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What to consider when applying for a £400,000 mortgage

4 mins read
by Unbiased Team
Last updated Thursday, April 11, 2024

Learn about securing a £400,000 mortgage and explore the considerations like the income requirements and monthly repayments for prospective homeowners.


  • At a 5% interest rate, a £400,000 mortgage would result in average monthly payments of £1,871 with an 80% loan-to-value ratio over a 25-year term.

  • Opting for a longer-term mortgage may result in lower monthly mortgage repayments but could lead to higher overall interest costs.

  • A minimum deposit of 10% to 20% of the property's purchase price is crucial for securing a £400,000 mortgage.

  • Unbiased can connect you with an experienced mortgage broker for expert advice tailored to your financial needs.

What is the monthly cost of a £400,000 mortgage?

Understanding the cost of a £400,000 mortgage is crucial for prospective homeowners as it involves several key factors.

The £400,000 mortgage represents the initial loan amount borrowed from lenders. 

The average interest rate is currently around 5%, directly impacting monthly payments. The loan term, usually 25 years, plays a significant role in determining overall interest costs. 

A £400,000 repayment mortgage involves capital repayment, where monthly payments consist of both interest and a portion of the principal, gradually reducing the outstanding balance over time.

Lenders calculate monthly payments based on the loan amount, interest rate, and term. 

They also consider the loan-to-value (LTV) ratio, which reflects the proportion of the loan to the property's value. This ratio influences mortgage eligibility and terms. 

For instance, an 80% LTV ratio typically results in more favourable terms, with monthly payments of around £1,871 over a 25-year term.

In contrast, a higher LTV ratio, such as 90%, may lead to higher monthly payments exceeding £2,000 due to increased borrowing costs.

Understanding LTV ratios is crucial for accurately assessing the affordability of monthly mortgage repayments and making informed decisions.

What mortgage are you planning to choose?

There are various ways to structure a £400,000 mortgage, such as an interest-only one or a hybrid option, which can significantly impact monthly mortgage repayments,. 

Understanding the pros and cons of each mortgage type is essential for choosing the most suitable option based on your financial circumstances.

Interest-only mortgage

  • The monthly payments cover only the interest.

  • The principal amount remains unchanged.

  • You have lower initial monthly payments.

Repayment mortgage

  • Your monthly payments cover the interest and principal.

  • Your monthly payments gradually reduce the loan balance.

  • You have higher initial monthly payments.

Part and part mortgage 

  • This mortgage combines interest-only and capital repayment.

  • You have lower initial monthly payments than an interest-only mortgage but higher than a repayment mortgage.

These mortgages offer different payment structures to suit your preferences and financial situation.

How long is the mortgage?

Opting for a longer-term mortgage may result in lower monthly payments but would lead to higher overall interest costs. 

Conversely, shorter-term mortgages typically involve higher monthly payments but allow homeowners to pay off their mortgage sooner and reduce overall interest expenses.

What are the interest rates of your mortgage?

Securing a lower interest rate can lead to more affordable monthly payments and reduced overall borrowing costs. 

Monitoring market trends and exploring different mortgages can help you secure a more favourable interest rate.

What income do you need to get a £400,000 mortgage?

Mortgage income requirements for securing a £400,000 mortgage depend on your income and financial circumstances.

According to Ascot Mortgages, most lenders consider income multiples of 4 to 4.5 times your annual income when determining mortgage affordability.

So, the annual income required for a £400,000 mortgage is around £90,000 to £100,000. 

Some lenders may offer higher income multiples, up to five or six times your annual salary, particularly for certain professions with a high or stable income.

In such cases, an income of £65,000-£70,000 may suffice for a £400,000 mortgage.

The area where the property is located can also influence mortgage eligibility.

Higher property prices in certain areas may mean a higher income to qualify for a £400,000 mortgage.

Conversely, properties in more affordable areas may require a lower income for approval.

How do I get a £400,000 mortgage?

To secure a £400,000 mortgage, having a good deposit is crucial.

Bankrate says most lenders typically require a deposit of 10% to 20% of the property's purchase price.

This means that you will need to have a deposit of between £40,000 and £80,000. You will also need to check your credit report to ensure it’s accurate and address any issues. 

Evaluating your finances, including your income, expenses, debt, and future commitments, is a vital component of the process.

You should research mortgage products from various lenders and check interest rates, terms, and fees.

You will also have to gather the necessary paperwork, including proof of income, bank statements, and ID. 

Do you need advice from a mortgage broker?

Seeking advice from a mortgage broker offers numerous benefits, including access to a wide range of mortgages, personalised guidance throughout the application process, and assistance securing the best deal. 

Mortgage brokers can provide valuable insights and help you navigate complex mortgage terms and conditions effectively.

Seek expert financial advice

Understanding the nuances of the cost of a £400,000 mortgage, income requirements, and monthly mortgage repayments is crucial for prospective homeowners.

By considering factors such as the income required for a mortgage, repayment methods, interest rates, and terms, you can make informed decisions.

Let Unbiased match you with a mortgage broker who can offer expert financial advice and help you explore your options and secure the most suitable mortgage for your needs.

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Unbiased Team
Our team of writers, who have decades of experience writing about personal finance, including investing, retirement and pensions, are here to help you find out what you must know about life’s biggest financial decisions.