How Much Can I Borrow for a Mortgage?

If you're thinking about buying a home, one of the first questions is usually: how much can I actually borrow?

It sounds like there should be a simple answer, but mortgage affordability is rarely that straightforward. Your income is important, of course, but lenders also look at your existing commitments, deposit, mortgage term, credit history and the type of income you receive.

Most importantly, different lenders assess affordability in different ways.

That means one lender may be prepared to offer you considerably more than another, even though your circumstances haven't changed.

Why mortgage calculators only tell part of the story

Online mortgage calculators can be useful for getting a rough idea of what you might be able to borrow, but they shouldn't always be treated as your final budget.

You may have heard of lenders offering four, four-and-a-half or even five times income, but the calculation goes much further than simply multiplying your salary.

Car finance, personal loans, credit card balances, childcare and other regular commitments can all affect affordability. Overtime, commission and bonuses may also be treated differently from one lender to another.

The same is true if you're self-employed. One lender might assess your latest year's income, while another may look at an average over a longer period.

This is why being told by one bank that you can borrow £300,000 doesn't necessarily mean £300,000 is your limit across the wider mortgage market.

Your deposit matters too

Your deposit affects your Loan to Value, usually referred to as LTV, which can influence the mortgage products and rates available to you.

A larger deposit can sometimes open up better options, but that doesn't mean putting every penny you have into the property is always the right decision.

You still need to think about legal fees, surveys, moving costs, repairs and having some money left once you get the keys.

Likewise, if you have debts or finance outstanding, it can sometimes make sense to reduce them before applying for a mortgage, but not always. Using savings to clear a loan may improve affordability, while keeping that money for the deposit could potentially improve your LTV instead.

It is worth doing the sums before making that decision.

How much can you borrow versus how much should you borrow?

This is the part I think matters most.

The maximum amount a lender is prepared to offer you isn't necessarily the amount you should borrow.

Your mortgage still needs to leave room for everything else you want to do with your money.

When I look at affordability with a client, I don't just want to know the maximum figure a lender's system will accept. I also want to know what monthly payment actually feels comfortable.

Those two numbers can be very different.

Work out the mortgage before finding the house

Having worked in estate agency for more than ten years before becoming a mortgage adviser, I've seen plenty of buyers do this the wrong way round.

They start looking at properties, gradually increase the Rightmove budget, find somewhere they love and only then properly investigate the mortgage.

It is far easier to establish your realistic buying budget first.

Once you know roughly how much you can borrow, how much deposit you want to use and what monthly payment you're comfortable with, you can look at properties with much more confidence.

At Healthy Financial Services, I help buyers understand their mortgage position before they commit to a property, including how much they may be able to borrow, which lenders may suit their circumstances and what the monthly payments could look like.

If you're thinking about buying in Reading, Berkshire, Oxfordshire, Buckinghamshire or further afield, feel free to get in touch for an initial conversation.

Your home may be repossessed if you do not keep up repayments on your mortgage.