Mortgage Affordability: How Much Can You Borrow For a Mortgage?

Buying a home is likely the biggest purchase you’ll ever make. To do this, most of us will need a mortgage. So, before you start looking for homes, it’s a good idea to find out how much you can borrow for a mortgage and avoid any disappointments later on.

In this guide, we’ll outline how mortgage lenders calculate borrowing limits, what rules usually apply, and the main factors influencing mortgage affordability.  

How much can you borrow for a mortgage?

Mortgage lenders determine how much you can borrow for a mortgage by first using a multiple of your annual income, followed by a more detailed affordability assessment. As a general rule of thumb, mortgage lenders will let you borrow between 4 and 5 times your annual income. 

If you’re applying on a joint basis, mortgage lenders will use the combined sum of your annual income. For example: 

• A single applicant earning £50,000 per year may be able to borrow between £200,000 and £250,000.

• A couple with a combined income of £80,000 might be able to borrow between £320,000 and £400,000.

Further examples of how much you could borrow for a mortgage

The table below shows how much you could borrow based on different salary amounts and the most common income multiples used by mortgage lenders. 

To find out how much you could borrow for a mortgage based on your annual income figure, you can use our Mortgage Calculator. 

It will also work out what the mortgage repayments could be for the amount you’re looking to borrow. 

How do mortgage lenders check how much you can afford?

Beyond your annual income, lenders will take a deeper look at how much you spend (monthly utility bills, etc.) and what other debt commitments you have (personal loans, credit card debt, etc.) to make sure you can comfortably afford the monthly mortgage repayments. 

Here's what the process involves.

Proof of income

Lenders typically request:

• Payslips from the last three months or your latest P60 tax statement  (for employed applicants).

• Last three years' certified accounts or SA302 tax calculations (for self-employed applicants).

• Last 3 months' bank statements.

• Evidence of additional income, such as bonuses, benefits or rental/investment income.

It’s possible for a mortgage lender to request a copy of your employment contract to confirm your yearly salary and the terms of your contract. This could also be used as evidence of your income if you cannot produce enough recent payslips. 

Credit check

Mortgage lenders will review your credit history to check your credit score, which indicates how reliable you’ve been with your financial commitments over the last six years. A strong credit score can boost your borrowing potential, while a poor score may limit it.

To learn more, read our guide: What Credit Score Do You Need For a Mortgage?

Debt-to-Income Ratio (DTI)

Your total monthly debt repayments will be taken into consideration so a lender can check that you have enough disposable income to cover your mortgage repayments. The type of debts included for this calculation are -  mortgage payments, personal or car loans, student loans, overdrafts, credit card bills and child maintenance. 

For example, if your total debt repayments each month are £1,000 and your gross monthly income is £2,500 then your debt-to-income-ratio (DTI) is 40% (1,000/2,500 x 100 = 40). 

Don’t be too concerned if your current DTI is higher than the figures used here, as plenty of mortgage lenders will still consider your application. However, it may affect how much you can borrow if your monthly debt commitments are too close to your total income. 

Stress testing

Stress testing is when a mortgage lender checks whether you have enough income to cover your repayments if interest rates were to rise by a certain amount during the term of your mortgage loan. 

Since August 2022, mortgage stress testing has no longer been mandatory. However, some mortgage lenders have continued the practice voluntarily as part of their affordability assessments. 

To find out more about the checks mortgage lenders will make, read our guide: What Mortgage Lenders Look For In Applicants. 

What is the maximum you can borrow for a mortgage?

The maximum amount you can borrow for a mortgage will vary from lender to lender and depend mainly on your income and outgoings. Other factors, such as your credit rating and age, can indirectly affect the number of lenders willing to consider your application.

Generally, most UK mortgage lenders will cap borrowing at 4.5 times your annual income. This is based on guidance from the Financial Conduct Authority (FCA), which ensures a lender takes appropriate steps to provide you with a mortgage you can afford. 

However, getting a mortgage based on 5 times, or in some circumstances, 6 times your income with certain specialist mortgage lenders is possible. To qualify for these income multiples, you would likely need the following: 

• A low debt-to-income ratio

• High deposit (15%-20% minimum)

• Excellent credit score

Which mortgage lenders will consider borrowing based on 6 times salary?

Several specialist mortgage lenders, including Kensington Mortgages, Vida Homeloans, and Perenna Bank, will consider using a six-times-salary calculation to determine how much you can borrow for a mortgage. 

There are even mortgage lenders available who will work on no maximum. However, in all of these cases, the lender will rely upon a robust affordability assessment test—reviewing your debt-to-income ratio, credit score, and personal circumstances (employment, age, etc.)- to decide how much you can borrow. 

It’s important to note that specialist mortgage lenders can usually be accessed only through a mortgage broker (like us!) and are not available on the high street. 

We already have strong working relationships with several specialist lenders who could offer higher income multiples and are more open to accepting complex incomes when assessing how much you can borrow for a mortgage. 

If you make an enquiry, one of our Mortgage Experts will get in touch to discuss your situation and see how we could help get the mortgage amount you need.  

How much can you borrow if you’re self-employed?

If you’re self-employed, the amount you can borrow for a mortgage is calculated in much the same way as someone who is employed - using a multiple of your income and an in-depth affordability assessment. However, the key difference is the income you declare is dependent upon your trading status. 

So, if you’re a sole trader or in a partnership, your income is based on an average of your net profits over the last three years (this would usually also be the case for freelancers). If you’re a limited company director, you can use your salary plus dividends or retained profits for this calculation. 

Some mortgage lenders are more open to considering self-employed applicants than others, which is why it’s recommended to use the services of a mortgage broker. They will help identify the lenders who are better placed to offer you a mortgage, saving you time and, potentially, some money, too. 

What factors affect how much you could borrow for a mortgage?

Lenders take several factors into account when assessing mortgage affordability, namely: 

• Credit score. A higher credit score improves your chances of securing a larger mortgage at better rates. If any bad credit issues have affected your rating, it’s still possible to get a mortgage, but you may have to pay higher interest rates and accept lower borrowing limits. 

• Debt levels. Higher existing debts (e.g., loans, credit cards) could reduce the amount you can borrow, as lenders must account for these repayments when assessing what you can comfortably afford for a mortgage. 

• Mortgage deposit. A larger deposit reduces the loan-to-value (LTV) ratio, potentially increasing your borrowing limit. However, securing the mortgage you need with a low deposit is still possible if the rest of your application is strong. 

• Job security. A stable job with regular income provides more comfort to mortgage lenders. But, there are several specialist lenders who will consider you for a mortgage with a more complex income.

• Living expenses. High monthly living costs (childcare, etc.) will reduce your disposable income and could limit how much you could borrow. 

• Age. Older applicants could face stricter borrowing limits, as the mortgage term may be lowered to account for any drop in income after retirement. 

• Property Type. Most mortgage lenders view non-standard properties (apartments or barn conversions) as a higher risk, meaning you may need a higher deposit and be limited to how much you can borrow. 

Mortgage declined due to affordability

If you’ve recently been declined for a mortgage due to affordability, it’s most likely because your disposable income wasn’t enough to satisfy the lender you could comfortably afford the amount you wanted to borrow. This could be a result of having too many debts or, possibly, your lender wouldn’t take all of your income sources into account. 

Rather than try and re-apply straight away with another lender, the wise move at this stage would be to speak with a mortgage broker who has experience in these types of situations. They can advise you on the right steps to take and help you fix the issues that may have caused the previous rejection. Your broker will also help you search for mortgage lenders who could be better suited to consider your application. 

Once you’ve taken these steps, you’ll hopefully be in a better position to secure the mortgage you need the next time you apply.