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When taking out a mortgage, you will want to aim to secure enough finance for your property without burdening yourself too much with the repayments. The mortgage calculator above is designed to provide you with a quick estimate of how much you could potentially borrow for your mortgage however, for personalised advice it is best to speak with an expert consultant.
For many years, the simple answer to the question ‘how much can I borrow’ was ‘a multiple of your income as shown on your P60 or payslip’. Some mortgage calculators, high street lenders and price comparison websites still quote a basic formula like this, even when giving guidance on the amount that a self-employed professional or entrepreneur might reasonably expect to borrow.
Nowadays there are a multitude of factors at play when calculating how much you can borrow on a mortgage including income, deposit size, employment status, family setup and existing debts. Our expert consultants can help you assess your financial situation and provide personalised advice to ensure you choose a mortgage that aligns with your budget and financial goals.
A mortgage affordability test is a calculation made by the lender to determine how much they are willing to let you borrow for a mortgage.
To assess affordability for a mortgage, the lender will run their calculations based on key variables such as annual income and financial outgoings. This test is not the same as a credit review and credit score, although this may influence the outcome.
Since the 1st of August 2022, the Bank of England removed their mortgage affordability test, offering lenders discretion on how they calculate affordability internally. While this may have been intended to offer lenders more flexibility in their internal processes to respond to the external lending environment, there has been a reduction in transparency in how affordability is calculated across lenders. It is entirely possible you could pass the affordability requirements with one lender and fail with the next, depending on their internal calculations and processes.
Affordability calculators have become more stringent in response to high Consumer Price Index (CPI) inflation and cost-of-living data from the Office of National Statistics (ONS). Simultaneously, lenders have to stress at higher rates in light of mortgage rates and lender’ Standard Variable Rates (SVRs) increasing.
There are several basic factors that influence how much you can borrow, including:
The deposit needed for your mortgage is influenced by several factors including the property’s value and the type of mortgage you’re seeking. As a general rule, lenders prefer a higher deposit as it reduces their risk. In return for a higher deposit, you may be able to receive a more preferential interest rate and higher borrowing amounts. The standard minimum deposit is often around 5-10% of the property’s value. Our consultants can guide you on the deposit requirements based on your specific circumstances and the type of mortgage you require.
The level of income needed to secure a mortgage will depend on factors such as your desired loan amount, existing debts, and the lender’s criteria. As a rough guide to how much income you will need for a certain mortgage amount is to divide the mortgage amount by 4.5 and 5. It is important to note that there are other factors that impact the borrowing amount than purely income alone. A mortgage broker can provide detailed insights into the income requirements based on your financial profile and the type of mortgage you’re considering.
Being self-employed may impact the way lenders assess your borrowing capacity as they often consider your business income, expenses, and overall financial stability. Self-employed individuals are likely to face more challenges securing a mortgage compared to a full-time permanent employee however, the primary hurdle is often their lack of awareness about available options. These challenges most commonly involve being able to prove a steady flow of income, paying yourself too low of a salary, or trading for a short period.
Self-employed individuals may find mainstream lenders are inflexible to meet their borrowing needs however, thankfully there are specialist lenders who offer more flexibility in such situations. Our expert consultants specialise in assisting self-employed individuals navigate the mortgage process. By analysing your business finances, we can help you determine the maximum amount you can borrow and guide you through the application process tailored to your unique situation.
The above calculations are only examples and are not guaranteed. Loans are subject to status and valuation and are not available to persons under 18 years of age. Written quotations available from individual lenders. For secured loans the lender will require a charge on your property and in the case of endowment mortgages, an endowment/life policy for the amount of the advance and a charge over the property. For interest only mortgages, the above calculations do not take into account the cost of any endowment, pension or other savings plan being used to repay the loan. In addition, the figures shown in respect of both repayment and interest only mortgages do not include the cost of additional life cover.
All mortgages are subject to the applicant(s) meeting the eligibility criteria of lenders. Loans are subject to status and valuation and are not available to persons under 18 years of age. Written quotations are available from individual lenders. For secured loans, the lender will require a charge on your property and in the case of endowment mortgages, an endowment/life policy for the amount of the advance and a charge over the property. For interest-only mortgages, the above calculations do not take into account the cost of any endowment, pension, or other savings plan being used to repay the loan. In addition, the figures shown in respect to both repayment and interest-only mortgages do not include the cost of additional life cover. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
This information does not contain all of the details you need to choose a mortgage.
Whatever your situation, our premier mortgage team can advise on suitable solutions. We specialise in complex and bespoke mortgage solutions to help you find competitive terms.
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