Mortgage borrowing

How to borrow the most for your mortgage.

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How much can I borrow for my mortgage?

Every homebuyer needs to know how much money they can borrow, simply to know which houses they can afford.

Each bank, building society, or lender has its own way of calculating what you can afford to pay each month, so their figures can differ significantly. They also consider different risks that affect your mortgage repayment rates.

It can sound quite complicated at first but don’t worry; we’re here to help you estimate how much you can borrow for a mortgage.

How much can I borrow? Mortgage to wage multiples

The standard way of calculating mortgage offers starts with your salary. Depending on your lender and your personal situation, you can achieve anywhere between two and six times your salary.

For example, let’s say the borrower’s salary is £30k; depending on the lender and their lifestyle and circumstances, they could borrow anywhere between £0 and £180k.

  • 2 x £30k salary = £60,000 mortgage
  • 3 x £30k salary = £60,000 mortgage
  • 4 x £30k salary = £120,000 mortgage
  • 5 x £30k salary = £150,000 mortgage
  • 6 x £30k salary = £180,000 mortgage

As you can see, that’s a broad playing field. With such a range of figures, how do you know which you’re most likely to be offered? Sadly, it’s not as simple as tracking down a lender who will happily provide the highest multiple. You’ll need to meet some pretty strict criteria for the best options.

Only a small number of applicants qualify for the highest multiples, with the majority of borrowers receiving between 3 and 5 times their income.

So, what criteria do borrowers have to meet to earn the highest loan amounts?

How do lenders calculate how much you can borrow?

Each lender needs to be confident that you can repay your loan, plus the interest they charge to make a profit. So as well as income, they look at how you manage your money, including any existing debt and outgoings. Only if there’s enough left at the end of the month—with a comfortable standard of living—will they make an offer based on their research.

Income

Lenders tend to have a minimum income requirement for each salary multiple. For example, there’s likely to be a wage threshold for borrowers achieving the high 5 x salary offer, perhaps of £50k and above. If you earn £25k or £30k, you might secure the 4 x salary offer from some lenders, or maybe only the 2 or 3 x options if you have a little outstanding debt to include.

Age

A lender needs the assurance that you’ll have an appropriate income throughout your mortgage term. So if you’re nearing retirement age, you may only be approved for shorter 5, 10, or 15-year terms, lowering the amount you can borrow or raising your monthly repayments significantly.

Credit score

Every lender, whether for a mortgage or a store card, will consider your credit score before accepting you. It’s the simplest way for them to see how you manage money. It reveals information about how much debt you currently carry, if you pay your bills on time, or if you’ve recently defaulted on payments or loans, painting a clear picture of your risk level.

Deposit

The more money you save for your deposit, the better rates you’ll achieve and the higher your total spend amount will be. This is because lenders consider the loan to value (LTV) rate as part of your risk assessment.

You must have a deposit to get a mortgage in the current market, most lenders expect 15%, but there are specialist lenders and even high street lenders who will accept as low as 5% and 10%. Expect the interest rates on lower deposit products to reflect the additional risk.

Profession and employment type

Lenders prefer well-paid, stable occupations, so teachers, doctors, lawyers and solicitors, police, other key workers, and professionals will likely qualify for higher multiples and lower interest rates.

Monthly outgoings and financial commitments

Earning a good salary is a great start, but if you have an equally high amount of debt, then the two can cancel each other out. Not only is the debt on your credit report taken into account, but also the money you’ll need to feed and home your family, pay for transport, and cover emergencies, entertainment, and other outgoings.

A mortgage affordability assessment includes all those essentials and monthly costs, leaving the lender with a clearer picture of how much money is left each month.

How can you borrow money if you need a bigger mortgage?

Apart from the property price, you'll also need to cover additional charges and costs with every home purchase.

Depending on how much money you’ve saved, they could end up being included in how much you need to borrow, lowering the amount you’ll have to spend on your new home.

“How much could I borrow for a house if….”

We’d all love that extra bit of luxury, more space, to be in a superior area, nearer to work or preferable schools—but that all results in pricier properties and bigger mortgages. So if your offers don’t meet your expectations, how can you squeeze the lenders for a little more cash?

Take out a joint mortgage

A joint mortgage doesn’t have to be with a husband, wife, or romantic partner. Many friends and family members enter a joint mortgage to expand their purchase range, happy to share the bigger space, or as a financial investment.

Increase your deposit

A larger deposit goes a long way to help lenders see just how serious you are and persuade them you’re a safer option. In addition, a larger deposit will open you up to offers from more lenders, perhaps even a few that may be willing to nudge you up into the next salary multiple.

Include supplementary or second incomes

You can include various supplemental income streams as part of your earnings—you’re not strictly limited to your primary job’s salary. Lenders will happily consider regular overtime payments, bonuses, commissions, income from a second job, and other benefits that bump up your monthly incomings.

Find a guarantor

A guarantor is someone who agrees to step in and pay your mortgage if you fall into trouble and can’t make your repayments. This is something that used to be common practice with mortgages, however in recent years a lot of lenders have stopped offering additional help for guarantor mortgage.

Still confused? Don’t be. A specialist mortgage advisor has all the answers you need.

You can generate various estimates and approximations using online mortgage calculators, repayment calculators, and affordability assessment calculators. There are so many online tools that cater to almost every best guess there is!

However, the only way to get a clear and accurate picture of how much you can borrow is to chat it over with a specialist mortgage advisor.

They’ll narrow down all the figures you need to present to lenders and know precisely which ones offer the best rates and deals to someone in your position.

CLS can provide the accurate assessments you need. So give us a call or drop us a line, and we’ll show you what your best options look like.

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