How Much Mortgage Can I Get?

Understanding how much mortgage you can get is a crucial first step in the home-buying journey. Whether you’re a first-time buyer or moving up the property ladder, knowing your borrowing potential helps you plan effectively and set realistic expectations. In this comprehensive guide, we’ll explore the key factors that influence mortgage affordability, how lenders assess your application, and provide a clear explanation of terms like loan-to-income ratio, affordability checks, and deposit requirements. 

 

This article outlines everything you need to consider when asking, “How much mortgage can I get?” or “How much could I borrow on a mortgage?” in the UK property market.

 

What Does Mortgage Affordability Mean?

Mortgage affordability refers to the amount a lender is willing to allow you to borrow, based on your income, expenditure, and financial commitments. It’s not only about how much you earn, but also how much you spend each month and your credit profile. Lenders assess affordability to ensure you can keep up with repayments now and in the future, even if interest rates rise or your circumstances change.

 

How Do Lenders Work Out How Much You Can Borrow?

When you apply for a mortgage, lenders will conduct an affordability assessment. This process varies slightly between lenders, but generally includes the following key areas:

 

1. Income

Lenders assess your total income to determine your borrowing capacity. This typically includes:

 

• Basic salary
• Overtime, bonuses, and commission (if regular and provable)
• Self-employed income or dividends
• Other income sources such as rental income, pensions, or certain benefits

 

Different lenders may treat non-salaried income differently. Some may only consider a percentage of bonuses or freelance income, so this can affect how much mortgage you could be offered.

 

2. Outgoings and Financial Commitments

Monthly outgoings reduce your disposable income, which affects how much you can afford in repayments. Lenders will usually factor in:

 

• Existing credit commitments (loans, credit cards, car finance)
• Household bills and living costs
• Childcare and school fees
• Maintenance payments

 

Your debt-to-income ratio – a measure of your monthly debts compared to your income – is a critical indicator in the affordability calculation.

 

3. Credit History

Your credit report gives the lender insight into your financial behaviour. A clean record can enhance your borrowing options, while missed payments or defaults may limit how much you can borrow or restrict you to fewer, possibly higher-rate, mortgage deals.

 

4. Deposit Size

The size of your deposit plays an important role. Generally, the larger your deposit, the more mortgage products may be available to you, and the lower your monthly repayments could be. For example, with a 10% deposit, you would need a mortgage for 90% of the property’s value, known as a 90% loan-to-value (LTV) mortgage.

 

5. Loan Term

Extending the term of your mortgage can reduce your monthly repayments and potentially increase how much you can borrow. However, a longer term means paying more interest over time. Common terms range from 20 to 35 years, but this can depend on your age and circumstances.

 

Loan-to-Income Ratio

One of the primary tools lenders use to determine mortgage affordability is the loan-to-income (LTI) ratio. This is a multiplier-based calculation where your income is multiplied by a set figure, usually between 4 and 4.5 times your annual income.

 

For example, if you earn £40,000 a year, a lender using a 4.5x multiplier may offer a maximum mortgage of £180,000, depending on other affordability criteria. High earners or those with minimal debts may be able to borrow a higher multiple, though this is rarely more than 5.5 times your income under current regulations.

 

Mortgage Affordability Explained in Practice

Let’s look at two simplified examples:

 

Example 1: Single Applicant

• Annual income: £35,000
• No debts
• Deposit: £25,000

 

With a loan-to-income ratio of 4.5, this individual may qualify for a mortgage up to £157,500. Combined with their deposit, they might afford a property worth £182,500, subject to affordability checks and credit status.

 

Example 2: Joint Applicants

• Combined income: £70,000
• Monthly debts: £400
• Deposit: £40,000

 

A couple with this financial position could potentially access a mortgage of £315,000 (based on 4.5x income). With their £40,000 deposit, their property budget could reach around £355,000, though actual offers would depend on their outgoings and credit profiles.

 

Other Factors That Affect How Much You Can Borrow

1. Mortgage Type

The type of mortgage you choose can impact affordability. For example:

 

• Repayment mortgage: Monthly payments go towards both interest and capital. This is the standard method.
• Interest-only mortgage: Lower monthly payments, but you must repay the capital at term end. Fewer lenders offer this and criteria are stricter.

 

2. Employment Type

Full-time salaried employees often find it more straightforward to prove their income. Self-employed borrowers, contractors, or those with variable income may need to provide additional documentation such as company accounts or tax returns.

 

3. Age

Your age can influence the maximum mortgage term available to you. Some lenders impose upper age limits for when the mortgage term must end, which can affect affordability calculations if a shorter term means higher repayments.

 

4. Location

In some cases, lenders may apply different affordability criteria based on the location of the property. Local house prices, rental yields, or other risk factors can influence how much you may be able to borrow.

 

How to Work Out How Much Mortgage You Can Afford

Aside from how much you could borrow, it’s vital to consider what level of monthly mortgage payment fits comfortably within your budget. This is what most people mean when they ask, “How much mortgage can I afford?”

 

Consider the following steps:

 

1. Calculate your total monthly income (after tax).
2. List all regular monthly expenses, including groceries, utilities, subscriptions, transport, and leisure.
3. Deduct expenses from income to work out your disposable income.
4. Ensure your projected monthly mortgage repayment leaves a buffer for savings or emergencies.

 

Lenders will stress-test your application to ensure you could still afford repayments if interest rates rose by 1-3%. This helps protect borrowers from financial difficulties in the future.

 

Using Mortgage Calculators

Many applicants begin by using online mortgage calculators. These tools can provide a broad indication of how much you could borrow based on income and expenses, but they use generic assumptions and may not reflect your specific circumstances.

 

For a more accurate calculation, speaking to a mortgage professional can help you understand what lenders might offer based on your full financial situation and credit profile.

 

How Your Deposit Affects Affordability

Your deposit not only lowers the amount you need to borrow but can also expand the range of products available to you. For example:

 

• 5% deposit: Higher LTV, may mean fewer options and higher interest rates.
• 10%-15% deposit: Opens access to more products with potentially lower rates.
• 25%+ deposit: Greater equity and often access to more competitive rates.

 

Generally, the larger your deposit, the more favourably lenders view your application, which could positively affect how much you’re able to borrow.

 

Can I Increase How Much Mortgage I Can Get?

There are a few ways you may be able to improve your borrowing potential, including:

 

• Paying off existing debts to reduce monthly outgoings
• Improving your credit rating
• Increasing your deposit
• Extending the mortgage term (if appropriate)
• Applying with a joint applicant whose income can be included

 

Bear in mind that borrowing more should be balanced against affordability. Taking on a larger mortgage may lead to greater long-term financial commitment.

 

Mortgage Affordability and Credit Ratings

Credit scores don’t directly determine how much mortgage you can get, but they play a significant role in how lenders view your profile. A higher credit score suggests to lenders that you manage money responsibly, which can improve the chances of being approved for higher borrowing levels or more favourable interest rates.

 

Regularly reviewing your credit file and addressing any errors or outstanding issues can help you present a stronger application.

 

Understanding how much mortgage you can get involves more than just multiplying your income. Lenders consider a range of factors, including your income, outgoings, credit profile, deposit size, and the type of mortgage you choose. While affordability calculators can provide a starting point, they don’t replace a detailed review of your personal financial situation.

 

Taking the time to understand mortgage affordability and how lenders make their decisions can help you approach the home-buying process with confidence and realistic expectations.