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How much can I borrow for a mortgage?

How much can I borrow for a mortgage?

Category: Mortgages
Author: Leanne Macardle
Date: 19/12/2018

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

We can all get carried away when looking for our dream home sometimes, but if you want that house search to be realistic, you need to know how much you can borrow in order to fund your purchase. This applies whether you're a first-time buyer, home-mover or second-homeowner. Once you've got an idea of the mortgage you'll be allowed, you can tailor your search accordingly, so just how much can you borrow?

Well, this will depend on four key things, namely your credit score, your income, your outgoings, and the amount of mortgage you want in relation to the property's value (known as the loan-to-value, or LTV). But really, you should be asking "how much of a mortgage can I afford?", which is perhaps a more pressing question for your future finances.

If you've got a rough idea of these things, you can start your search by checking out our mortgage Best Buys, or heading to our mortgage search to get a better idea of the kind of deal you'll be offered. If not, read on!

How much can I afford?

Mortgage affordability is the buzzword of the mortgage market, and with good reason – you need to be able to comfortably afford your mortgage repayments, not just when you first take out the loan, but also should your finances be impacted by unforeseen events in the future (such as an interest rate rise or job loss).

Thanks to tighter lending rules, providers are obliged to carefully check the affordability profiles of all applicants, but you'll want to take a close look at your budget for your own peace of mind as well. A lot of this will depend on your income and outgoings – you can use a mortgage calculator to see what your potential repayments could be, and go from there to see if you need to make any changes to your lifestyle and/or house aspirations.

Points to consider

  • Credit score. Your credit score will have a huge impact, not only on how much you can borrow, but whether or not you'll be accepted for a mortgage in the first place. A poor credit score means it'll be hard to find a lender that will accept your application, and even if they do, they may use a lower income multiple to determine how much you can borrow. Consult a credit check provider before you even start thinking about applying for a mortgage, and if your score needs improving, start taking action.

  • Your income. Your income has a huge impact on how much you can borrow – lenders will apply an income multiple to determine how much they'll lend, typically in the region of 4x your annual income. This means that if you earn £30,000 a year, they may lend you £120,000 for a mortgage (if you're applying as a joint applicant, the income multiple rules may be slightly different; as with anything, criteria change depending on the lender).

  • Your outgoings. Again, this is all to do with affordability – your lender will need to see proof of all your income and outgoings, covering everything from credit card repayments to council tax, child maintenance, insurance payments and utility bills, and will use that information to determine how much extra you can take on in the form of mortgage repayments. They can then adjust their mortgage offering accordingly.

  • Loan-to-value (LTV). LTV refers to how much the mortgage is in relation to the value of the property, so if you've got a £50,000 deposit on a £200,000 mortgage, you'd need a mortgage of £150,000 – 75% of the value of the property, or 75% LTV. Lenders will specify a maximum LTV for each of their mortgage products, but whether or not you'll be able to borrow this amount will depend on the above point. Find out more about LTV here.

There's no easy answer to the question of how much you can borrow for a mortgage – it all comes down to your individual circumstances – but you can get an idea of things (and boost your chances of being able to borrow more) by laying the groundwork.

Start by focusing on your credit score and taking a close look at your budget to make sure you can afford an extra outgoing, and be prepared to put the time in to make changes to either if necessary. Save as much as you can for a deposit, too, and check out the best mortgages available so you have some idea of what to expect.

What next?

Mortgage calculator – how much will your monthly repayments be?

Find a Mortgage with our comprehensive whole of market mortgage search tool.

Check out our mortgage Best Buys

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.