High-Income Multiples With Bad Credit

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High-Income Multiples With Bad Credit

High-Income Multiples With Bad Credit

Lewis Shaw explains how high income multiples work for a mortgage if you have bad credit.

Can you get a mortgage based on six times your income if you have bad credit?

If you’ve had bad credit in the past, you can get a mortgage for up to six times your income, but it depends on the type of bad credit and whether it’s now repaid.

When you’re stretching your income and affordability and combining that with bad credit, there are fewer options, as you can imagine. Certain lenders will allow an income stretch even with bad credit, but you’re typically going to need a higher gross household income of £60,000 or, in some cases, £75,000.

However, if you have bad credit, it’s still possible to get a mortgage based on six times your income, as long as you fit the lender’s policy.

What are the eligibility criteria for six times income multiple mortgage lenders?

There are generally a few requirements to get a mortgage that’s six times your income. One might be that you need to be a First-Time Buyer.

If you’re not a First-Time Buyer, some lenders will lend up to six times your income, but they’ll generally want a household income in excess of £75,000. They may also require at least a 15% deposit.

In some cases, you can still get a six-times-income mortgage with bad credit. Again, it’s all down to the lender’s policy and whether you’re suitable for that type of mortgage.
Of course, if you’re borrowing that amount of money, your repayments will be higher than if you were borrowing, for example, four times your income. Therefore, we need to make sure it’s affordable and sustainable during the mortgage term.

How much income do I need to qualify for a six times income mortgage with bad credit?

Generally, if you’ve got bad credit and are looking for a high-income multiple mortgage, you will need at least £75,000 in annual household income. That could potentially be between two of you or just one person’s salary.

You’re generally going to need at least a 15% deposit. Also, the type of bad credit should not be too serious – it couldn’t be bankruptcy and repossession. It’s more like County Court Judgements (CCJs) and defaults, to potentially get a mortgage of six times your income with bad credit.

What types of bad credit could make it hard to get a six times income multiple mortgage?

For a higher income multiple mortgage, especially if you’ve got bad credit, generally anything to do with insolvency will rule you out. Bankruptcy, repossession, and individual voluntary arrangements (IVAs) tend to prevent you from getting a higher-income multiple mortgage. Debt management plans will also get you ruled out.

The only types of bad credit allowable in this scenario are CCJs, defaults, unsecured arrears, and missed payments—what we would classify as medium bad credit. If you fit into that category, it should be possible.

How much can I borrow with a six times multiple mortgage if I have bad credit but a high income?

Borrowing will be capped at six times your income. To explain some mortgage jargon, the Loan to Income is effectively the income multiple that sits in the background.

It means the maximum you could borrow would be six times your gross annual income. So if you had £100,000 in income, the maximum you could borrow would potentially be £600,000.

That won’t always be the case if you’ve got children, or current credit commitments like car finance, personal loans or credit card balances. It means that the maximum a lender will consider advancing is six times your gross annual income. You won’t necessarily get six times your income – but they will potentially allow it if they deem that mortgage affordable for you.

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How much deposit will I need for a six times income multiple mortgage if I have bad credit?

If you have bad credit and you’re looking to get a high-income multiple mortgage, you’ll generally need a 15% deposit. The bigger the deposit, the better, but it will need to be 15% as a minimum.

The reason is that if you’re borrowing a significant amount of money, a lender wants to make sure you’ve got enough ‘skin in the game’. If you’ve had bad credit in the past, lenders want to know that if they have to repossess the property, they’re going to get their money back.

That’s why the deposit levels are slightly higher when you’re looking for a high-income multiple mortgage, particularly if you have bad credit. So 15% is a minimum, but the bigger, the better.

What income can you include for a six times income multiple mortgage?

It will include your basic income—your monthly or weekly salary, plus any regular overtime, commissions, or bonuses from your employer.

Bonuses, commissions, or overtime would need to be sustainable and consistent to get a six-times-income multiple mortgage. When I say sustainable, I mean that we need to demonstrate over a period of one to two years that you have regular and consistent money coming in. Therefore, your mortgage should remain affordable throughout the term.

Are there many lenders that offer six times income multiples for people with bad credit?

Yes, there are lenders that offer these types of mortgages. If you have bad credit and want to borrow six times your income, they exist, but there are only a handful.
There is a very small pool of lenders that offer this, and there are additional hurdles to jump through. Lenders do it, but you need to fit their lending policy to be approved.

How do I improve my chances of getting a six times income multiple mortgage with bad credits and a high income?

The right way is to make sure you’re paying down all your debt. That will get you the maximum income multiple, regardless of whether you have bad credit. Generally, you need to be debt-free, and you’re going to need at least a 15% deposit. In some circumstances, you can get away with 10%, but it’s normally 15%.

You’ll need at least £75,000 in income, particularly if you have bad credit, but if you’re a First Time Buyer, that’s not necessarily the case. People without bad credit may not need that level of income.

But if we’re combining six times borrowing with bad credit, the income needs to be £75,000, and you will need a 15% deposit. Ideally, you would also go into that with as little debt as possible.

How can a mortgage broker help? Is there anything else we need to know?

In terms of getting a high-income multiple mortgages of five or six times income, you have to bear in mind that only a few lenders offer this type of mortgage, and most can’t be accessed directly by the consumer. You would ordinarily only get these types of products and mortgages through a broker.

The second is discussing the approach in detail and whether it makes sense. Are you absolutely certain about what you’re getting yourself into? Taking out a mortgage of six times your income is a big debt, and if something goes wrong and one of the incomes vanishes, it can be extremely difficult to keep paying that mortgage.

We’d have a serious conversation to ensure you understood that, and we would help you mitigate the risks. These would include life insurance, income protection, and critical illness coverage. Then, if something did happen to you, there’s something in place to support you. You can get into a pickle very quickly if you borrowed that much, and then all of a sudden, your income stops.

So talk to a broker for access to these lenders and to make certain that you know what you’re getting yourself into.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.