How much can I borrow?

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How to work out how much you can afford to borrow for a mortgage

We hear this question a lot: 'How much can I borrow?' If you are hoping to get a mortgage to buy a home, various factors go into how lenders work out how much you could borrow, for example, each applicant's income, deposit amount, and credit score.

What mortgage can I get with my salary?

Your salary will have a large impact on the amount of money you’ll be able to borrow for a mortgage. Generally speaking, banks and building societies can offer four to five times the annual income of the applicant(s).

If you’re buying alone, for example, and earn £30k per year, you could be offered up to £150k.

How many people will be paying into the mortgage? A second applicant—whether a partner, family member, or friend—will increase the annual income of the household.

However, there are some exceptions to this. For example, some banks offer more to borrowers who have high earnings or can put down a larger deposit. If you fit into desirable categories, then you may be able to borrow up to six times your annual income.

Other things that impact the mortgage multiples

Along with your salary and property value, lenders will also consider the following:

Monthly Outgoings

As well as exploring each applicant's income, lenders will conduct an affordability assessment to find out more about your monthly outgoings and financial situation. You may need to answer some questions about regular utility bills, transport costs, debt repayments, outstanding loans, and how much money you spend on leisure activities.

You may also need to provide access to payslips and bank statements to support your application.

Interest Rates

Interest rates also play a big role when it comes to how much money you might be able to borrow and what your mortgage payments will be. In the majority of cases, lenders conduct a ‘stress test’ on a proposed repayment plan to ensure that you are earning enough to withstand a rise in interest rates of at least 3%.

If you get a fixed-rate mortgage, then interest rates will not rise until your fixed-rate period ends, preventing any increases to your monthly payments throughout that mortgage term.

However, if you have a variable-rate mortgage, the interest you pay on your mortgage balance could rise or fall at any point during the term.

What mortgage can I get with my salary using help to buy?

Help to Buy equity loans are in place to help first-time buyers purchase a new build house with a government loan. The size of the loan and the maximum price will vary depending on the property's location.

In England, excluding London, there are regional price caps in place that limit the maximum cost of properties that are sold under the scheme. You can get an equity loan that covers up to 20% of the value of the property. In London, properties priced up to £600k are eligible, and you can get an equity loan of up to 40%.

In order to qualify, you will need to have at least a 5% deposit, be planning to purchase a property that you intend to use as your main home and be planning to purchase a property that is within the price limits of the scheme.

However, the help to buy equity loan scheme is coming to an end; find out all relevant information on the help to buy and government websites.

How to improve your chances of being accepted

The process of applying for a mortgage is not always easy to navigate, even if you have bought a home before. Different factors will impact your application, from your employment situation to the type of property that you want to buy.

Along with this, each lender has different criteria in place when it comes to assessing mortgage applications. If you are planning to apply for a mortgage, then here are some of the main things that can improve your chances of being accepted.

Do I need a regular income to get a mortgage?

It is not just the size of your salary that mortgage lenders will look at when assessing your application. A lender is more likely to approve your application if your employment is stable and long-term.

In general, you will need to have been working in your current job for a minimum of three months before you apply.

However, there are other options available if you have less than 3 months employment in your current job.

Get on the electoral register

Lenders don’t just look at your income and expenses – you will improve your chances of getting a mortgage if you are registered to vote at your current address.

This can be a huge step in improving your application and is one of the ways that lenders check your identity and where you live. You can easily get on the electoral register at any time by doing it online or contacting your local council.

Improve your credit score

The better your credit score, the easier it will be for you to get a mortgage application approved. You can get a free credit report from any of the three main credit agencies: Experian, Equifax, and TransUnion.

Before you apply for a mortgage, it’s a good idea to carefully check your credit report – in some cases, records might include errors that could be bringing your score down lower than it should be, which can harm your chances of being accepted for a mortgage. If you find any errors, then get in touch with the credit agency to correct them.

If you do not have a very strong credit history, then it could take a while for you to rebuild it. Any incidents in the past where you have had issues with debt or missed bill payments could be a significant problem when it comes to applying for a mortgage.

It is a good idea to set up direct debits for your regular bills to make sure that you avoid missing any future payments. And, take a look at your overall credit use; you may be able to pay off smaller debts or close down accounts and credit cards that you no longer need.

On the other hand, if you have never taken out any credit, you may not have much, if anything, on your credit history. Lenders might be reluctant to offer you a mortgage in this situation since they do not have any evidence of how you have managed money in the past. If this is the case, consider getting a credit card and using it to pay for things that you would normally buy, such as petrol and food, and pay it in full every month.

Increase your deposit

A larger lump sum mortgage deposit amount can increase the chances of your mortgage application, along with potentially offering you more opportunities for better mortgage deals with lower interest rates.

The minimum deposit that you will usually need to save up for in the current market is 5% of the property’s purchase price. However, if you can save up for more, this could help improve your chance of having the application accepted and help you get a better deal. How much deposit you can afford to put down contributes to the interest rates you'll be offered and, in turn, your monthly payments.

Be organised

Before you submit the application to your chosen lender, it’s important to ensure you have all the relevant paperwork to hand.

Be careful when you fill out the application form, as even small mistakes could lead to big delays. In some cases, just one or two simple errors could set you back significantly.

Avoid applying for multiple mortgages simultaneously since this can damage your credit score. This is why it could be beneficial to speak to a broker when applying for a mortgage, as they will be able to explore the mortgage market without affecting your credit score.

Why not take our mortgage calculator for a test drive?

For a quick idea into the amount of money that could be available to you, the CLS mortgage calculator searches through a range of lenders and products to give you a good indicator of what's available over your chosen mortgage term. There are no credit checks and you can have a result in under a minute.

Expert advice from the mortgage specialists

Even if, after reading our advice and inputting your figures into our mortgage calculator, you're still not totally sure about 'How much can I borrow?' and the kind of monthly payments you'll be making on a specific property value, why not give us a call?

Here at CLS, we'll walk you through all of your options. With a little information about your financial commitments, credit history, existing debts, annual income, and your hopeful property value, we'll explore your options and compare mortgages until we find precisely the right one for you.

We'll give you an accurate estimate of mortgage rates and how much you could borrow before delivering a completed agreement in principle, and the type of monthly repayments you'll face over your mortgage term. Call us today. It could be the first step you'll take towards owning your new home.

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Gemma May

Operations Director

Gemma May

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