Depending on which part of the country you live in and the size of your property, you may be looking at taking out a £300,000 mortgage to purchase your new home. But how easy is it to borrow this much, and what steps do you need to take?
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In this article, we look at how the repayments on a £300k mortgage are calculated, how much you need to earn to qualify, and what factors could affect your application.
Click a link below for more information, or read on for a comprehensive overview:
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What are the monthly repayments on a £300k mortgage?
The monthly repayments on a £300,000 mortgage will differ for each customer, so this figure will be calculated based on personal factors, including how much you earn, what job you have, if you have any dependents and your credit rating.
Your repayments will also be calculated based on the interest rate, length of the term, and your repayment type.
See the table below to find out how your monthly repayments could be affected based on the interest rate and term length:
|10 Year Mortgage||£2,628||£2,760||£2,897||£3,037||£3,182|
|15 Year Mortgage||£1,795||£1,931||£2,072||£2,219||£2,372|
|20 Year Mortgage||£1,380||£1,518||£1,664||£1,818||£1,980|
|25 Year Mortgage||£1,131||£1,272||£1,423||£1,584||£1,754|
|30 Year Mortgage||£965||£1,109||£1,265||£1,432||£1,610|
The above is for comparison purposes only. For more accurate rates, speak with a mortgage broker.
How much income do you need to qualify?
Many lenders will determine how much you can borrow using a multiple of your income. They do this in order to see if you can comfortably afford your repayments and other expenses. For example, some lenders may provide loans at 4.5x your annual income, although some will do 5x, and in some circumstances, a handful may consider up to 6x.
So, in order to qualify for a £300k mortgage, you would need to earn around £67,000 a year based on 4.5x your income, £60k on 5x income, and £50k on 6x income. However, some mortgage lenders assess applications on a case-by-case basis on which to make a decision.
Another thing to bear in mind is that while income is important, most lenders will factor in what percentage of your salary is going on other bills. See our section below for more information.
Mortgage lenders will also calculate your affordability by assessing your debt-to-income ratio. To do this, lenders will look at your monthly income minus any outgoings. The lower your DTI the better, as this suggests to lenders that you have more disposable income to put towards mortgage payments.
These expenses may include:
To find out what your debt-to-income ratio is and what mortgage you could get, speak to an expert.
How much deposit do you need?
Your mortgage deposit requirement depends on the prospective property’s price and whether you’re classed as ‘high risk’.
Most mortgage lenders set the maximum loan-to-value (the size of the mortgage in comparison to the property price) to 90%, so you’ll need a 10% deposit, though some accept as little as 5% and other mortgage lenders may require you to put down more if you are looking at a mortgage with bad credit, for example.
You’ll get access to more lenders and better rates if you can put more deposit down, such as 20%. This is to reduce the risk if you default on your mortgage repayments.
If you want to take out a mortgage of £300,000, bear in mind that this is just the loan, not the total value of your property.
You could get a £300,000 mortgage for a house worth £315,000 and put down a 5% deposit of £15,700, whereas a £300k property would require a 5% deposit of £15,000, so you would need a mortgage of £285,000.
Getting a mortgage on a £300k house
This isn’t the same as simply taking out a £300,000 mortgage as you likely won’t need to borrow the full amount of the property you’re buying is on the market for £300k.
The deposit requirements must also be factored in. Since most lenders ask for 10% deposit for a residential property, you would only need to borrow £270,000 from a mortgage lender. It may also be possible to buy a home of this value with a £285,000 mortgage as some providers accept 5% deposit.
How can the term length affect your repayments?
Typically, the longer your repayment term, the less it’ll cost per month, but the more you’ll likely pay back overall. For example, if you take out a £300,000 mortgage over 30 years at a rate of 3.92%, you’d pay £1,418 per month and £510k overall. But a 10-year term would cost £3,026 a month and £363k in total.
What other factors could affect your chances?
Most mortgage lenders will consider your whole application before they decide to lend. While each lender will favour different factors over others, many will look at your age, your monthly expenses, the type of property you want to buy and your income sources. For more information on these factors, see our quick summaries below.
Many lenders set age limits at the point of application, or when the mortgage term ends. Some lenders won’t lend to anyone over 50, others set the cap at 85, while others have no age limits, so long as you can demonstrate how you’ll repay your loan.
As discussed in the debt-to-ration section, your total monthly expenses will also be considered when applying for a mortgage and will be expressed as a percentage.
The type of property
Most mortgage lenders prefer more ‘conventional’ properties as they will be easier to sell on and may have less structural problems in the future. ‘Non-standard’ construction properties they may be wary of include houses with thatched roofs or timer frames, high-rise flats, ex-local authority housing, and flats above shops.
Your income source(s)
Some mortgage lenders prefer applicants with full-time jobs on PAYE salaries. They’ll typically offer less attractive rates to applicants with income sources they deem ‘non-standard’ – for example, if you are self-employed or receive benefits. However, the experts we work with have access to lenders who can accept various income types.
Can you get an interest-only mortgage?
Yes, you can. An interest-only mortgage means that you’ll only have to pay off the interest each month until the end of your term, where you’ll have to pay back the capital, aka the entire loan. While this could be a great way of keeping the costs down, you’ll need to have a solid repayment strategy in place before they’ll agree to lend.
In order to get an interest-only mortgage, you may need to put down a larger deposit of 25% or even 30% to offset any risks.
Can you get a £300k buy-to-let mortgage?
Yes, you can, although the rules around buy-to-let properties are different to residential ones. Mortgage lenders often expect you to meet minimum income requirements and put down a larger deposit of say 25%. And while there are lenders who’ll accept a smaller deposit like 15%, you would need both a suitable property and sufficient rental income that’s at least 125% of your mortgage payments (based on an interest-only repayment type).
Which mortgage calculators can you use?
There are online mortgage calculators you can use on our website. And while calculating your costs ahead of applying for a £300,000 mortgage can help you to avoid nasty surprises (one of those being a possible mortgage rejection), bear in mind that these calculators won’t provide you with an accurate cost, only a rough idea of what you may be eligible for.
For a more accurate calculation on how much a £300,000 mortgage could cost you, speak to a specialist.
Speak to an expert
Getting a 300k mortgage can be easier with the guidance of a mortgage broker, as they can advise you on where to find the best rates. They could possibly save you money by recommending mortgage deals that may be more affordable or suitable for your circumstances.
Although some lenders can have strict criteria that prevent them from lending to certain borrowers, this doesn’t mean that those with specialist circumstances such as bad credit should be put off from applying for a £300,000 mortgage.
The brokers we work with have access to hundreds of lenders across the UK and can work with you to find the lenders who are more likely to accept you. Make an enquiry for a free, no-obligation chat