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How much can you borrow?

Find out how much a bank is likely to lend you for a mortgage with our 'How much can I borrow?' calculator, plus how lenders use affordability testing to make their decisions.

In this article
How do mortgage lenders decide how much you can borrow? Mortgage borrowing calculator What does 'LTV' mean?
LTV calculator How could interest rates affect how much you can borrow?

Hoping to buy a property but not sure how much you'll be able to borrow for a mortgage?

This guide explains how mortgage lenders assess affordability, how loan-to-value ratios work, and the circumstances in which you might be able to boost your borrowing.

How do mortgage lenders decide how much you can borrow?

The amount you can borrow will be heavily influenced by your salary and your month-to-month expenditure.

How income multiples affect your borrowing chances

Banks and building societies will usually lend a maximum of four-and-a-half times the total annual income of you and anyone else you're buying with. For example, if your total household income is £60,000 a year, you might be offered up to £270,000. 

Some mortgage lenders do offer larger amounts to people in certain professions, those with bigger deposits, or those with higher earnings. People who fit into these categories may be able to borrow as much as five or five-and-a-half times their household income. 

  • 'Professional' mortgages allow borrowers with specific jobs (such as doctors and dentists) to borrow at a higher multiple. These deals are usually aimed at recently-qualified individuals in industries that lenders believe experience high wage growth.
  • If you have a deposit of 25% or more, some lenders may be willing to offer you a higher multiple.
  • If you have high household income, lenders may be willing to let you borrow more. Criteria varies, but borrowers with income of more than £100,000 may qualify for the biggest income multiples.

If you don't fit into the above categories, it's best to assume that four-and-a-half times income will be the maximum amount you'll be able to raise. Some lenders may offer some leeway, but all work within strict guidelines set by the Bank of England. The current rules mean lenders can only offer 15% of new mortgages at four-and-a-half times earnings or higher.

How affordability assessments work

When deciding how much to lend you, a mortgage provider will do an affordability assessment. Essentially, this means looking at the amount you typically earn in a month compared with how much you spend. 

Lenders are also interested in the types of things you spend your money on. Some expenses can be quickly cut back, while others are less flexible - a gym membership, for example, may be easy to cancel whereas childcare costs are likely to be fixed.

Your lender will ask about things such as: 

Income

  • Regular income from paid work
  • Any benefits that you receive 
  • Income from other sources 

Outgoings

  • Debt repayments such as student loan or credit card bills
  • Regular bills such as gas and electricity 
  • Transport costs
  • Grocery costs
  • Spending on leisure activities

The lender will also compare what you say with recent bank statements and wage slips. See our 'Applying for a mortgage' guide for more detail on the documents you'll need for an application. 

Mortgage borrowing calculator

Use our mortgage borrowing calculator to get a rough idea of how much you might be able to borrow when applying for a home loan.


What does 'LTV' mean?

The deals you're offered when applying for a mortgage will usually be affected by the loan-to-value ratio or 'LTV' - ie the percentage of the price that you're borrowing compared to how much you're putting in yourself.

This means that if you have a 10% deposit, your LTV will be 90% as your mortgage will need to cover 90% of the property price. With a 15% deposit, your LTV will be 85%, and so on.

Lenders will set a maximum LTV for each deal they offer - for example, a particular interest rate may only be available to those with an LTV of 75% or below. 

In general, the lower your LTV (ie the more money you're putting in yourself), the lower the mortgage rate, and the cheaper the overall deal.

LTV calculator

How could interest rates affect how much you can borrow?

Interest rates can play a deciding role in how much you can borrow. Lenders won't just look at what you can afford to repay at current interest rates - they'll also 'stress test' to see what you could pay if rates increased.

In general, lenders will check to see if you could withstand at least a three percentage point rise in rates, though the Bank of England is currently consulting on whether it should remove this requirement. Any changes would be unlikely to come into force until 2023.

You can see how much a rate rise would affect your mortgage payments by using our mortgage interest rate calculator.

If you have a fixed-rate mortgage, interest rate changes won't affect you until your fixed rate comes to an end. However, if you have variable-rate mortgage, the interest rate on your monthly repayments could go up or down during the term of the mortgage.

 

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