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How Much Can I Borrow? – A Down-to-Earth Guide from Coreco

This guide was last updated 21 February 2024

Hey there, future homeowner! we’re here to guide you through one of the big questions on your journey to buying a home: “How much can I borrow?”
  1. Understanding Your Budget: It’s More Than Just Numbers

Before we dive into the nitty-gritty of numbers, let’s talk about what you can comfortably afford. Your dream home shouldn’t be a financial nightmare. So, let’s get real about your monthly budget. What are your regular expenses? How much do you love those weekend getaways? Remember, life doesn’t stop when you get a mortgage.

  1. The Magic Formula: How Lenders Think

Lenders aren’t just nosy; they need to know your financial ins and outs to decide how much they’ll lend you. This includes your income, outgoings, debts, and credit score. They use this info to calculate a thing called ‘affordability’. In simple terms, can you afford the monthly payments without living on instant noodles?

  1. Income: It’s Not Just Your Salary

When calculating how much you can borrow, your salary is just the starting point. Got bonuses? Overtime? Maybe a side hustle? Lenders will consider these too. But remember, they’re a cautious bunch. They’ll take a conservative view of your income, especially if it’s variable.

  1. Outgoings: Honesty is the Best Policy

Be upfront about your outgoings. Lenders will look at your regular expenses – think bills, groceries, and those Netflix subscriptions. If you’re spending like a royal but earning like a commoner, lenders might get jittery.

  1. Debt: The Elephant in the Room

Got existing debts? Lenders will take these into account. This includes credit card balances, loans, and even your car finance. The more debt you have, the less you’ll likely be able to borrow. It’s about showing you’re not juggling more than you can handle.

  1. Credit Score: Your Financial Report Card

Your credit score is like your financial street cred. It shows lenders how reliable you are at paying back money. The better your score, the more likely you’ll get a thumbs up for a bigger loan. So, keep on top of those bills!

  1. Deposit: Bigger Can Be Better

The more you can put down as a deposit, the less you need to borrow. And lenders love that. It reduces their risk and can get you better mortgage rates. So, if you’ve got a hefty savings piggy, it’s time to smash it open.

  1. The Rule of Thumb: The 4.5x Salary Guideline

Here’s a rough guide: lenders typically lend up to 4.5 times your annual salary. So, if you earn £30,000 a year, you might get up to £135,000. But remember, this is a ballpark figure. The actual amount can be higher or lower depending on your situation. In fact, depending on your circumstances, you may be able to get over 5 times your income.

  1. Testing Affordability – Can You Handle the Heat?

Lenders will test your affordability, also known as a ‘stress test’. This means lenders will test your affordability to ensure you can keep up your mortgage repayments along with all your other day to day living expenses. They will review your incomings and out goings along with any debts you may have. It’s like preparing for a rainy day, but with finances.

  1. Getting Expert Advice: That’s Where We Come In

Every situation is unique. That’s why chatting with us can make a world of difference. We’ll help you understand how much you can borrow and guide you through the whole process. Think of us as your mortgage sherpa.

Wrapping It Up

Remember, getting a mortgage is a big step. It’s not just about how much you can borrow, but how much you should borrow. Stay realistic, plan for the future, and don’t forget to have a life outside of your mortgage payments. Ready to chat? We’re here to help – with a smile and some solid advice.

You can also use our Mortgage Calculator, to get a rough idea on how much you can borrow here.

Happy house hunting!

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.

Andrew Montlake

Written by Andrew Montlake

Andrew Montlake, better known as Monty, began his journey with an Hons degree in Economics & Politics before starting in the mortgage industry in February 1994. As a main founder of Coreco in 2009, he successfully grew the brand, marketing, and communications, and was made MD in 2019 focussing on the overall vision, strategy, and culture of the company. As Coreco’s media spokesperson, Andrew can often be seen or heard on TV and radio as well as regularly commenting in the national, local, and trade press. He is the author of this acclaimed Mortgage Blog and is well-known for his social media, podcasts, and public speaking. Andrew is now proud to serve as Chairman of the Association of Mortgage Intermediaries, (AMI) as a cheerleader for the Mortgage Industry as a whole and continues to work at the coal face, writing mortgage business and advising clients.

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