How Much Can I Borrow?

This depends on three factors:


1) How Much You Earn

The amount you can borrow will vary between lenders but the rule of thumb is three and a half times your annual earnings.

You may get up to four times your earnings, particularly if you have a good mortgage broker.

For a couple buying together typical variations would include:

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.

You can check out our couple’s mortgage calculator, to see how much you can borrow.


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 strong competition between lenders to get your business.

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.


2) Depending on How Much The Property is Worth.

Most lenders will loan up to 75% of the property’s value. (This is known as the loan to value ratio).

Some lenders might lend more – a mortgage broker would know who – but you would probably have to pay over the odds – eg a higher interest rate.

Plus you’ve got the UK Government’s Help to Buy Scheme

Depending on the area you want to buy in, the lender may refuse a loan, for example if they feel the property isn’t expensive enough for the area.

More often, it’s the opposite case – where a property is seen as too expensive.

Some mortgage lenders will put a limit on the amount they’ll allow on certain types of property. For example, thatch-roofed, timber framed…. and houseboats? Well that’s a whole different deal.


3) Depending On How Much The Mortgage Lender Thinks You Can Afford

You may be able to 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.

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

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.

Related article Possible Solutions Help and Ideas for First time Buyers


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