Glossary - Income Multiples

Income Multiples is the method for calculating mortgage allotment.
Income multiples are used as a guide by the consumer to find out how much mortgage lenders or brokers are prepared to advance to them on a mortgage. As a rough guide usually the maximum amount available to borrow in order to buy a property is three times your annual salary, or two and a half times the joint income when buying property with a partner.

Example: UK Mortgage

• The first step when purchasing a property is to find out how much you can borrow. A Lender does this by doing some calculations relating to your income.
• The second step is the deposit: nearly all UK mortgage brokers offer mortgages of up to 95% of the value of the property this means that a deposit of 5% of the property price is needed. There are 100% mortgages available if you look for them.
• The third step find a property that you want to purchase whether by using the services of an estate agent or doing it alone.
• The fourth step make an offer for the property using solicitors to act for both parties.
• The fifth step the exchange of contracts for the property the consumer can then become the home owner.

Useful Tip
The income multiple rules can be useful to the customer as a guide but will not tell them how much they can afford to repay. The reason being that the mortgage rates are the key factor when assessing the affordability of the property. If the interest rates are low the less a mortgage is going to cost but if they are high the actual cost every month will be high…
The multiple income rules are not set in stone and there could be times when borrowers find they can borrow more..

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