£500,000 Mortgages

A six bed detached home in Preston, a maisonette in Brighton or a barn conversion in Lancaster; numerous properties across the UK come with a price tag of around £500,000 but is a mortgage of that amount something you could afford? If so, what would your repayments look like and how good a deal could you get?

This guide will help you answer any questions on £500,000 mortgages including what you’d need to be earning to qualify, where to seek advice and what kinds of rates and terms you could expect.

How much do you need to earn to get a £500,000 mortgage?

It’s the norm for lenders to offer a loan of 4.5 times annual salary. That means the salary needed for a £500,000 mortgage would sit around £110,000. This is a considerable sum but if you’re planning to purchase the property with someone, that figure would factor in both incomes.

It is, however, important to note that lenders assess more than just your earnings when it comes to judging whether or not you can afford a £500,000 mortgage. A low deposit and bad credit history might mean they’d want you to earn more while a large deposit, good credit score and profession in perhaps medicine, dentistry or law could mean a lender is willing to offer 5 or even 6 times a salary.

The below table breaks down what 4.5, 5 and 6 times annual salary could mean for the size of mortgage available to you.

These numbers are only estimates so it’s worth speaking to an expert who can provide a more definitive figure for your specific circumstances.

What mortgage payments to expect

If approved for a £500,000 mortgage, you’d begin paying back the loan on a monthly basis. For one borrower, that monthly amount might look like £1,200 while for another it could be closer to £3,000. That’s because the terms and interest rates available differ depending on the lender you opt to go with and how risky they perceive you to be.

Interest rates

In general, rates are currently (May 2023) anywhere between 4% and 5.5%. Ideally you want to be at the lower end of that range. Putting down a bigger deposit can help encourage a lender to offer that.

Then there’s the choice of a fixed rate or tracker mortgage. In a fixed rate arrangement, the interest rate will remain the same throughout your mortgage term but is likely to be higher than a tracker rate which will fluctuate in line with the Bank of England base rate.

There is also the option of choosing an interest only mortgage which would mean you’d only be paying back the interest each month, saving the paying off of the loan itself for the end of your mortgage term. This would significantly lower your monthly repayments. However, to qualify you’d have to show the lender that you have a viable way of paying off the full £500,000 at the end of the term.

Mortgage terms

When it comes to loan terms, the norm is 25 years but paying a mortgage back over a longer period of time – and therefore reducing the monthly repayments – is becoming increasingly common. For example, HSBC offers mortgages over 35 years and Santander is happy to extend that to 40.

If you’re relatively young, opting for a longer term could be worth exploring but for those a little older, longer terms may be difficult to find. For example, Together will only accept applications prior to an applicant turning 80th and state they may limit the terms.

Both the terms and rates will determine the exact £500,000 monthly amount but to give you an idea of repayments you could expect, factoring in a 10% deposit, see the table below.

Please note that the rates displayed in the table above are purely for example purposes and may not be representative of the mortgage deals currently available or when you apply

Other factors affecting monthly payments

For a lender to determine what terms and rates to offer for a £500,000 mortgage there’s also a range of additional factors. Each lender has their own set of criteria they’ll be working from but, as a general rule for deciphering what they’re willing to lend, they’ll be considering:

• Your income and spending habits: You’ll need to be earning a certain amount each month to viably have between £1,200 and £3,000 for repayments. A lender will also be looking at your employment type and whether it’s dependable while assessing your spending habits to ensure they won’t affect your repayments. If there are any extravagant payments coming out regularly that can be cut back on, it might be good to do so before application time.
• Your credit history: Do you have a bad one? If so, why might that be? Ideally lenders want a good credit history that shows you’re a reliable borrower but of course things can easily impact that. A broker would be able to advise on how to improve your credit if it’s less than ideal or match you with a specialist bad credit mortgage lender if necessary.
• Any debt you have: Having debt doesn’t mean an automatic application rejection but lenders will want to know the type of debt you have and how much it is. Some types of debt such as student loans are viewed as better than say credit card debt. If any debt can be paid off before applying, this could improve your application.
• Deposit amount: Bad credit and debt can sometimes be offset if you have a substantial deposit to put forward. This limits some of the risk and offers lenders some reassurance.

How a broker can help you get approved for a £500,000 mortgage

You may well have done the maths yourself and worked out that a £500,000 mortgage is perfectly feasible but it’s worth getting that peace of mind before you embark on the lengthy process of applying for the mortgage. That’s where a broker can help. With expertise in mortgages of this size, an advisor can:

1. Do an analysis on your financial picture, ensure no factors have been overlooked and share what they believe you could expect a lender to be willing to loan, be it £500,000 or otherwise.
2. Based on that amount, recommend which lenders – including those who only work exclusively with brokers – are likely to give you the most attractive rates and terms for your circumstances.
3. Share advice on any ways you could make your money go further be it by sourcing lenders willing to offer above 4.5 times a salary, assessing whether an interest-only mortgage is an option or advising on any government schemes you might be eligible for.

The deposit required

Most lenders are looking for at least 10% of the property’s value as a deposit. The size of your mortgage is not relevant here as the minimum deposit requirements are based largely on the value of the home you are buying.

If you can increase your deposit up to 25%, the number of lenders willing to loan to you will increase while the monthly repayments would decrease.

If for whatever reason you’re hoping to pay closer to a 5% deposit, then talk to a broker because, while lenders offering such a deal might be rare, they do exist.

Get matched with a broker specialising in £500,000 mortgages

For some, £500,000 is a large amount of money and when your dream home is potentially at stake, it’s worth working with a professional to ensure you’re getting the best mortgage deal possible from a lender that’s right for you.

A broker can calculate with more accuracy how much a £500,000 mortgage would cost in your specific circumstances, whether your salary is enough to make it happen and what your monthly repayments would look like. The brokers we work with have experience in this size of mortgage and can offer bespoke advice as well as application support for your £500,000 mortgage.

Call 0808 189 0463 or fill out an enquiry form for a free, no obligation consultation with a broker we’ve handpicked for you today.