Multiplier

When a lender assesses you for a mortgage they will typically use a calculation to decide how much they can lend you. This will normally be based on a multiple of your income for example 3.5 x income. So if you earn £20,000 a year you would be able to borrow a maximum amount of £70,000. In recent years with the sharp increase in the price of housing lenders have had to adjust these calculations to keep pace with house prices. This has seen this simple calculation often be used less as lenders switch to using calculations based on a percentage of the customer’s income.

So for example their repayment cannot exceed 40% of their monthly income minus existing financial commitments. The maximum mortgage amount can then be calculated from the payment amount. See also Multiplier.

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