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Maximum Mortgage

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 8th July 2019* | Published: 6th February 2019

How big of a mortgage can I afford?

With the rise of house prices over time, many people approach us wanting to know what the maximum they can borrow is, or some advice on how to increase their maximum mortgage size.

Need a little advice on what kind of mortgage size might be the best for you? Get in touch with some of the expert advisors we work with - they can work with you to find the best mortgage size to suit your circumstances, even if you’ve been declined a mortgage or have bad credit.

Here’s what is covered in this article:

  • How is my affordability calculated?
  • What's the maximum mortgage I can get?
  • How much should I borrow?
  • Maximum mortgage loan calculator

How is my mortgage affordability calculated?

There are four main things that affect how much you can borrow:

#1 Your income

#2 Your outgoings

#3 Your credit history

#4 Your loan to value (i.e. how much of a percentage of the property’s value you want to borrow)

We’re often asked ‘what is the maximum mortgage I can afford?’ - in reality, you and your lender may have different ideas on this figure.

Though the lender is ultimately responsible for determining whether they’ll lend to you or not, it’s your decision about how large you want your mortgage to be, and whether to apply for a mortgage that may stretch your finances or not.

Maximum mortgage borrowing: It’s not how much can you borrow, but how much should you borrow

Before asking yourself ‘how big of a mortgage can I get?’, perhaps consider how much you could really afford without making your life difficult by borrowing too much.

Everyone’s circumstances are different, so there’s no one answer for everyone. If you’d like some guidance, one of the experts we work with can take a look at your unique situation and advise you.

#1 Your income: the ‘mortgage to income ratio’

Your lender will apply a multiple to your annual income in what is called the ‘mortgage to income ratio’. How large that multiple is (i.e. x4.5, instead of x2) is largely determined by how creditworthy your lender sees you.

For example, if you earn £40k a year, and your lender sees you as lower risk, they may offer you a mortgage to income ratio of 4 - which would be a mortgage up to £160k.

Below is an example of how different multiple incomes can affect the maximum mortgage you can get.

Income 3x Income 4x Income 5x Income 6x Income
£35,000 £105,000 £140,000 £175,000 £210,000
£40,000 £120,000 £160,000 £200,000 £240,000
£45,000 £135,000 £180,000 £225,000 £270,000
£50,000 £150,000 £200,000 £250,000 £300,000
£55,000 £165,000 £220,000 £275,000 £330,000
£60,000 £180,000 £240,000 £300,000 £360,000
£65,000 £195,000 £260,000 £325,000 £390,000
£70,000 £210,000 £280,000 £350,000 £420,000

The above is for demonstrative purposes only and you should consult your lender or broker for the most up-to-date information for your circumstances.

Things start to get a little more complex for people who earn money outside of a salary. For example, if you’re self employed, or a significant amount of your earnings are based on bonuses, overtime, or other variable factors - lenders might only offer you a percentage of your total earnings.

For example: say you’ve earned a £30k bonus for the last few years, a lender may only factor £15k of that bonus into their calculations.

#2 Your outgoings: ‘The affordability test’

As well as how much you make, a lender will also look at how much you spend, and your existing financial commitments. This may be more in-depth than you’d think.

They’ll scrutinise your expenses - both discretionary and otherwise, taking into account things such as:

  • Your unsecured debt - such as personal loans and credit card statements
  • Your tax, utilities, insurance etc,
  • Childcare, child maintenance and expenses related to dependents
  • Other costs, such as gym memberships, regular holidays, work travel expenses and so on

They may also ‘stress test’ to see if you could still make your mortgage payments if interest rates rose.

#3 Your Credit Score

Your ‘creditworthiness’ is another big factor in how much a lender may choose to offer you. The better your creditworthiness, the less risk you’ll be seen as - which means larger loan offers at lower interest rates.

Bad credit can be a barrier - though not an insurmountable one. If you’re asking yourself ‘whats the max mortgage I can get with bad credit?’ - take a look at our guide to bad credit mortgages or get in touch with one of the experts we work with.

Things that can negatively affect your credit history include:

  • Bankruptcy
  • Low credit score
  • Late payments
  • Multiple credit problems
  • Missed mortgage payments
  • Defaults
  • CCJ’s
  • IVA’s
  • Payday Loans
  • No credit history
  • Debt management Schemes
  • Repossessions

#4 Your loan to value:

The loan to value (LTV) describes how large your mortgage is, relative to the full property value. So, for example, if you were looking to buy a £200k house and had a £100k deposit, that would be a LTV of 50%.

Here are some examples -

Purchase Price Deposit Mortgage Loan to Value (LTV)
£155,000 £5,000 £150,000 96.70%
£165,000 £15,000 £150,000 90.90%
£175,000 £25,000 £150,000 85.70%
£180,000 £30,000 £150,000 83.30%
£190,000 £40,000 £150,000 78.90%
£200,000 £50,000 £150,000 75%
£225,000 £75,000 £150,000 66.60%
£250,000 £100,000 £150,000 60%
£275,000 £125,000 £150,000 54.50%
£300,000 £150,000 £150,000 50%

The above table is for comparative purposes only. You should talk to your lender or broker for the most up-to-date information for your circumstances.

As a general rule, the lower your LTV - the more likely the lender is to say ‘yes’. Higher LTVs are seen as more risky.

It’s also worth mentioning that most lenders impose LTV limits at certain mortgage sizes. For example, many of them won’t lend above 75-80% at or above £1,000,000 - regardless of other factors.

How much should I borrow? What is the maximum mortgage I can get?

Here at OMA, we’re often asked ‘how big of a mortgage can I afford?’

There’s no right answer for everyone. We don’t give advice, but we can put you in touch with expert advisors who can. If you’re looking for advice on how much to borrow, give us a call and we’ll connect you with someone who can help.

The obvious benefit of the ‘max mortgage loan’ is getting the house that you want, as quickly as possible. But there are a number of downsides too, which we’ve outlined below.

If you borrow the maximum, you might not get a very good interest rate

Bear in mind that the higher the LTV on your loan, the worse the rate you’ll get. You could save many thousands of pounds over time by taking steps to reduce your LTV (by, for example, waiting to raise a larger deposit, or buying a cheaper property).

If you borrow the maximum, you might not have much of a margin of safety if things change

A financial margin of safety will protect your finances and your peace of mind should something unforeseeable happen, such as a rise in interest rates, the loss of a job, or a large unexpected expense.

If you borrow the maximum, you might be able to afford the mortgage, but not much else else

Many people who get the largest mortgage that they can find themselves managing to make the monthly payments - but not much else. Forgoing life’s little luxuries and struggling to pay other bills in a scenario known as becoming ‘house poor’.

How can I get a larger mortgage?

With our (hopefully) familiar caveat that the largest mortgage mortgage possible shouldn’t be taken lightly, there are a number of ways to increase the size of the mortgage you can get

Increase the size of your deposit

Which, all things being equal, will allow you to borrow more at the same LTV.

Increase your credit rating

There are a number of easy ways to improve your credit, such as paying your bills on time, settling your debts, closing unused accounts and being registered on the electoral roll. Consider doing as many of these things as you can to increase your credit score . …

Settle your debts

Lenders will assess how much you already owe in debt before offering you a large debt in the form of a mortgage.

Get a longer loan term

Typical mortgages are for 25 years, but some lenders will go up to 35 years. This’ll ease the burden on your monthly payments but cost you more in the long run - you have to decide if it’s worth it.

Spend less

Remember, lenders also assess your outgoings as part of the ‘affordability calculation’. So if you have expenses that you can cut (such as unused gym memberships or regular holidays), lenders may look more favourably at your application.

Ask for a pay rise

The more you make, the more a lender will offer you - all other things being equal.

Get a guarantor

Certain mortgages allow for this. But remember - your guarantor is legally obliged to make your mortgage payments, in the event that you default, it’s another thing not to be taken lightly.

Buy with others

Whether with a partner, parents or with a group of friends, you increase your purchasing power when you buy with others.

Work with your family

There are ways for your family to help you with your mortgage. For example: offset mortgages allow your family to offset the interest payments on your mortgage. Guarantor schemes allow your family to help you increase your deposit.

Speak to an expert

Some lenders are willing to offer more, or better terms. One of the experts we work with can help to find them.

Maximum mortgage calculator: find out how much you could borrow

If you consider all of the variables involved in mortgage financing, an online max mortgage calculator can only give you a rough idea, or a rule of thumb.

A more accurate way to find out how much you could borrow would be to speak to one of the mortgage experts we work with. They can give you a much more exact calculation, based on your unique circumstances.

Still looking for the maximum mortgage loan? Speak to the experts

If you have any questions or would like to know more about how to get the maximum mortgage, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. - We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 8th July 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.