Lots of people ask us who the best lender is for a 120k mortgage and how they can boost their application in order to get approved for their rates.
With so many factors affecting your eligibility for a mortgage, this guide explains what lenders will look at when assessing your application as well as how much deposit you’ll need if you want to borrow £120,000.
How much income do I need to get a mortgage for £120,000?
If you’re applying for a mortgage on your own, your income will have to be sufficient enough to pay for:
The mortgage (including the capital and interest payments)
Household bills
Any debts you have including credit cards or car finance payments
Other outgoings such as travel costs or childcare costs
Most lenders will look closely at the above factors to determine your affordability for the mortgage you’re applying for.
Every lender will have different rules about what they deem as affordable but if your chosen lender does calculate that you won’t be able to comfortably afford the repayments, they could reject you.
Is there a minimum income requirement for a mortgage?
Some lenders also have minimum income requirements or minimum taxable income thresholds for self-employed mortgage applicants.
Most but not all, will use income multiples of 4.5 x your annual salary to calculate how much they’ll lend to you. If you wanted to borrow £120,000, that would mean you would need to earn at least £26,666 a year.
What other factors do lenders look at on a mortgage for 120k?
Income isn’t the only factor that a lender will consider when deciding if they can approve a mortgage for £120,000.
Lenders could also look at:
Age - older borrowers can be seen as higher risk and may be given shorter mortgage terms
How long you’ve been in your job for
The type of employment you have i.e. whether you’re in a secure contract or are recently self-employed or on furlough
The hours you work i.e. part time or full time
Your credit history
The amount of debt you have
The cost of your outgoings
The type of property you’re buying - some structures or building materials can be expensive to repair and maintain, so lenders will want to check you can afford them.
Can I get a joint mortgage for £120,000?
A benefit of applying for a joint mortgage, either with a family member, partner or friend, is that both of your incomes can be included on the mortgage application.
Two incomes may be better than one as the risk of you not being able to pay your mortgage could be deemed as less. A combined income can, in some circumstances, allow you to access better interest rates which can make your loan more affordable.
That being said, your ability to access the lowest interest rates depends on a multitude of factors which is why it can be quicker to search the market with the help of a mortgage broker.
How much deposit do I need to buy a £120,000 house?
Lenders all vary but most are currently asking for 15% to 20% of the market value of a property. Although higher deposits can take longer to save, if you’re able to do so, it could help you to again access better rates.
Having a higher deposit means that you borrow less in most circumstances and some lenders prefer this as it means the loan-to-value ratio is lower.
The table below shows the relationship between deposit size and mortgage amount for a property with a market value of £120,000.
Property value | Deposit size as a percentage. | Deposit size in GBP | Mortgage amount | LTV ratio |
£120,000 | 5% | £6,000 | £114,000 | 95% |
£120,000 | 10% | £12,000 | £108,000 | 90% |
£120,000 | 15% | £18,000 | £102,000 | 85% |
£120,000 | 20% | £24,000 | £96,000 | 80% |
£120,000 | 25% | £30,000 | £90,000 | 75% |
Can I get a mortgage for £120,000 with bad credit?
In some circumstances when the borrower has low affordability or bad credit, a lender might decide that it’s too risky to lend a larger proportion of the property value and they could ask for an even higher deposit.
Applicants with severe or recent credit issues such as CCJs or bankruptcy can find it difficult to get a lender to approve their mortgage application if they have small deposits, although that’s not always the case, especially if you know where to look.
A mortgage broker will have access to the UK market and can quickly identify the lenders that are more likely to approve a mortgage for £120k, even in instances of bad credit.
Avoid applying to a mortgage lender without checking your eligibility beforehand though, as getting a mortgage rejection can negatively affect your credit score which is something you’ll want to avoid.
Can I get a BTL mortgage for £120,000?
Buy-to-let lenders will also look at your affordability, credit history, age and property type to determine whether you’re a good borrower and therefore eligible for approval.
Because a BTL property is seen as a riskier financial devour, perhaps because the repayments are often reliant on the borrower finding tenants, lenders can require a higher deposit in comparison to a residential mortgage.
Some lenders can ask for 40% deposits, which means that if the property you wanted to buy was worth £120,000, you could need a £48,000 deposit.
Applicants with a good credit history and high affordability are likely to have a wider range of lenders to choose from, potentially with more desirable deposit requirements.
Contact a mortgage broker about a £120k mortgage
If you’re wondering how to get started, talk to one of our advisors and they can give you practical tips on how you can improve your chances of approval as well as advise you on the most financially viable routes for you based on your situation.
Call us or use our contact form to let us know about your plans to buy a property. Alternatively, use our mortgage calculator for a quick quote and learn more about how much you could borrow.
