An Income Multiplier is the number by which a mortgage lender will multiply your sole or joint incomes when calculating the maximum amount they are prepared to lend to you.
This multiplier will vary from lender to lender and the figure calculated is subject to adjustment for other factors including the makeup of your income (e.g. how much of your gross income before tax is made up from overtime or discretionary bonuses, etc).
For example, a mortgage lender might usually offer borrowers either 4 x the borrower’s primary salary or 3.5 x the borrower’s joint salaries (in the case of a joint application where both parties have income). These multipliers vary from lender to lender and depend upon personal circumstances.
In addition to the multiplier, other factors that lenders will set and which should be considered by borrowers when considering which lender is most likely to make the offer of a loan include; Type of work, whether full time or part time, other monthly expenses and disposable income, the interest rate and the deposit required.
One lender might be happy with a 5% cash deposit, others might require 30% deposit. In most cases, the larger the deposit the better the terms on offer from a lender.
However, more and more lenders are moving away from this way of calculating applicant’s maximum borrowing and applying a set of affordability rules. This involves taking into account other day to day expenditure and credit commitments. Two applicants on identical salaries can end up with very difference borrowing amounts!
For more details on how much you can expect to be able to borrow and what this will cost you every month contact our mortgage advisers on 01928 507477.
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