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An Income Multiplier (or Income Multiple) is the yardstick by which some mortgage lenders gauge the maximum level of borrowing they are generally prepared to advance to a borrower.
So here we take an in-depth look at Income Multipliers and how they relate to mortgage borrowing as well as provide details as to how we can help arrange a mortgage or remortgage.
Table of Contents:
So as we've established an Income Multiplier (or Income Multiple) is the benchmark that mortgage lenders often use to calculate the maximum level of borrowings they are generally prepared to advance to a borrower.
In recent years, income multipliers have been greatly extended to as much as 5 times (or 5x) income, 4x joint income, or even more. Infact, there are currently products in the market place that permit borrowings of up to 6x and now even 7x a borrowers income.
Well, put simply, you should only ever borrow what you can comfortably afford! To do otherwise would be sheer folly!
Historically, income multipliers were first operated in the 1960's when the UK mortgage market was predominantly served by over 400 Building Societies. Mortgage funds were very tightly controlled by the societies, which operated income multiples of 2.5x basic income and disallowed overtime and bonus payments. Event at these low levels, mortgage rationing and mortgage queues were not uncommon.
Almost half a century on, the building society movement has lost considerable ground to fierce competition from banks, centralised lenders, and other specialist mortgage financial institutions, who have flooded the market place with literally thousands of mortgage products, thereby providing a terrific choice for the borrower.
No longer does the customer have to save a 10% deposit to make the initial qualification, and be offered meagre ultra-conservative and restricted funds. No, the modern day borrower has a massive choice with generous, but sophisticatedly controlled maximum advances.
The tired old 2.5 times income-alone products have long since gone, to be replaced with a refreshing variety of lending parameters to suit the twenty-first century!
Just take a look at some of the features that Shire Direct will take into account when we are assessing your maximum borrowings:
Shire Direct is at the forefront of providing sensible and affordable mortgage solutions for individuals, and although many lenders still express their lending criteria on income multipliers, as we've already discussed, lenders nowadays take a much more adventurous stance on their affordability calculations, and the marketplace now sports mortgage products that have multipliers of an equivalent of 7x available income - or even more!
But, don't be fooled! An income multiplier as high as 7x, is not available as standard! The higher income multiples usually stem from a secondary income calculation based on a "gross debt to income" ratio, and this tends to favour those on higher pay.
Nowadays, lenders have a variety of sophisticated methods to check that the mortgage payments should be affordable to the borrower. As we've discussed, some affordability checks now sensibly check total monthly commitments against total income, generally to a maximum of 50%.
So, for example, if you had a joint monthly gross income of say £4400.00; on this basis, the lender may allow 50% to cover all financial commitments, including the new mortgage. Thus in this case, the lender would allow £2,200 (50% x £4400) to cover your monthly financial commitments of up to £2200.00.
Thankfully, the answer is usually yes we can!
Here at Shire Direct, we realise that many traditional lenders will not be interested in providing mortgage funds if you earn your income from self-employment, but don't have three-years audited accounts. Not so at Shire Direct!
We understand that accounts may not be reflective of your current income. Let's face it, you pay your accountant to devise financial statements in order to mitigate your tax position, and of course the balance sheet and profit and loss accounts are merely snapshots of a historic financial position on one particular day, often up to two years ago!
That's why we have developed a range of mortgage products within our portfolio of lenders who will consider self-certification of income. By doing so, you are more accurately able to state your current available income, from which affordability of your mortgage repayments, and other commitments can be better gauged.
Yes, we certainly can!
Firstly, we all have to acknowledge that arranging a mortgage is probably the largest personal financial transaction you will ever enter into. Accordingly, the affordability of your mortgage repayments is one of the most crucial aspects that must be taken into account.
As professional mortgage intermediaries, the first thing our qualified mortgage advisors will do is carefully assess your circumstances, needs and aspirations. At Shire Direct advice and service are paramount! We'll discuss the options available to you, and then provide you with a rapid in-principle decision on the most appropriate and affordable solution.
So, if you need to explore the amount you may be able to borrow, we would naturally be delighted to discuss your requirements with you. Our Freephone telephone number 08000 282 281 is open until 10 o'clock at night every day (including weekends) and you can also enquire online. We'll assure you of a friendly and unstuffy service whatever your requirements.
Hopefully, we've managed to shed some light on Income Multipliers for you and how income multiples relate to mortgage borrowing. There is lots more useful help and information available throughout our site, and if you do feel we can be of assistance with a mortgage or remortgage, please get in touch, we'd love to hear from you!
The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.
There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.
THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Adding existing debt to your mortgage will increase the repayment term and overall cost.
Are you worried and becoming stressed because you are having problems getting a mortgage or remortgage? Worry and stress no more! Here at Shire Direct we provide tailor made mortgage solutions to suit you, and can usually help with all kinds of circumstances including...
Remember, we're here to help, and would love to hear from you!
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Shire Direct and Shire Direct Mortgages are trading styles of Shire Processing Centre Limited which is
Authorised and regulated by the Financial Services Authority in respect of regulated mortgage products and general insurances.
Registered No: 302389. Commercial funding and Secured Loans are not regulated by the FSA.
Licensed Credit Brokers. Consumer Credit Licence Number: 349999.
Shire Processing Centre Limited is registered under the provisions of the Data Protection Act by the Information Commissioners Office: Registration No: Z6795249. Registered in England & Wales. Company number: 2732202. Telephone calls may be recorded for training, monitoring and security purposes. All applicants must be aged 18-years or over.
