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How to Maximise Your Borrowing Amount When Applying for a Mortgage

This guide was last updated 18 June 2024

Securing the maximum borrowing amount on your mortgage can make all the difference when it comes to purchasing your dream home. At Coreco, we understand the importance of maximising your borrowing potential while ensuring your financial stability. Here’s our guide on how to achieve this.

1. Improve Your Credit Score

Check Your Credit Report

Regularly review your credit report to ensure it’s accurate. Correct any errors that could be dragging your score down. There are various places you can do this and some of the most common are listed here:

Experian 

Exqifax

Clear Score 

Credit Karma

Pay Bills on Time

Consistently paying your bills on time is crucial. Set up direct debits or reminders to avoid missed payments, which can negatively impact your credit score.

Reduce Existing Debt

Lowering your credit card balances and paying off personal loans can improve your credit utilisation ratio, a key factor in your credit score.

 

What is your Credit Utilisation Ratio?

The credit utilisation ratio is a crucial part of your credit score, especially when you’re looking to get a mortgage in the UK. Simply put, it measures how much of your available credit you’re actually using. For example, if you have a credit card limit of £10,000 and you’ve used £2,500, your credit utilisation ratio is 25%.

Lenders look at this ratio because it shows how reliant you are on credit. A lower ratio suggests you’re managing your credit well and not overstretching yourself, which makes you a safer bet for a mortgage. Ideally, you want to keep your credit utilisation below 30% to improve your credit score and show lenders you can handle debt responsibly.

Keeping your credit utilisation low is an easy way to boost your credit score and improve your chances of getting a good mortgage deal. If you find your ratio creeping up, try to pay down your balances or ask for a higher credit limit. This way, you’ll look more attractive to lenders and could secure better mortgage rates.

 

2. Increase Your Income

Seek a Pay Rise or Promotion

If feasible, negotiating a pay rise or aiming for a promotion at work can boost your income, thereby increasing your borrowing capacity.

Take on Additional Work

Consider supplementary income sources, such as part-time work or freelancing. However, ensure that these income streams are stable and documented.

Rental Income

If you have a property, consider renting out a room or utilising short-term rental platforms. Lenders often consider rental income when calculating affordability.

See the following guide for advice on What your Debt-to-Income Ration is:

https://www.coreco.co.uk/mortgage-guides/is-it-better-to-clear-loans-and-debt-before-applying-for-a-mortgage/

3. Reduce Monthly Outgoings

Clear Existing Debts

Pay off as much debt as possible to reduce your monthly financial commitments. This can improve your debt-to-income ratio, making you a more attractive borrower.

 

Cut Unnecessary Expenses

Review your monthly expenses and identify areas where you can cut back. Reducing discretionary spending can increase your disposable income.

Consolidate Debts

If you have multiple debts, consolidating them into a single, lower-interest loan or 0% interest credit card can reduce your monthly repayments and improve your affordability.

 

4. Save for a Larger Deposit

Regular Savings Plan

Set up a dedicated savings account and contribute regularly. A larger deposit can reduce the loan-to-value (LTV) ratio, making you eligible for better mortgage rates and higher borrowing amounts.

Use Government Schemes

Take advantage of government schemes like the Lifetime ISA, (Link to guide on ISAs) which can boost your savings and increase your deposit amount.

Gifts from Family

If possible, accept financial gifts from family members to increase your deposit. Ensure these are properly documented, as lenders will require proof that these funds are non-repayable gifts.

 

5. Choose the Right Mortgage Product

Fixed vs. Variable Rates

Consider the pros and cons of fixed-rate versus variable-rate mortgages. Fixed rates offer stability, while variable rates can sometimes offer lower initial payments, which might increase your borrowing capacity. Beware though, variable rate mortgages can be risky as rates can move up as well as down.

Interest-Only Mortgages

For some, an interest-only mortgage might be an option to consider. While riskier, it can lower initial monthly payments, allowing you to borrow more. However, ensure you have a clear repayment strategy.

Longer Loan Term

Opting for a longer loan term can reduce monthly payments, thereby increasing the amount you can borrow. However, remember that this will result in more interest paid over the life of the loan.

 

6. Demonstrate Financial Stability

Stable Employment

Lenders prefer applicants with a stable employment history. Aim to stay with your current employer for at least six months to a year before applying for a mortgage.

Avoid Major Financial Changes

Avoid making significant financial changes, such as switching jobs or taking out new loans, shortly before applying for a mortgage. Stability is key.

Provide Comprehensive Documentation

Ensure you have all necessary documentation ready, including payslips, tax returns, and bank statements. This can expedite the application process and present you as a reliable borrower.

 

7. Work with a Mortgage Adviser

Expert Guidance

Mortgage advisers, like those at Coreco, have access to a wide range of mortgage products, often many that you will only find through a professional broker, and can help you find the best deals to maximise your borrowing amount.

Tailored Advice

We offer personalised advice based on your unique financial situation, helping you navigate the mortgage application process and improve your borrowing potential.

For a friendly chat with one of our down-to-earth mortgage experts please call us on 020 7220 5110 or send us a message.