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If you’re planning to buy a property, one of the first questions you’ll have is how much you can borrow.
While most people are told they can borrow around 4.5 times their annual income, the reality is more complex. That’s where we can help.
How Much Can I Borrow on a Mortgage?
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What Do Mortgage Lenders Look At?
Lenders base their mortgage offers on affordability, which means looking at your income, outgoings, credit commitments, and overall financial health.
Here’s how each factor plays a part:
Income
Your income is the foundation of your borrowing potential.
Most lenders start with a basic calculation using your annual salary, typically offering 4.5 times your income.
Some may go up to 5 or even 6 times if you meet stricter criteria.
For example:
- £30,000 income x 4.5 = £135,000
- £30,000 income x 6 = £180,000
They’ll also consider overtime, bonuses, and any regular allowances. If you’re self employed, lenders will usually look at your average earnings over the last two or three years.
Existing Credit Commitments
Lenders factor in your current debts, such as car finance, personal loans, and credit cards, as these reduce the amount of spare income you have for mortgage repayments.
The higher your monthly outgoings, the lower your borrowing capacity.
Deposit and Loan-to-Value
Your deposit affects both your loan size and your mortgage deal. A larger deposit gives you a lower loan-to-value (LTV) ratio, opening up access to better interest rates and a broader choice of lenders.
If you’re applying for a first time buyer mortgage with just 5 percent deposit, your borrowing limit might be lower due to tighter risk controls. With 10 percent or more, you’ll likely have more flexible options.
Credit Score
A stronger credit score can improve the amount you’re able to borrow. Lenders will look at your credit history to assess how reliable you are at managing money.
Any missed payments, defaults or bad credit will reduce the number of lenders available to you, and in some cases, reduce how much you can borrow.
There are lenders who offer mortgages for bad credit, but they may apply lower income multiples or request a bigger deposit.
Age and Mortgage Term
The length of your mortgage term will also influence borrowing. If you’re younger, you may be able to stretch the term to 30 or even 35 years, keeping monthly payments lower.
If you’re older, especially over 50, the shorter term might reduce your affordability, though there are later life mortgage solutions that could help.
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What Affects the Final Mortgage Amount?
Even once a lender has assessed your income, other parts of the process can impact what you’re finally able to borrow.
Property Valuation
Lenders will carry out a valuation on the property to ensure it’s worth the amount you’re paying. If the property is down-valued, the lender may reduce the mortgage offer or ask for a bigger deposit.
Type of Property
Unusual or non-standard construction types can lead to stricter lending conditions. If the property is hard to sell or maintain, some lenders may offer less or avoid lending altogether.
What If a Bank Says You Can’t Borrow Enough?
Not all lenders are the same. High street banks tend to take a cautious approach, but there are plenty of specialist mortgage lenders who assess cases differently.
As mortgage brokers, we work with these lenders every day and know which ones are more flexible based on your situation.
Mortgage Borrowing Based on Salary
Here’s a general guide to how much you might be able to borrow, depending on your income:
Income vs Potential Borrowing (Based on 4.5x to 6x Salary)
- £25,000 salary: £112,500 to £150,000
- £30,000 salary: £135,000 to £180,000
- £40,000 salary: £180,000 to £240,000
- £50,000 salary: £225,000 to £300,000
- £60,000 salary: £270,000 to £360,000
This could be a joint salary, and actual borrowing will vary depending on all the other factors mentioned above.
How We Can Help
Online mortgage calculators are a useful starting point, but they can’t tell you the full story.
At UK Moneyman, we look at your complete financial picture to give you a realistic view of how much you can borrow.
We’ll match you with the right lender based on your circumstances, whether you’re a first time buyer, home mover or looking to remortgage.
Once you’re ready to start house hunting, we’ll provide you with an agreement in principle to support your offer.
