How Much Can I Borrow on a Mortgage?
Updated: 18th February 2020 | Published: 17th May 2019
To calculate how much you can borrow on a mortgage it’s important to understand that there are numerous factors that will affect the calculation.
We have covered them below as in depth as possible to help you estimate the impact they may have on your application.
Use the links to jump below or read from the top for a comprehensive overview:
- Maximum mortgage calculator
- The difference between lenders
- What else changes the amount I can borrow?
- How much you can borrow on secured loans
- How can I improve the size of the mortgage I can afford?
- Speak to an expert
Any online mortgage calculator will only be able to provide a rough estimate as to how much you may be able to borrow.
To obtain an accurate figure, call 0808 189 2301 or make an enquiry. We’ll refer you to one of the expert mortgage brokers we work with. All the experts are whole-of-market brokers with access to all the lenders across the UK, both on and off the high street.
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Maximum mortgage calculator
To calculate how big of a mortgage you can afford to borrow, the mortgage calculator below will take into account your income and outgoings and apply different multiples depending on whether you might qualify for a mainstream or specialist lender.
NOTE: In certain circumstances, specialist lenders can exceed 5x income (if you are a high earner, for instance), as some underwriters have a level of discretion to stretch the affordability model. If you are an individual earning over £50k a year this may be for you.
Get in touch for a quote from one of the expert advisors we work with.
Bear in mind that online calculators like this can only provide a rough illustration and, as described above, every lender calculates things differently. This calculator doesn’t consider credit history or credit score, nor does it distinguish between the different types of income that are acceptable with different lenders, which are all factors affecting maximum mortgage you can borrow.
This calculator is designed to calculate maximum mortgage amounts for first charge residential mortgages.
If you are looking to borrow more money against a property you own already, you may be able to borrow more with a secured loan than a remortgage. For secured loan maximum borrowing, or for an accurate figure make an enquiry for a free, no obligation chat with one of the experts we work with.
Follow the link for a buy-to let-mortgage calculator.
The difference between lenders
Every mortgage lender is different, they all have their own affordability models and policy on who they will lend to, and how much. Many use automated systems that calculate based on a borrower’s credit score, others use a more manual process. The fact is, the same borrower may be able to borrow hugely different amounts depending on which lender they approach.
Traditionally, lenders talked in terms of income multiples and loan to income ratio (LTI), and would tell you what mortgage you could afford based on your salary alone, lending up to a maximum of say 4x income without really factoring in credit commitments or month to month affordability. So, someone earning £20k borrowing £80k would have an LTI of 4x.
Nowadays, especially since since the Mortgage Market Review, we have seen real changes in lender perception of what is deemed affordable and many have completely changed their processes.
Many lenders will look through your bank statements to establish what your regular monthly expenditure is and calculate your net disposable income. They will use this information to equate the maximum loan repayments you could afford.
Other lenders continue to set their policy around income multiples, deducting any monthly commitments from the total.
In any case, lenders and others in the industry continue to describe maximum borrowing in terms of LTI and those using affordability based models will still have lending caps at 4x or 5x income, for example.
There are one or two lenders who may exceed their 5x cap and go up to 6x or 7x income in certain circumstances. For professionals who are due large increases in salary in a relatively short period (doctors/solicitors), for example. Or perhaps those who have a guaranteed lump sum payment due and already have a large deposit ready to put down. However, getting these loans approved is extremely difficult and rare, so don’t get your hopes up too high!
Affordability is far easier to describe in terms of LTI because most mortgage lender affordability models are complex and diverse, so what may be relevant for one borrower will be very different for someone else.
That said, the same borrower on £20k may be lent to a maximum of 3x income with lender A = £60k, 4x with lender B = £80k, and 5x with lender C = £100k. The impact of this is clear, which is why we always recommend you shop around for the best model, or save time and hassle by using a mortgage broker who can do it for you, like those we work with.
The expert brokers we work with are all whole-of-market brokers with the tools, knowledge and experience to know which lender to go to, depending on your own set of circumstances.
Make an enquiry for a free, no obligation chat to see how much you could borrow and find the right mortgage at the best available rate for you.
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What else changes the amount I can borrow?
There are various factors which will impact how much you can borrow and how mortgage lenders will assess your affordability. Lenders will change the way they assess borrowers depending on whether you are:
- A first-time buyer – when it comes to maximum borrowing, some lenders restrict loans more than they would for other borrowers to negate the perceived increased risk lending to people on their first mortgage. However, there are lenders that place no additional restrictions and will still approve loans up to 5x income, as long as you meet all their other criteria.
- A homeowner remortgaging or purchasing – is generally subject to the standard affordability rules already discussed, where lenders will restrict to 4 or 5x income. Affordability tends to be measured the same way whether you’re borrowing for a remortgage or a purchase.
- A homeowner borrowing additional funds on a remortgage are typically considered in the same way, however there are often restrictions placed depending on the purpose of the remortgage. If you are borrowing for debt consolidation, for instance, a lot of lenders will only allow up to 85% loan to value (LTV), whereas one or two lenders will allow up to 90%. The same goes for those borrowing for business purposes or to finance an investment, where some lenders will decline to lend at all. In these circumstances, you may need to find a specialist lender.
- Investing in a buy-to-let property – affordability on buy-to-let property is calculated very differently to mainstream residential borrowing, because it is based on the rental income of the property. Most lenders will apply affordability models that require income to be 125% of the interest-only mortgage payments (if the mortgage was 5% – some use different figures). So if the monthly mortgage is £500 then the rental income needs to be £625.
Most lenders will require you to have a personal income of at least £20-£25k too. However, if you are an experienced landlord, some lenders don’t require an income at all.
First-time buyers without a residential property wanting a buy-to-let will be required to evidence affordability based on their own personal income as if it were a residential mortgage – this is to avoid the issue of someone buying a property to live in that they otherwise can’t afford, by pretending its a buy-to-let.
- Looking for a secured loan – Secured loans are the most flexible type of finance and, in the right circumstances, it’s possible to borrow well over 5x income – often up to 8x or more. Because secured loans are currently unregulated by the FCA, lenders are allowed greater freedom to stretch and exceed what may be deemed affordable by a mainstream regulated first charge mortgage lender.
The size of the mortgage can impact how much lenders will offer. Typically, borrowing will hit a cap with most lenders based on certain thresholds, which are often £500k, £750k, £1 million, £1.5 million, and so on. The FCA has now placed regulation on lenders to have no more than 15% of their new lending over 4.5x income, and so some lenders have taken action to restrict all loans over £500k under this level – watch out for this if you are looking for a large mortgage.
How you earn your income and your income type will play a part in establishing how much you can borrow, as not every lender will take every penny you earn into account. The table below helps explain what lenders will consider depending on the type of income you have:
|Income Type||% Taken into Account|
|Basic Employed Income||100%|
|Allowances (car, shift, London living etc.)||50-100%|
|Income Type||% Taken into Account|
|Salary + dividends||100%|
|Income Type||% Taken into Account|
|Bursary / grant||0-50-100%|
|State benefits (child benefit / tax credit etc.)||50-100%|
|Overseas income (e.g. earned in dollars / euros / yen etc.)||100%|
Credit score and history
Your credit history can have a huge impact on the maximum you can borrow, as it not only affects if the lender will offer you their maximum borrowing, it affects which lenders will consider your application in the first place.
Often adverse credit or a low credit score means that mainstream lenders wouldn’t consider any amount of borrowing. However, there are specialist lenders who are happy to approve mortgages for those who feel like they wouldn’t have a chance.
It really depends on what the issue was and when. The more severe and recent the issue, the higher the likelihood it will impact mortgage affordability and the lenders that will consider you.
Most borrowers are surprised at how flexible the specialist lenders are these days, with people who have been bankrupt now being able to get mortgages up to 95% LTV and, depending on the date of the bankruptcy, can even borrow up to 5x their income.
Typically, specialist lenders will limit borrowing to 4x income, but there are some that will go up to 5x and even 6x in the right circumstances. An experienced whole-of-market broker, like those we work with, should look at all the options for you and establish who the best lender is based on your situation.
Make an enquiry for a free, no obligation chat with one of the advisors we work with.
Generally, the amount of deposit you have makes little difference to how much you can get a mortgage for, as it doesn’t really impact the affordability models (calculations are based on your income and regular monthly expenditure). Of course, it does impact what house you can afford to buy as the more cash you put in on top of your maximum mortgage, the higher the price you can pay!
A higher deposit also makes a difference when you’re looking to build a case for specialist lenders to approve 6-7x income applications (as you’ll have a lower LTV and be a lower risk). More deposit can also go some way to improving credit score – the lower the LTV the better the score, so those individuals who may score lower with a small deposit may find they can actually borrow more if they put more deposit down.
How much you can borrow on secured loans
The maximum figure you can borrow on a main first charge mortgage can be completely different to how much you can borrow on a secured loan. One of the main reasons for this is that, at the time of writing, loans secured on a property are not currently under FCA regulation, so affordability rules are different.
Most secured loan lenders will not factor the main mortgage into the total loan to income (LTI) calculation and most will take just the monthly payment against the net affordability. So if you have a low mortgage payment because it’s interest-only or on a great rate, then you might be surprised at how much extra a secured loan lender will offer when compared to a full remortgage with additional borrowing.
How can I improve the size of the mortgage I can afford?
If you are looking to stretch yourself and borrow the absolute maximum mortgage your income will allow, for your dream home or to repay and settle existing debts, caution needs to be exercised.
Make sure the monthly payments are not only affordable in the present, but also well into the future if and when rates change. Repayments on current record low rates aren’t going to stay low forever, so we urge anyone looking to make the most of their LTI to consider the impact of a rate rise on lifestyle and monthly budgeting.
To ensure you’re offered the most from your income there are some steps to take:
- Improve your score
Sounds simple, and it is! Your credit score has a large part to play. Improving your score can be done by repaying old adverse credit debts, closing old accounts and cards, maintaining payments, repaying current unsecured borrowing etc. Learn how to improve your credit score.
- Increase deposit
The lower the LTV the better your credit score with that lender is likely to be. Often we find that customers applying at 90% (with a 10% deposit amount) are offered 4x income, whereas 85% (with 25% deposit) they are offered 5x income – it is always worth trying to lower the LTV to check the impact.
- Pay off debts
This will increase your credit score as the amount of used credit compared to your available credit will reduce. It will also mean that lenders will view you as having an increased monthly disposable income as you don’t have any other financial commitments and thus you will be more able to afford a larger mortgage.
- Cut down on spending
Lenders who assess bank statements to establish regular spending in order to equate your disposable income are more likely to penalise anyone with regular monthly outgoings toward certain things, especially gambling or other higher risk items. Many lenders actually decline creditworthy customers who have gambling activity on their bank statements because this activity makes it hard to predict the impact on your ability to repay, and they can perceive you to be of increased risk.
- Finalise accounts (self-employed)
If you are applying after the end of a tax year but have not yet finalised that years’ accounts, then do it! If you’ve had a good business year but want to borrow more, you may have to go against what their accountant might suggest and declare fewer expenses. Find more information about getting a mortgage when you’re self-employed.
- Speak to your boss (employed)
If for instance, you are on a temporary contract – ask for a permanent one! Or, if you earn through regular bonuses, allowances or overtime – it might be worth asking your boss if your contract can be changed to add these regular incomes into your basic. Lenders will take 100% of a basic income but some only 50-80% of bonus or overtime (even if confirmed as guaranteed). Asking your employer to include it in your basic salary can make a huge difference to the way your mortgage application will be assessed. And, with a new contract in hand, many lenders will be happy to go on the contract terms without having to wait for your first payslip to come through (some will require new payslips). Often if an employer can confirm it is guaranteed then it is literally just a paper exercise to change it over as they are paying you the same every month anyway.
Speak to an expert
We work with expert mortgage brokers with whole of market access, so they can find mortgages from specialist boutique lenders and get deals you wouldn’t find on the high street.
Make an enquiry or call 0808 189 2301 and we’ll connect you to one of the brokers, ensuring they are experienced in helping customers in similar circumstances. They will help you understand how much you could borrow and ensure you find the right mortgage solution with the best available rate.