A NUMBER of lenders offer customers the chance to borrow five times their salary to get on to the property ladder, which can be tempting for many first-time buyers.
But the “monster mortgages” are not always a good idea as it means you rack up a lot of debt right from the beginning.
The Sun has searched the market for banks and building societies that offer these kind mortgages, and with the help of data from Moneyfacts, we’ve found nine lenders with mortgages that customers can access directly, meaning you don’t have to go through a broker to get them.
It comes as earlier this year, Clydesdale Building Society Earlier launched a mortgage which allows customers to borrow up to 5.5 times their salary.
Of course, it’s important to keep in mind that not all mortgages are available to first-time buyers and some require really high annual salaries, which makes it unlikely that they’re within reach for those who haven’t yet bought their first home.
It’s also crucial to remember that all banks will take other things into consideration too, and as always, they’ll conduct affordability checks before they approve loans.
Meanwhile, with interest rates on the rise, it’s also important for prospective borrowers to assess any mortgage deal for the length of the loan and not just the initial years, Rachel Springall, a money expert from Moneyfacts, told The Sun.
Which banks lend fives times your salary?
Barclays, Sainsbury’s Bank, Santander, Scottish Widows Bank and Virgin Money all let customers borrow five times their earnings.
As do the smaller Cambridge Building Society, Ipswich Building Society, Teachers Building Society and West Brom Building Society.
Lloyds Banking Group and RBS are the notable big banks that don’t lend up to this amount, according to the data by Moneyfacts.
Teachers Building Society also offers a mortgage with the lowest earnings requirement at £13,000, with education professionals only needing a five per cent deposit.
All other professions can borrow 90 per cent of the total home value – meaning they need a 10 per cent deposit.
But the building society stressed that all cases must meet a background affordability check, as did Santander.
A spokesperson for Santander told us: “When reviewing a mortgage application the biggest factor we consider is whether the mortgage is affordable for the customer.
“This is assessed using a range of factors including the customer’s income, their financial commitments, any future changes in circumstances and what their position would be under potentially higher interest rates.
“We don’t believe it is appropriate to focus on income multipliers as they can give a misleading picture for customers looking to take out a Santander mortgage.”
Yet the fact that such big mortgages are on the increase is not surprising, according to the experts The Sun has spoken to.
Andrew Hagger of Moneycomms, told us: “Banks and building societies are faced with a tricky balancing act – they want to lend to help people buy homes, but because property prices have risen much faster than wages, they are having to push the boundaries.
“Five times salary sounds a bit scary, however the important thing to remember is that the lender must satisfy themselves that the borrower can afford to meet their monthly repayments.
“Lenders will undergo a rigorous review of an applicant’s income and expenditure to ensure they can comfortably afford their mortgage payment each month – an interview for a mortgage can easily take two to three hours.
“The five times salary lending isn’t guaranteed – it will be assessed on a case-by-case basis – the regulator (the Financial Conduct Authority) keeps a close eye on this sort of thing as the last thing it wants is people overcommiting themselves and getting into financial difficulties.”
Ways to boost your chance of getting a mortgage
BY boosting your credit score, you'll give yourself a better chance of getting a mortgage. But there are also many other ways you can improve your chances:
- Build or rebuild your credit score: An easy way to improve it is by getting a credit card and spend on it each month, as it shows lenders you’re capable of paying back what you borrow. Just make sure you repay the debt in full each month, or you’ll be charged hefty interest rates. Credit builder cards are especially aimed at people with no credit or bad credit – but keep in mind their interest rates can be even higher. Find the most suitable card card for you by comparing them on websites such as Money.co.uk, Go Compare as well as uSwitch
- Get on the electoral roll: It’s also easier to get a mortgage if you’re on the electoral roll – you can register on the government’s website here
- Double-check your credit file and that everything’s correct: You can get free copies of your credit file from credit reference agencies Equifax, Experian and TransUnion – check out how here. Once you’ve got it, double-check all the information for errors. You can add a notice of correction to your file explaining why it’s unfair or how the circumstances arose
- Avoid withdrawing cash on a credit card: Withdrawing cash on a credit card is frowned upon as its incredibly expensive and not a good sign – and it’s also specifically noted on your credit file
- Break with past relationships: If you’ve ever had a joint account or any other financial “association” with an ex, their financial history can also impact your own file. To stop this, simply contact the credit referencing agencies and they will make sure the link between the two of you is broken
- Don’t miss payments or pay late: Set up a direct debit to make at least the minimum repayment on credit cards so you’re never late and never miss a month
- Avoid payday loans: Not only are the interest rates sky-high, but some mortgage underwriters (the people who decide if you’ll get a mortgage) simply reject anyone who’s got such a loan is it indicates you’re not the greatest at managing your finances
- Close unused credit cards: If you have lots of unused credit available, this can be seen as a negative, as you could borrow large amounts on a whim without passing a further credit check. Even if you’ve paid an old card off and stopped using it, it’ll still show up as active unless you write to the card company and shut it down. But keep in mind there can also be circumstances (such as shutting a long-standing account with a perfect history) where closing cards could be seen as negative
- Stay out of your overdraft: Try to avoid using your overdraft, as it could be seen as you’re living close to the edge of your finances.In fact, some lenders won’t even tolerate you being in your overdraft at all in the last three months
Meanwhile, Hannah Maundrell, editor-in-chief of Money.co.uk, commented: “Getting on the property ladder can be a real struggle and the only way many first-time buyers can afford it is by borrowing a significant chunk of money and paying it back over 35 to 40 years.
“Borrowing 5 x your income is a huge stretch and it’s understandable why some feel like it’s a big risk.
“Monster mortgages like this almost disappeared after the financial crisis but with longer terms now commonplace and affordability checks more rigorous – the chance of banks allowing people to overextend themselves is lower.”
If you’re considering this type of mortgage, Ms Maundrell said you need to consider the below.
- How much of your monthly income are you happy to commit to a mortgage?
- Are you comfortable with the age you’ll be when you pay off your mortgage?
- If house prices fell due to a disorderly Brexit and you found yourself in negative equity would you be OK to stay put and ride it out?
“If you want to buy a home for the long term, short term bumps in the property market aren’t such an issue, but you might want to think twice if you’re buying a property in the hope to make money on it and sell it on again swiftly,” Ms Maundrell added.
“If house prices take a dip, borrowing such a significant amount which may not give you a return on your investment for a few years could make you feel trapped.
“There are lots of factors to consider when you’re looking at taking out a mortgage, especially if you’re needing to borrow big.
“If you’re not sure what’s right for you getting some proper independent financial advice before you sign on the dotted line is a must.”
More on mortgages
Last month, The Sun wrote about a new loan that gets cheaper as you pay it off and your credit score improves.
And earlier this summer, a simple “30 per cent rule” that could help your credit score was revealed.
Meanwhile, one in six families who applied for a mortgage in the last 10 years say they have been offered a smaller loan or were even rejected because of their childcare costs.
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https://textbacklinkexchanges.com/the-banks-that-let-you-borrow-five-times-your-income-and-how-much-you-need-to-earn/
News Pictures The banks that let you borrow five times your income – and how much you need to earn
You don’t have to pack away your bikini just because you’re the wrong side of 20. These body-beautiful stars reveal their secrets to staying in shape and prove you can smoulder in a two-piece, whatever your age. Read on and be bikini inspired!
TEENS
Hayden Panettiere
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To achieve her kick-ass figure, Hayden – who plays cheerleader Claire Bennet in Heroes – follows the ‘quartering’ rule. She eats only a quarter of the food on her plate, then waits 20 minutes before deciding whether she needs to eat again.
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Nicollette says: “I don’t like diets – I see it, I eat it! I believe in eating healthily with lots of protein, vegetables and carbs to give you energy.”
kim cattrall
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SATC star Kim swears by gym sessions with Russian kettle bells (traditional cast-iron weights) and the South Beach Diet to give her the body she wants. To avoid overeating, Kim has a radical diet trick – squirting lemon juice on her leftovers – so she won’t carry on picking.
Kim says: “I am no super-thin Hollywood actress. I am built for men who like women to look like women.”
https://www.thesun.co.uk/wp-content/uploads/2018/12/NINTCHDBPICT000374564650.jpg?strip=all&w=960
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