Repayments on a £300,000 Mortgage

You’ll likely need an annual income of around £70,000 to be eligible for a £300,000 mortgage (£70,000 x 4.5 = £315,000). This £70,000 can be the total amount of all co-applicants – e.g. you and your partner earn £35,000 per year each and are applying for the mortgage together.

The above example assumes an income multiple of the commonly used 4.5, although some lenders will use higher or lower income multiples depending on your situation and their criteria.

Most lenders will want a deposit of at least 5% - 10% of the property purchase price.

• For a mortgage on a £300,000 house, this would work out at £15,000 - £30,000
• For a mortgage of around £300,000 on a house worth £330,000, you would need about £16,500 - £33,000 in deposit

You might find that some lenders might request a higher deposit, depending on your circumstances, your credit score or the property.

The lender will look at your monthly outgoings to consider how much left over income you have left each month to comfortably go towards mortgage payments. This will then help them figure out how close to your maximum borrowing you can borrow and over what kind of term you can afford to pay back the mortgage.

The house mortgage deposit is paid at exchange of contracts and is a percentage of the property purchase price. The minimum amount required for a mortgage deposit is 5% - 10%.

Paying a larger deposit can lower your monthly interest payments and capital repayments on a £300,000 mortgage.

Firstly, providing more in deposit can be a way to borrow less on your mortgage, ultimately reducing the amount you’ll have to pay back and the total interest charged.

Secondly, a larger deposit can lower your LTV (loan-to-value) whether you choose to borrow less or simply use that extra deposit towards a more expensive property. A lower LTV will give you access to better rates which will again reduce the amount of interest charged.

You typically pay interest each month on a mortgage, whether it’s repayment or interest-only. The interest is charged on the outstanding loan amount at that time, which is why you often pay more interest on an interest-only mortgage (since the outstanding loan amount doesn’t reduce over the course of the mortgage term).

A lower interest rate essentially means lower monthly payments.

Typically, the more risk you are to the lender, the higher your interest rate. If you're a low risk borrower, with a large deposit and great credit history, you'll find that lenders offer more competitive interest rates.

Fixed and Variable Interest Rates

Another thing to consider with interest rates is whether to opt for a fixed or variable rate, such as a tracker.

When you take out a mortgage, you’ll be offered an introductory rate for a period of time such as 2 or 5 years. This will usually be a fixed or tracker rate. After your introductory rate period ends, you’ll be transferred onto your lender’s more expensive SVR (standard variable rate) for the remainder of the mortgage term unless you choose to remortgage onto a better deal.

A fixed interest rate stays the same while a tracker rate moves in line with the Bank of England Base Rate. So, how does this impact your monthly payments? Well with a fixed rate, your monthly payments will stay the same, while with a tracker rate, your monthly payments will fluctuate slightly. What works out better (and cheaper) for you will depend on your situation, the lender’s available to you and market conditions.

How Your Credit Score Affects Your Interest Rate

Lenders will often look at your credit score and history when you apply for a mortgage. Your credit history shows how you’ve managed your finances in the past and whether you’ve paid back debts and loans on time. If you have a good credit score, you're likely to be offered more competitive interest rates. If your credit history shows late payments, defaults, County Court Judgments, bankruptcy, house repossession, or other issues, you’ll likely have to accept a higher interest rate to get a mortgage. Not all credit issues have the same negative impact on your credit profile and the longer ago they occurred, the less impact they’ll have.

To calculate what your monthly mortgage payments could be before settling on a property or amount you want to borrow, you can use a few different tools such as best buys and calculators.

£300,000 Mortgage Calculators and Best Buys

First, compare £300,000 mortgage deals with our best buys tool. This will give you an idea of the kinds of rate to expect.

Second, use our mortgage repayment calculator to work out how much you could be paying each month and what impact the different term lengths and interest rates could have.

For a quick estimate of the potential monthly cost of a £300,000 mortgage set up on a repayment basis, see the table below.

If you're looking for an interest-only mortgage, your monthly payments will be lower than those on a repayment mortgage. But, bear in mind you’ll have to repay the outstanding loan amount at the end of the mortgage term via a suitable repayment vehicle approved by the lender. Again, as you make no monthly repayments, the mortgage term does not impact what you pay each month.

See our table below for an idea of the interest-only payments on a £300,000 mortgage.

Again, on a flexible interest rate, this would change during the course of your mortgage. You might also be offered a very different interest rate than those listed above.

You would also pay more in interest overall than on a repayment mortgage.

Independent mortgage brokers like John Charcol can often help reduce your monthly payments by offering advice and ultimately getting you a better deal on your mortgage without you having to shop around for different lenders and rates, including if you have complex circumstances such as alternative income sources, bad credit issues, you’re looking to buy a non-standard construction property and more.

We also have access to a much larger pool of mortgage lenders which means possible access to more flexible criteria, lower rates and extras such as overpayment facilities, offset savings accounts and more.

Secure your £300,000 mortgage by getting in touch today and calling us on 0330 433 2927.