
£7,000 |
| |
|
|
= |
£22,000 |
| |
|
Multiply
by 2.5 |
= |
£55,000 |
|
|
|
|
Important!
|
Most
lenders will deduct the yearly payments made for outstanding loans
before applying the income multiples i.e.
2 Loans
Loan 1, £150 per month.
Loan 2, £95 per month.
Total £245
£245
x 12 = £2,940
Income
= £1600
- £2940
= £13060 x income multiple.
*Our quick
calculators do give you a fairly standard indication, but
all enquires will be checked thoroughly if clients require greater
multiples.
|
|
