In This Guide
Apply for a mortgage
1. How much can I borrow?
2. How much can I afford?
3. Mortgage application
4. Mortgages online
5. Agreement in principle
6. Confirmation of offer
Buying at auction
Buying in Scotland
Conveyancing
Find and view
Negotiate
Plan your purchase
Success and failure
Surveys and valuations
To buy or not to buy
Apply for a mortgage
How much can I borrow?
The first step in getting a mortgage is working out how much you are going to try to borrow. If you have used the cost planners in the previous section, you should have some idea of how much money (if any) you are going to have available for a deposit. However, lenders do not base their calculations solely on that figure.
The main influence on the amount of money that you will be able to borrow is your gross income. You will usually have to show evidence of your salary in the form of payslips, or at least a reference from your employee that confirms your salary details. If you are self-employed and going for an orthodox mortgage, you will usually need a reference from your accountant and three years worth of audited figures.
Lenders vary quite a lot in the multiples that are used to work out how much money you can have. The standard income multiples that are used are around three to three and a half times an individual salary. When calculating the maximum that will be lent to a couple, it is usually in the region of two and a half times the joint salary, or 3 times the higher salary plus the lower salary.
What counts as part of my salary?
Commission, overtime and bonuses are not normally
considered as part of your gross income by the lender, unless
you receive them at a guaranteed level. Any supplementary payment
that is not guaranteed but which can be shown to remain above
a certain level over a period of time can sometimes be taken into
account, though many lenders will only incorporate a portion of
this money into the calculation.
When can I borrow more than that?
Quite often. Many lenders stick to these formulae quite rigidly,
but not all of them. Your relationship with the lender may influence
the amount they are willing to lend you. So might your credit
rating, your stage of career, the amount of equity you already
own in your home and whether you play golf regularly with the
branch manager. Even with high street lenders, you can sometimes
push your borrowing level up to four times your salary or three
times your joint salaries.
To further confuse matters and leave you no closer to knowing how much you can borrow, an increasing number of lenders now use an affordability rating to assess how much money they will lend you. This means that they don't simply take your salary details and multiply them by a factor to come up with a ceiling on your borrowing. They do take into account your income, but also your monthly expenditure and how much you have available for repayments.
Your repayments each month must not go over a certain proportion of your take home pay minus your expenses. The lenders that use this method differ in the exact methods they use, but in some circumstances you can end up with a loan of anything up to five times your salary! In special circumstances, it can be even higher but generally only if a customer has other assets to cover the loan in the event that they are unable to repay.
If you would prefer to use our interactive 'mortgage borrowing' calculator, which will help you decide how much lenders are likely to forward you according to different income multiples, please click here to visit our calculators section.
It is impossible for us to tell you how much you will be able to borrow. Shop around, try a few different types of lender and unless you are being very unrealistic, eventually you should be offered a loan value that suits your needs.
The other pages in this section will tell you more about the mortgage application process, but if you really want to go in depth about mortgages, you will find perhaps the most comprehensive web-based guide to mortgages in the How To section.
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