How much can I borrow for a mortgage?

The income multiple rule

The most common starting point is the income multiple. Most lenders will offer between 4 and 4.5 times your annual income. Some specialist lenders will go up to 5 or 5.5 times, though this usually requires a larger deposit or a particularly strong credit profile.

For example, if you earn £40,000 per year, you could typically expect to borrow between £160,000 and £180,000 as a starting estimate. For joint applications, lenders will usually use the combined income of both applicants.

Affordability is more than income

Since the Mortgage Market Review in 2014, lenders are required to carry out a full affordability assessment — not just look at your income. This means they will look closely at your outgoings too.

What lenders assess:

• Monthly committed expenditure — loans, car finance, credit cards, subscriptions
• Childcare and school fees
• Travel and commuting costs
• How you would manage if interest rates rose (stress test)
• Your credit score and history
• Any existing mortgage balances or rent payments

How your deposit affects things

The size of your deposit affects both how much you can borrow and the interest rate you'll be offered. Deposits are expressed as a percentage of the property value — the Loan to Value (LTV).

A 5% deposit means you need a 95% LTV mortgage. A 25% deposit means a 75% LTV. The lower the LTV, the lower the risk to the lender, which is why the best rates are typically reserved for those with at least a 25–40% deposit.

What about self-employed applicants?

If you're self-employed, lenders will typically want to see at least two years of accounts or tax returns. They'll use your net profit (if you're a sole trader) or salary plus dividends (if you operate through a limited company) to calculate your income.

One year's accounts is possible with some lenders, but your options will be more limited. The key is working with an adviser who knows which lenders are most favourable to self-employed applicants — this varies significantly between providers.

Government schemes that can help

Several schemes exist to help buyers who might otherwise struggle to meet standard affordability criteria:

• Shared Ownership

  Buy a share of a property (between 25% and 75%) and pay rent on the rest. You only need a mortgage on your share, making it more affordable.

• Right to Buy

  If you're a council tenant, you may be eligible to purchase your home at a significant discount. The discount can be used as your deposit.

• Guarantor Mortgages

  A family member uses their property or savings as additional security, allowing lenders to offer more than standard income multiples.

Getting a Decision in Principle

Before you start viewing properties seriously, it's worth getting a Decision in Principle (DIP) — also called an Agreement in Principle or Mortgage in Principle. This is a conditional statement from a lender saying how much they'd be willing to lend you, based on a soft credit check.

Estate agents will often ask to see a DIP before accepting an offer, as it shows you're a credible buyer. We can arrange a DIP for you quickly, usually within 24 hours.

Frequently asked questions