How much can I borrow for a mortgage?

19 July2021
Row of flats

If you're thinking of applying for a mortgage, you'll probably be wondering how much you will be able to borrow. Lenders look at a number of factors in order to decide this - as they have to be confident that you can afford your repayments.

What do mortgage lenders look at?

Mortgage lenders look at factors like your earnings and outgoings, the value of the property you want to buy and your credit rating. You need to give your potential lender as much detail as you can about how much you earn and your monthly costs. You need to make sure you don't take on a mortgage that you can't realistically afford.

In the past, lenders largely based mortgages on income multiples - so you might have been able to get a mortgage that was three times your annual income, for example. They are now usually more cautious about the 'bigger picture'. So they also factor in possible future interest rises, and calculate whether you'd still be able to afford your mortgage payments if rates went up.

You'll need to show your lenders how much you earn and how much you typically spend each month on your essentials. You'll probably fill out a budget planner, which will include details about your unsecured debts (like credit cards and personal loans) and any dependants you have or maintenance payments you make.

If you're struggling with debt, you can read about the solutions that could help you here.

Your lender will factor in any extra payments you'd have to make on top of your mortgage payments when you move in - for example, council tax, gas and electricity bills, phone and broadband and any insurance you'll need.

Most mortgage lenders would probably consider a quarter of your take-home pay to be a reasonable amount to spend on a mortgage, according to the Money Advice Service.

They'll also look at your credit history. If you've had difficulty repaying loans or keeping up with the rent in the past, then it might affect whether / how much you can borrow. It's still worth shopping around, though, if a lender refuses you a mortgage or offers you one with a higher interest rate than you were hoping for.

Use our simple mortgage calculator if you'd like to see how much your mortgage could cost you every month.

What do I need to think about?

Other things you should think about include:

. How would you be able to cope if the interest rates increased?

. Would you be able to cope if you or your partner lost your job?

. Are you expecting any major changes in your life in the foreseeable future?

Taking on a mortgage is a serious, long-term commitment, so you shouldn't go ahead unless you're confident you'll be able to keep up with the payments.

You can apply for a mortgage here.

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