Updated: May 17, 2022

£40,000 Mortgages

How much will a £40,000 mortgage cost you? We’ll look at what affects repayments, how much you’ll need to earn, and how a broker can help

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: May 17, 2022

If you’re looking for a £40,000 mortgage, it’s helpful to know in advance how much this will cost you each month, and where to find the best deal. In this article, we’ll look at the cost of borrowing £40,000, what factors can affect the repayments, and how much income you’ll need for a loan of this size.

Monthly repayments on a £40,000 mortgage

The length of the mortgage term and interest rates offered generally have the greatest impact on the cost of your mortgage. This table demonstrates how much these factors would affect your monthly repayments on a typical £40,000 repayment mortgage.

Term length 2% Interest 2.5% Interest 3% Interest 4% Interest 5% Interest
10 years £368.70 £377.08 £386.24 £404.98 £424.26
15 years £257.85 £266.72 £276.23 £295.88 £316.32
20 years £202.35 £211.96 £221.84 £242.39 £263.98
25 years £169.54 £179.45 £189.68 £211.13 £233.84

*Please note, interest rates vary from lender to lender and based on your individual circumstances. Typical interest rates at the time of writing are between 2.5% -2.9%*

Use our mortgage repayment calculator to look at other examples using different interest rates and terms than those stated in the table above.

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Mortgage Repayment Calculator

Our mortgage repayment calculator can tell you how much your mortgage will cost you each month and overall. Enter the amount you’re borrowing, the term length and interest rate, and our calculator will do the rest.


Enter the amount you're borrowing
£
2.5% is an average figure but the rate you get may vary
%
25 years is average, but most lenders offer longer and shorter terms
years

Monthly Repayments:

Interest Only:

Total amount paid at end of term:

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There are a number of other factors that can also influence the cost of your monthly repayments:

Deposit

Providing a larger deposit than the minimum requirement – typically around 5% to 10%, depending on the property’s value – is likely to result in lenders offering you a more competitive interest rate.

The amount of deposit can affect your repayments both directly and indirectly. Of course, the more you contribute in the form of a deposit, the less you will need to borrow overall, therefore reducing the amount you’ll need to repay.

Mortgage type

Whilst the vast majority of residential mortgages tend to be repayment, it is possible to secure an interest-only mortgage. These have much lower monthly payments and are far more commonly used to purchase buy-to-let properties. You’ll need a viable repayment vehicle to repay the full loan at the end of the term, with this option.

There are also smaller differences in cost based on whether you choose a fixed-term or variable interest rate deal. Initial fixed-term deals offer lower introductory interest rates for a number of years (usually between 2 and 10), and you can choose to remortgage at the end of each deal to maintain the lowest rates and ensure you don’t revert to the lender’s standard variable rate (SVR), which is typically higher.

Credit status

Most lenders tend to reserve the more competitive interest rates for applicants with strong credit scores, so your credit status can impact your monthly repayments positively or negatively.

It’s, therefore, a good idea to download your credit reports and check your record prior to making an application.

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How much do you need to earn to get a £40,000 mortgage?

Although the majority of mortgage lenders use a multiple of your annual income to determine how much you can borrow – typically, most lenders use between 4 to 4.5 times your annual income – there’s a lot more to their calculations than that simple equation.

However, using this traditional rule of thumb, you would need to earn between £9,000-£10,000.

These days lenders will use a broader perspective, examining each applicant’s financial circumstances when deciding whether to accept and approve your mortgage application.

This table demonstrates how the multiple of your income offered by the lender can impact the size of your loan.

Income X 3 X 4 X 5
£8,000 £24,000 £32,000 £40,000
£9,000 £27,000 £36,000 £45,000
£10,000 £30,000 £40,000 £50,000
£15,000 £45,000 £60,000 £75,000
£20,000 £60,000 £80,000 £100,000

As £40,000 is a relatively small loan for a modern mortgage, the income multiple may be less important than if you were trying to secure a larger loan. If you have a lower income, however, it can be an important factor, and a mortgage broker can help you to find the lender that will offer you the highest multiple available.

If you’re looking for an additional £40,000 to upsize to a larger home, it may be possible to use some of the equity in your current property to remortgage. This could reduce the amount that you need to borrow, or, in the best-case scenario, allow you to upsize without taking on additional borrowing.

Our mortgage affordability calculator will show you what you may be able to borrow, based on your own annual salary:

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Mortgage Affordability Calculator

Our affordability calculator can tell you how much you can potentially borrow from a mortgage lender. Simply enter your total household income below and our calculator will do the rest.

Input full salaries for all applicants
£

You could borrow up to 

Most lenders would consider letting you borrow

This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.

Some lenders would consider letting you borrow

This is based on 5 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.

A minority of lenders would consider letting you borrow

This is based on 6 times your household income, a salary multiple you will struggle to get without a broker. Six-times salary mortgages are usually only available under very specific circumstances.

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How a broker can help

There are hundreds of mortgage products and a vast number of lenders on the market, which can make it almost impossible to know which lender is the most suited to your circumstances.

The good news is, whether you’re looking to maximise the size of loan available for your income, or find the most competitive interest rates for your circumstances, the brokers we work with have access to the full market of lenders, and deals that you won’t find on the high street.

If you’re self-employed, have bad credit, or are concerned about meeting any of the other lender criteria, we can match you with an expert in the specific niche of mortgages that you need. Get in touch and we’ll arrange for an advisor to contact you straight away.

What could affect how much you can borrow?

The following aspects of your personal circumstances are usually assessed against each lender’s criteria, and can therefore affect whether you’ll be offered a £40,000 mortgage or not:

  • Affordability and Income – Lenders will consider your income alongside your existing outgoings to determine your affordability. If some of your income is non-salary based, for example, bonuses or shift allowances, not all lenders will consider it, and some will only consider 50% of the full amount in their calculations.
  • Employment – Lenders are typically looking for stability, and some will therefore assess self-employed income differently, especially if your experience is minimal. Those in professional careers, such as solicitors, sometimes have access to higher income multiples.
  • Age – Most lenders reduce the amount they are willing to lend to older applicants. This can be because they are unable to secure a long mortgage term, and/or due to a decrease in income at retirement.
  • Property type – Some lenders consider non-standard construction properties, such as thatched cottages or listed buildings, to be riskier. They may, therefore, reduce how much you are able to borrow if you are purchasing certain properties.

Speak to a broker who specialises in lower mortgages

Whatever your circumstances, we can match you with an expert broker who will be able to find you the most suitable, and competitive deal on a £40,000 mortgage. All brokers that we work with are selected based on their knowledge and credentials and offer an initial consultation free of charge.

Simply contact us on 0808 189 0463 or via this form and provide us with as many details about your circumstances and home ownership goals as possible. We’ll introduce you to the most suitable expert immediately for a free initial chat, and you’re under absolutely no obligation, so what do you have to lose?

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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