£120,000 Mortgages

Looking to get a £120,000 mortgage but aren’t sure if you can afford the repayments? This guide will tell you everything you need to know about taking out a £120k home loan, what can impact your monthly payments, and how a broker can help secure the borrowing you need.

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How much do you need to earn to get a mortgage of £120,000?

Traditionally, mortgage lenders have tended to use a multiple of an applicants’ annual income – usually between 4-4.5 times – when initially considering how much you can borrow. So, on this basis you’d need to earn at least £30,000.

However, these days the amount you can borrow for a mortgage depends on a whole range of factors, with your personal circumstances scrutinised as well as your income. Lenders will run several affordability checks and will take into account your outgoings too, thereby getting an indication of whether or not you’ll be able to afford the repayments.

Yet your income will still play a big part, and one of the key factors is the income multiple your lender applies.

Will lenders go higher than 4-4.5 times your annual income?

Yes, this is possible. The less risk you pose to the lender – that is, if you’ve got a clean credit history, a high deposit and a standard property type – the higher the income multiple you’re likely to receive.

As mentioned above, the typical income multiple is 4x your salary, though some lenders may increase this to 5 or even 6 times annual income, depending on their criteria and your personal circumstances.

So for example, if the income multiple was 5, you’d only need to earn £24,000 to borrow £120,000 and £20,000 if it was 6 times. To see how this works out, based on your own annual salary, take a look at our mortgage affordability calculator below:

What would the monthly repayments be?

This will largely depend on two key factors – the interest rate and mortgage term, and lenders will calculate the monthly repayments accordingly.

To get a rough idea of the amount you’ll pay based on the interest rate and mortgage term, the table below is full of example calculations…

You can also use our repayment calculator here by inputting different interest rates and terms other than those outlined in the table above:

How a broker can help with a £120,000 mortgage

A broker can be invaluable in your search for a £120k mortgage. They’ll be able to help determine your affordability and will know the lenders to approach based on your unique profile, and use their network of contacts to secure the best rate possible.

It’s the level of support and advice they can give that can make all the difference, too. Not only will they help with every step of the mortgage application – and crucially, they’ll liaise with the lender so you don’t have to – but they also can help you work out the kind of mortgage that would be best for your long-term plans.

Make an enquiry to find out more.

What factors could affect the mortgage repayments?

As the above demonstrates, the question of how much is a £120k mortgage per month depends heavily on the term and interest rate, but there’s a lot more that goes into the calculation besides. Here are some of the key factors that are likely to affect your mortgage repayments explained in more detail.

Interest rate

A higher interest rate means your mortgage will be more expensive, both in terms of the total cost and monthly repayments.

Make sure to bear in mind the importance of initial rates and revert rates, too. The figures in the table above are based on a single interest rate being charged for the life of the mortgage, but if you’ve got a fixed rate deal with an initial term of, say, two years, the rate can ramp up substantially when it reverts to the lender’s standard variable rate thereafter.

This means your repayments will increase accordingly, and is why borrowers often choose to remortgage to another low-rate deal after their initial rates period expires.

Mortgage term

A longer mortgage term means you’ll be paying more in interest over the life of the mortgage and the total cost will therefore be higher, even though you’ll be paying less each month. This is why it’s important to weigh up the pros and cons of each option carefully, and speaking to a broker about how it could impact your long-term finances is always advisable.

Mortgage type

If you’ve got an interest-only mortgage, your repayments will be lower as you’re only paying off the interest each month, leaving the capital untouched, whereas a capital repayment method, whilst higher payments each month, ensures you clear all your mortgage by the end of the term.

So for example, a £120,000 mortgage over 25 years at a rate of 2% would equate to monthly payments of £508.63 for a repayment mortgage, but just £200 per month with interest-only. Yet while a lower repayment undoubtedly sounds appealing, just make sure you’re able to pay off the capital at the end of the mortgage term using an approved repayment vehicle.

Credit score

Your credit score won’t have a direct impact on your monthly repayments, but it will heavily influence the mortgage rate you’re offered, so it makes sense to ensure yours is the best it can be before you apply. Head to our credit score hub to get started.

Deposit

Similar to the above, your deposit won’t directly affect your monthly payments, but can make all the difference to the rate. This is because a higher deposit will lead to a lower loan-to-value (LTV) and therefore a lower mortgage rate, and as we’ve seen, a lower mortgage rate equals lower repayments.

Get matched with a broker experienced in £120k mortgages

Ready to find a £120,000 mortgage? We can set up a free chat between you and an expert broker who will make the process far easier. Just fill in our contact form or call us on 0808 189 0463 and we’ll scour our network of brokers to find the one who perfectly suits your needs. There’s no obligation and no hidden catches, just the chance to find the broker – and ultimately, the mortgage – that’s right for you.