How Much Can I Borrow for a Mortgage? What Actually Affects Affordability

"How much can I borrow?" is understandably one of the first questions people ask when considering a mortgage.

Unfortunately, there isn't one calculation that applies to everyone.

While your income is an important part of mortgage affordability, lenders can consider much more than your salary when deciding how much they may be prepared to lend.

Your income

Lenders will normally start by looking at your income.

That might include basic salary and, depending on the lender and your circumstances, some additional sources of income may also be considered.

This could potentially include overtime, bonuses, commission or certain other regular income.

For self-employed applicants, the assessment can be different again.

Your existing commitments

How much you earn is only one side of the equation.

Lenders also need to understand your existing financial commitments. These can include loans, credit cards, car finance, childcare costs and other regular expenditure.

Two households earning the same amount could therefore be offered very different mortgage amounts.

Your deposit

Your deposit – or the equity you already have if you're moving home – is another important consideration.

The relationship between the mortgage amount and the property's value is known as the Loan-to-Value, or LTV.

Different mortgage products and lender criteria apply at different LTV levels.

Your credit history

Your credit history can also influence which lenders and products may be available to you.

A missed payment doesn't automatically mean you won't be able to obtain a mortgage, but the type of credit issue, how recently it occurred and the lender's individual criteria can all be important.

Mortgage term and age

The length of your mortgage can affect affordability too.

A longer mortgage term can reduce the monthly repayment on a repayment mortgage, but it can also mean paying interest for longer and therefore potentially paying more overall.

Age and expected retirement income may also become relevant depending on how long the proposed mortgage will run.

So, how much could you borrow?

Online mortgage calculators can provide a useful starting point, but they shouldn't necessarily be treated as a definitive answer.

A mortgage adviser can assess your income, commitments, deposit and wider circumstances to give you a clearer idea of your potential borrowing options.

Understanding your budget before you start viewing properties can also help you focus your search on homes that are realistically within reach.