Repayments on a £300,000 Mortgage

You’ll likely need an annual income of around £70,000 to be eligible for a £300,000 mortgage (£70,000 x 4.5 = £315,000). This £70,000 can be the total amount of all co-applicants – e.g. you and your partner earn £35,000 per year each and are applying for the mortgage together.

The above example assumes an income multiple of the commonly used 4.5, although some lenders will use higher or lower income multiples depending on your situation and their criteria.

The mortgage term is how long you have to pay back the loan. This is usually calculated in multiples of 5 years, and typical mortgage terms last from 5 years – 40 years.

The mortgage term will only impact the monthly payments on a repayment mortgage, not an interest-only mortgage. This is because the cost of paying back the mortgage (i.e. the repayments) is spread out over the mortgage term with a repayment product, but with an interest-only product, the term doesn’t affect the monthly payments as the loan amount the interest is charged on stays the same until the end of the term.

Therefore, the longer your mortgage term on a repayment mortgage, the less your monthly payments will be. And the shorter your mortgage term on a repayment mortgage, the more your monthly payments will be. However, a longer mortgage term on any mortgage will increase the amount of interest you pay overall, as interest is being charged over a longer period.

You typically pay interest each month on a mortgage, whether it’s repayment or interest-only. The interest is charged on the outstanding loan amount at that time, which is why you often pay more interest on an interest-only mortgage (since the outstanding loan amount doesn’t reduce over the course of the mortgage term).

A lower interest rate essentially means lower monthly payments.

Typically, the more risk you are to the lender, the higher your interest rate. If you’re a low risk borrower, with a large deposit and great credit history, you’ll find that lenders offer more competitive interest rates.

Lenders will often look at your credit score and history when you apply for a mortgage. Your credit history shows how you’ve managed your finances in the past and whether you’ve paid back debts and loans on time. If you have a good credit score, you’re likely to be offered more competitive interest rates. If your credit history shows late payments, defaults, County Court Judgments, bankruptcy, house repossession, or other issues, you’ll likely have to accept a higher interest rate to get a mortgage. Not all credit issues have the same negative impact on your credit profile and the longer ago they occurred, the less impact they’ll have.