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Income multiples
Income multiples could vary from lender to lender and can go up to five times a single income. Normally, lenders will offer loans on an income basis of 3.25 to 4.5 times a single income or between 2.75 to 3.75 times on joint applications.
But some lenders offer over four times a joint income as standard, while some offer higher income multiples, if you are borrowing a lower loan to value or on a higher basic salary. Therefore, if you are trying to maximize your borrowing, it is worth shopping around not only for the product but also for the criteria.
If you have questions about the income figure you should use, it could be simple as this, ie. if you are employed and on a basic salary with little or no bonuses, the answer to this is easy. However, if your salary is made up of a basic salary with bonuses, shift pay, allowances etc., the answer is not so clear cut, unless your income is guaranteed and can be verified by your employer.
Most lenders will only accept 50% unless for any none guaranteed income, if you can provide substantial proof that the income has been paid on a regular basis for a given period of time.
Some lenders accept income from state benefits and pensions, again they may not accept 100%. For those of you that are self employed, the lenders will be looking to use either drawings or net profit figures and not the gross figures.
Lenders will generally annualise the payments made and deduct the outgoings before they apply the income multiple. In the case of credit cards, they will take between 3% and 5% of the outstanding balance as the monthly payment .
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