Earning a salary of £20,000 a year is a decent income, and it's certainly possible to get a mortgage with this salary. Yes, if you are looking for properties worth £80,000 with a 10% deposit, there will be many lenders who would give you a mortgage of £72,000. The standard is usually around 5 times your annual salary. According to the latest mortgage statistics, you'll typically need at least 5% of the home's value as a deposit to get a mortgage. Therefore, to buy an average house in the United Kingdom that costs £250,000, you normally need a deposit of at least £12,500 to borrow the £237,500 needed to buy the house.
On the other hand, if you could deposit a 10% deposit, you might only need to earn £30,000, or if you had a 20% deposit, you would need a smaller mortgage of £120,000 and, therefore, a lower salary of around £27,000. If you earn £250,000 or more annually, the same multiples will apply. So simply multiply your salary by 4, 4.5 or 6 to find out what type of mortgage you can borrow with your income. This is where a mortgage broker can help: they'll know which lenders are most likely to accept overtime as part of their income calculations. The loan-to-value (LTV) of your mortgage means how much the mortgage is relative to the value of the property. The loan-to-value ratio is the size of your mortgage deposit compared to the value of the property you're buying. Based solely on your income, then yes, you could buy a house earning £40,000 a year and they could offer you a mortgage of up to £180,000.
However, to find lenders willing to lend at such high levels, you may need the help of a specialized mortgage broker. They have deep working relationships with lenders who don't have minimum mortgage amounts, meaning that your chances of finding the right mortgage provider the first time will increase. It's also worth noting that this mortgage would amount to an LTV ratio of 88.9% in this scenario. This means that mortgage offers for first-time buyers would be their best option. With many people in need of help and few mortgage loan providers, it pays off to go the extra mile to find mortgages for people who were considered lost causes by many others. However, this amount isn't representative of everyone.
Even with a lower income, you may be able to get a mortgage. So if you want to get the most out of your pension or get a new mortgage agreement, it's worth exploring all your options.