Next Steps
Deciding On How Much To Borrow
The main influence on the amount of money that you will
be able to borrow is your gross income. You will usually
have to show evidence of your salary in the form of payslips,
or at least a reference from your employee that confirms
your salary details. If you are self-employed and going
for an orthodox mortgage, you will usually need a reference
from your accountant and three years worth of audited figures.
Lenders vary quite a lot in the multiples that are used
to work out how much money you can have. The standard income
multiples that are used are around three and a half times
an individual salary. When calculating the maximum that
will be lent to a couple, it is usually in the region of
two and a half times the joint salary, or 3 times the higher
salary plus the lower salary.
What counts as part of my salary?
Commission, overtime and bonuses are not normally considered
as part of your gross income by the lender, unless you receive
them at a guaranteed level. Any supplementary payment that
is not guaranteed but which can be shown to remain above
a certain level over a period of time can sometimes be taken
into account, though many lenders will only incorporate
a portion of this money into the calculation.
When can I borrow more than that?
Many lenders stick to this type of income multiple formulae
quite rigidly, but not all of them. Your relationship with
the lender may influence the amount they are willing to
lend you. So might your credit rating, your stage of career,
the amount of equity you already own in your home and so
on. Even with high street lenders, you can sometimes push
your borrowing level up to four times your salary or three
times your joint salaries.
To further confuse matters, an increasing number of lenders
now use an affordability rating to assess how much money
they will lend you. This means that they don't simply take
your salary details and multiply them by a factor to come
up with a ceiling on your borrowing. They do take into account
your income, but also your monthly expenditure and how much
you have available for repayments.
To qualify for a mortgage using an affordability rating,
your repayments each month must not go over a certain proportion
of your take home pay minus your expenses. The lenders that
use this type of calculation differ in the exact methods
they use, but it is perfectly possible to end up with a
loan of five times your salary. In special circumstances,
it can be even higher but generally only if a customer has
other assets to cover the loan in the event that they are
unable to repay.
It is impossible for us to tell you how much you will be
able to borrow. Shop around, try a few different types of
lender and unless you are being very unrealistic, eventually
you should be offered a loan value that suits your needs.
