With house prices continuing to rise and affordability pressures increasing, a new mortgage trend is gaining traction – 7x income lending.
This borrowing approach allows eligible borrowers to secure a mortgage up to seven times their annual income, opening new doors for homebuyers, but it also raises important questions.
Here’s a detailed look at what 7x income mortgages are and what you need to know.
What is a 7x Income Mortgage?
A 7x income mortgage means that a lender allows you to borrow an amount equal to seven times your gross annual income. For example, if you earn £40,000 per year, you could potentially get a mortgage for £280,000.
This is a significant increase compared to the more traditional borrowing limits of 4 to 5 times income, and it’s designed to help buyers who might otherwise struggle to meet the deposit or loan size requirements in expensive housing markets.
Why Are Lenders Offering Mortgages at 7 Times Income?
Lenders like April Mortgages have introduced this product primarily to address the growing gap between income and property prices. Here’s why:
- Help buyers access larger loans without needing multiple income sources or large deposits.
- Make homeownership more achievable in areas where prices have outpaced wage growth.
- Attract a new market segment that requires more flexible borrowing criteria.
- By offering 7x income mortgages, lenders hope to provide options for borrowers with strong financial profiles but limited ability to save for big deposits.
Who Can Apply for a 7x Income Mortgage?
Not everyone will qualify for these high multiple loans. Usually, lenders look for borrowers who:
- Have stable employment and consistent income streams.
- Maintain a good credit history.
- Can comfortably afford repayments even if interest rates rise.
- Use mortgage brokers who can verify affordability and offer professional guidance.
For example, April Mortgages offers this product exclusively through brokers to ensure applicants get tailored advice and the right fit.
How Do Lenders Assess Affordability at 7x Income?
Lenders don’t simply multiply your salary by seven and approve the loan. They conduct comprehensive affordability checks, including:
- Reviewing your monthly outgoings like bills, debts, and living costs.
- Considering any additional income sources, such as bonuses or rental income.
- Running stress tests to make sure you could handle repayments if interest rates increase.
- Looking at your overall financial health to avoid overextension.
This means even with the option to borrow 7x your income, the final loan amount depends on your specific financial situation.
Are There Risks Associated with 7x Income Mortgages?
Yes, while borrowing more can help you get on the property ladder or buy a better home, it also comes with potential risks:
- Higher monthly repayments can strain your budget.
- Borrowing at high multiples could leave you vulnerable if your financial circumstances change.
- Interest rate increases might make repayments more expensive.
The product is not widely available and often comes with stricter criteria.
It’s crucial to balance the benefits of increased borrowing power with realistic assessments of your long-term financial stability.
How Can You Access a 7x Income Mortgage?
Currently, products like April Mortgages’ 7x lending offer are available exclusively through mortgage brokers. Working with a broker is important because they can:
- Help you understand if borrowing seven times your income is suitable.
- Find lenders who offer these products.
- Guide you through the application process and affordability assessments.
Is a 7x Income Mortgage Right for You?
If you’re exploring options to boost your borrowing power, a 7x income mortgage could be a game-changer but it requires careful thought.
At UK Mortgage Centre, we’re here to help you make informed decisions about your mortgage. Our experts can guide you through the process, ensuring you find the best solution tailored to your needs.
Call us on 01925 573328
Email: hello@ukmc.co.uk
Or book your own appointment to speak with one of our friendly advisers.
Let us assist you in making your next move a smooth and successful one.
Disclaimer
UK Mortgage Centre is a trading style of Refresh Mortgage Network Limited. Refresh Mortgage Network Limited is authorised and regulated by the Financial Conduct Authority. FRN – 826982. Registered in England & Wales: 11614569. As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments. The Financial Conduct Authority does not regulate some forms of buy-to-let mortgages. The Financial Conduct Authority does not regulate will writing and taxation and trust advice.
