How Much Can the Self Employed Borrow?

This depends on (a) how much you earn and (b) how much the property you want to buy is worth.

Re. the latter: Most lenders will loan up to 75% of the property’s value and some specialist lenders might go higher. (You also have the new UK Government mortgage lending schemes to take into consideration).

The higher the “loan to property value” ratio (LTV) the more you’ll probably have to pay – in interest rates and charges eg you’ll probably be forced to buy mortgage indemnity insurance (bad)
Here’s a secret: Assuming you have a regular income and clean credit history you’re likely to get a loan fairly easily. Despite the impression you may be given that you’ve got to jump through the hoops, there is competition between lenders to get your business.
The amount you can borrow will vary between lenders but if you’re buying on your own the rule of thumb is three and a quarter times your annual earnings.

Typical scenarios for couples might be:

Couple 1: two and a half times both annual incomes

Couple 2: three to three and a half times the greater income plus one year of the second income.

Check out our calculator, either now or later, to see how much you can borrow.

 

Some lenders now use more sophisticated credit rating methods, where they examine your income and your outgoings. The idea is that every borrower has unique circumstances. Someone with teenage children and high outgoings can’t afford to borrow as much as a singleton earning the same salary.

Depending on the area you want to buy in, the lender may refuse a loan eg if they feel the property isn’t expensive enough for the area. More usually, it’s the opposite case – where a property is seen as too expensive.

 

Note that how much you can borrow is not necessarily what you can afford

You may be able get a mortgage which stretches your budget to the limit but leaves you in trouble when you have to pay the other costs involved in buying your home and its future running costs

Some lenders will want to estimate this by checking your average outgoings eg your household bills, any debts etc. Some will get you to fill in a detailed questionnaire either by hand or on the phone or online etc.

Read more about What can you afford when buying your home

If you’re a first time buyer it will always help if you can show you’ve been paying regular rent for a similar amount to what your intended mortgage payments will be.

 

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