How Much Can I Borrow
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How Much Can I Borrow on a Mortgage
How much can I borrow on a mortgage is one of the first things to think about when buying or moving home.
The amount you can borrow on a mortgage will depend on your income and whether you want to buy the property on your own or jointly with someone else.
The exact amount will depend on your individual circumstances. Traditionally mortgage lenders would use an income multiplier of three & half to four times your annual income minus any financial commitments. These would include:
- Personal and Secured Loans
- Credit Cards
- Buy now Pay Later
- Car Finance
- Interest Free Credit
Using a simple example of someone with a £100 per month loan with more than 6 months outstanding, a mortgage lender would then deduct the £1200 annual payment from the mortgage applicant's income before applying the income multiplier.
Credit card debts would be assessed using the outstanding balance and multiplying it by four or five percent and assuming that this is the monthly cost of that card. Unfortunately O% cards will be viewed in the same way.
Employed - How much can I borrow?
Employed people are assessed on the their annual basic salary. Mortgage lenders will then look at any additional income, like overtime, bonuses, commission and second jobs. Any additional income to the applicant's basic salary may not be included when looking at how much you can borrow unless it is guaranteed. Employed Company Directors are often paid a minimal salary with the remainder in dividends. Most mortgage lenders will used the overall income (salary + dividends) rather than one or the other.
Self-Employed - How much can I borrow?
If you are self-employed the amount of mortgage you can borrow is based on your business accounts, normally using your net taxable income (net profit) for the previous 2 years. Many mortgage lenders require at least 2 years of accounts to assess your net income. If this is not available than they will ask for your previous 2 years SA302's from the Inland Revenue. The Revenue does not always automatically send these every year so you may need to contact them to request it.
Tax Credits & Maintenance Payments - How much can I borrow?
Many mortgage lenders will take this additional income into consideration. However, they are likely to need good supporting evidence of this. In the case of Tax Credits, this would be your most recent years statement and with maintenance, possibly details of the court order and/or bank statements to confirm.
Finally, more and more of the top mortgage lenders now have affordability calculators. These don't just look at your gross annual earnings. They also look at your net income and whether you have children. Someone with a high company pension contribution or several children may therefore not be able to borrow what they need to mortgage or remortgage.
Impartial deal with this on a daily basis so please feel free to contact us.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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*We do not normally charge a fee for mortgage advice, however this will be dependent on your circumstances. If a fee is charged our typical fee is £200.
As a mortgage broker, Impartial receives a fee from mortgage lenders, which is normally a small percentage of the loan we arrange. Where we arrange mortgages from £100,000 upwards we do not normally charge a fee. For mortgages under £100,000 we will charge minimum fee of £200, this fee is payable on application.