How much morgage can I borrow?

Buying a house is a big financial commitment, and one that needs careful planning and consideration. One of the most common financial queries that we receive is from people who are unsure of the amount of mortgage they can borrow on their salaries. Here we take a closer look at the calculations...

The amount of mortgage you can borrow essentially depends on the balance between your incomings and your outgoings.

Your Income

Traditionally, a good indicator of how much you could borrow for a mortgage was to multiply your annual salary by three and a half. Any bonuses or freelance earnings were multiplied by 1.75 and added to the total (because these incomes aren't usually guaranteed, they are multiplied by half of what guaranteed income is multiplied by).

Although this is still a decent rough guide, mortgage lending is now a lot more complicated than that. Not only will a lender look at your income, but they will also consider the type of contract you have, how long you have been with the company, how long you have been in the industry etc.

Your Outgoings

In addition, the lender will make a detailed assessment of your outgoings in order to determine how much you can afford to repay. You will be asked to detail how much you spend on loan repayments, food, entertainment, rent/mortgage, petrol, gifts, travel etc.

The lender will use this information and the information about your income to determine how much you could afford to repay per month.

Your deposit

The amount of mortgage you can borrow also depends on how much deposit you have, and whether you saved this deposit yourself or received it as a gift. A minimum of 10% deposit is normally required for first time buyers, but 20% or more will secure better interest rates, terms and flexibility.

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