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Mortgage Information: How Much Can I Borrow?

 

When you take out a mortgage it's the lender who decides how much you can borrow. They use a variety of different methods to assess your eligibility for a mortgage and, of course, the affordability of the mortgage for you. They look at a number of things when you ask to borrow for a mortgage, including:

  • Your earnings (or you and your partner's combined earnings);
  • Your outgoings (or combined outgoings);
  • The property value;
  • Your credit history.

 

How do mortgage lenders decide how much can I borrow on the above criteria?

Each mortgage lender will have a different set of rules for each of the above, but the general basics are the same.

 

Your Earnings

Lenders will use your combined earnings to calculate the affordability of the mortgage. This can be difficult if you're self employed and especially difficult if you've recently changed jobs, but it's essential they perform this check. After all, if you can't afford the mortgage then the lender is going to lose out, and that's the last thing they want to happen.

 

Your outgoings

You're normally expected to list your outgoings to the lender so they can establish what you can afford on mortgage repayments at the end of the month. It's absolutely essential that you are honest with the lender as failure to repay a mortgage can lead to a very bad credit rating and, of course, your home being taken.

 

Your property value

The lender will arrange for the property to be valued to check the mortgage amount you require and establish how much you can lend. Some lenders will limit the amount they will lend on certain types of properties, such as timber-frame properties.

 

Your credit history

All lenders, no matter the loan, will check your credit history. Adverse credit may make it difficult for you to obtain a mortgage. By assessing your credit history the lender has a better idea about you as a borrower and how you deal with your money and, more importantly, it'll help them decide how likely you are to default or keep to payments.

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