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500K Mortgage

Want to find out how you can get a 500K mortgage in the UK? Then, read our short guide on the topic and get ahead of the crowd.
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A £500K mortgage is a large loan amount, but it certainly isn’t impossible to get one either.

If you’re looking for a high-value property in a prime location, such as London, then this is an amount you might need to attain. As with other mortgages, a 500K mortgage also comes with its own set of requirements.

Today, we will examine those requirements and other factors to consider when taking out a mortgage like this.

Scoping Out A Repayment Strategy

When taking out a mortgage, the first thing you need to pay attention to is the repayment strategy and calculate the monthly repayment amounts. This will help you analyse your situation better and take steps accordingly. 

In general, the monthly repayment amount will depend upon the interest rate, the length of the term, the deposit you’ve made, and the type of mortgage so either capital repayment or interest only.

On a capital repayment basis, a longer-term will mean smaller monthly payments but greater interest payments overall. Of course, higher interest rates will mean higher payments, both monthly and overall.

Related: Million Pound Mortgage

£500K Mortgage Cost Per Month

For a 500K mortgage, at a typical term of 25 years at 5% interest, your monthly payments will be somewhere around £2900. This means you’ll effectively be paying over £370,000 in interest.

To get such a high mortgage amount, you’ll naturally need to be a high-salaried individual or potentially a business owner with a successful business and high levels of profit & dividends.

Most lenders usually lend around 4.5-5 times your annual income, though some may be willing to offer amounts up to 6 times your annual income. This is of course individualised to your personal circumstances. 

Considering the 4-4.5 times bracket, for a 500K mortgage, you’ll need to have an annual income of about £125,000. This is a sizeable salary, way above the current UK average annual salary of £35,404.

One way to avoid this is to take a joint mortgage with your partner, in which case both your incomes will be considered for the calculation. Also, certain professionals, such as doctors and lawyers who have a more arguably stable income, may find it easier get large mortgage products.

In such a scenario, it’s best to consult with us here at Lendingline, where our experts can guide you with the most suitable advice. To see if you can afford such a large loan, use our mortgage affordability calculator and check it out as a rough guide.

Deposit Amount For A £500,000 Mortgage

Right now, the minimum deposit amount for residential mortgages is between 5% and 10% of the property value, not the loan amount. So, for a property worth £500,000, you’d need to make a deposit of around £25,000 to £50,000. 

The associated mortgage amount would be somewhere between £475,000 to £450,000. In rare cases, you might be able to bag the amount without a deposit, but that’s extremely unlikely.

If you have a poor credit history or are looking to buy a non-standard construction property, the deposit amounts may go higher, up to around 25%. For buy-to-let mortgages, the deposit amount is usually 25% with 20% as a realistic minimum. 

Please note that the higher the deposit, the more likely you’ll get lower interest rates. This is because you’ll have a low loan-to-value (LTV) ratio. 

£500K Mortgage Application

Once you’ve gathered the above details, it’s time to file your mortgage application. For this step, it’s best to work with a professional mortgage broker who can guide you. This will improve your chances of getting the mortgage approved.

Not only can a broker help you with the paperwork and determine the deposit required, but they’ll also help you optimise your credit reports so that any outdated or incorrect information is removed. Outdated credit information can work against your application, so this step is required. 

They’ll also help you organise your personal documents, proof of income and residence, the latest P60 form if required, and any other requirements. They can even help you calculate the amount you can borrow and let you compare rates across lenders to get the best deal.

If you’re applying for a mortgage for the first time, it can be a tough process. A mortgage broker can help you decide what is right and wrong and how to best safeguard your interests.

Related: How to get 700000 Pound Mortgage

Frequently Asked Questions (FAQs)

1. What are the usual mortgage charges associated with a £500K mortgage?

Some of the additional costs associated with 500K mortgages are:

  • Arrangement fees, which can vary across lenders. 
  • Valuation fees between £250-£1,500
  • Early payment charges, if you’re trying to pre-pay the loan amount after completion. 
  • Legal fees
  • Stamp duty, which is the tax levied on property purchases

You might also have to consider other costs, such as property insurance and life insurance, to cover the mortgage amount and fees charged by the broker. 

I am a CeMAP (Certificate in Mortgage Advice and Practice) qualified mortgage adviser with a proven track record of successfully helping my clients achieve their property goals within the whole of the market. I personally specialise with clients who have a bad credit history (Defaults, CCJs, IVA etc), self-employed, first-time buyers & Buy To Lets.

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