If you are starting to look at homes, one question usually comes first: how much mortgage could I get? The answer shapes your budget, where you search and the kind of home you can realistically aim for.
Nobody can give you an exact figure from your salary alone. Each lender looks at your whole financial picture and applies its own criteria, so two lenders can reach different answers for the same person. That is one of the reasons people speak to a mortgage adviser: to understand how different lenders may view the same income, and to arrive at a realistic budget before they start making offers.
This guide explains, in general terms, what UK lenders look at, how you can work out a rough figure for yourself, and how Step by Step Financial Solutions can help you make sense of the differences. This article is general information, not personal advice. An adviser will still need to look at your individual circumstances before recommending anything.
How much mortgage could I get? The quick answer
How much mortgage can I get? It depends mainly on five things:
- Your income – what you earn, how you earn it and how secure it is.
- Your outgoings – regular bills, living costs, and commitments such as loans, credit cards and car finance.
- Your deposit – how much of the purchase price you pay yourself, which sets your loan to value (LTV). A 5% deposit is a common starting point on many deals, but it is not the only option. In some cases, and subject to criteria, 100% loan-to-value mortgages may also be available.
- Your credit history – how you have managed credit in the past.
- The type of mortgage and the property – for example, the term, whether the rate is fixed, and whether the lender is happy to lend on the specific home.
As MoneyHelper puts it, you will only know what you can borrow when you apply for a mortgage. Before that, a lender or broker can give you an estimate. So treat any figure you see online, including from a calculator, as a starting point, not a promise.
How UK lenders work out how much you can borrow for a mortgage
If you are asking “how much can I borrow for a mortgage?”, it helps to know how lenders think. Mortgage lending in the UK is regulated, and lenders have to check that a mortgage is affordable for you before they lend. GOV.UK explains that the affordability assessment takes into account your income and your current outgoings, and also considers changes that might affect whether you could keep up repayments, such as interest rates changing or being made redundant.
Your income
Lenders start with what you earn. MoneyHelper lists the kinds of income a lender may consider, including your basic income, pension or investment income, maintenance from an ex-partner, and other earnings such as overtime, commission, bonuses, a second job or freelance work. Lenders differ in how much irregular income they count, and you will usually need payslips and bank statements to back it up. If you buy with someone else, lenders normally look at both incomes and both sets of outgoings.
This is already a point at which two lenders can come to different figures. One may count all of your overtime or bonus, another only a proportion, and a third may leave irregular income out until they have a longer track record. If you are a limited company director, the difference can be even more marked, because lenders do not all treat salary, dividends and company profits in the same way. That is why looking at only one lender, including your own bank, can give an incomplete picture.
Your outgoings and commitments
Income is only half the picture. Lenders also look at what you already spend each month. That includes credit card repayments, loans and credit agreements (such as a car lease), child maintenance, bills, Council Tax and property charges such as service charges and ground rent. They may also ask about everyday spending such as travel, food shopping, childcare and subscriptions, and check recent bank statements against the figures you give.
This is why two people on the same salary can be offered very different amounts. Imagine two households, each earning £50,000 a year. One is paying car finance and a personal loan, and has higher everyday spending. The other has few regular commitments. A lender will treat less of the first household’s income as available for a mortgage, even though the salary on paper is the same. The government’s How to buy a home guide notes that monthly repayments on credit cards and loans are factored into what you can borrow, so you may want to consider paying them down before you apply.
What happens if interest rates rise?
Lenders also look beyond today’s payments. The FCA explains that lenders must take account of the impact of likely future interest rate rises on your mortgage payments when they assess affordability, often called the “stress test”. In general, this applies over at least the first five years. Where the interest rate is fixed for five years or more, lenders are not required to apply that particular interest rate stress test. That does not mean they skip the affordability assessment: they will still check that the payments are affordable for you. Each lender sets its own basis for this test within the FCA’s rules, which is another reason figures vary.
Your credit history
GOV.UK notes that your credit score can affect whether you can get a mortgage and the kinds of deals you are offered. Check your credit report before you apply so you can correct any mistakes.
Income multiples: a rough guide only
You may have heard that you can borrow a set multiple of your salary. Many UK lenders use income multiples when assessing mortgage applications, with 4.5 times annual income often used as a general starting point. MoneyHelper notes that most people are offered less than the maximum a lender might consider. However, some lenders may offer higher multiples, depending on your income, employment, financial commitments and their individual lending criteria. This is why the amount you could borrow may vary significantly between lenders.
Purely as an illustration of that sum: 4.5 times a household income of £50,000 would be £225,000. That is a worked example of the arithmetic, not a cap and not a figure you should expect to be offered. Your outgoings, credit history, deposit and the lender’s own criteria can all mean the real number is lower or, with some lenders and in some circumstances, higher. What a lender will lend is also not always what is comfortable for you to repay.
How to estimate how much mortgage you can get
Wondering “how much can I borrow?” Mortgage calculators and a few simple sums can give you a useful ballpark before you speak to anyone:
- Add up your income. Use your gross annual income, plus your partner’s if you are buying together. Note any income that is irregular, such as bonuses or overtime.
- List your monthly commitments. Include loans, credit cards, car finance, childcare and maintenance.
- Check your deposit. Work out how much you can put in after setting money aside for buying costs such as solicitor’s fees, surveys and any applicable property transaction tax, such as SDLT in England and Northern Ireland, LBTT in Scotland or LTT in Wales.
- Run the numbers. Use a calculator to get a rough borrowing range, then check what the monthly payments might look like.
- Stress-test your own budget. Ask yourself whether you could still pay if interest rates went up, if your income dropped or if your circumstances changed, for example after having a baby.
SBS Finance has three free tools that can help:
- The mortgage borrowing calculator gives a quick estimate based on your income and deposit. It uses a simple calculation based on 4.5 times your gross annual income. That is a rough starting point only, not a prediction of what a particular lender will offer.
- The affordability calculator goes further by taking your outgoings and property details into account.
- The mortgage repayment calculator shows how different loan amounts and terms might affect monthly payments.
Calculator results are estimates only. They are not a mortgage offer, and they do not confirm what you can borrow. Actual borrowing depends on lender criteria, your credit history and your individual circumstances.
If you are starting to view properties, it is worth arriving at a realistic budget first. An adviser can help you understand a range across different lenders, rather than a single calculator figure, before you set your heart on a home that may not fit your finance.
First-time buyers, home movers and remortgaging
The same affordability principles apply whatever your situation, but the questions you need to think about are slightly different.
First-time buyers
As a first-time buyer, your deposit usually comes from savings, sometimes with family help, and it has a big effect on your options. Knowing your budget before you start viewing helps you avoid falling for a home you cannot finance. The government’s How to buy a home guide suggests getting a mortgage decision in principle before you begin viewing properties.
Budget for more than the deposit too: solicitor’s fees, surveys, search fees, moving costs and any applicable property transaction taxes. Our first-time buyer mortgage advice page explains how we support first-time buyers from the first conversation to completion.
Home movers
If you already own a home, the equity you have built up may form part or all of your deposit for the next one. How much you can borrow will still depend on a fresh affordability assessment based on your income and outgoings today, not when you took out your current mortgage.
You may also be able to take your existing mortgage with you (porting), but not all mortgages are portable, and any extra borrowing will need to be assessed. Our home mover mortgage page covers this in more detail.
Remortgaging
If you already have a mortgage and are approaching the end of a deal, it helps to be clear about two different routes.
A product transfer is a switch to a new deal with your current lender. If you are not increasing the loan and the main terms are not changing in a significant way, your lender may not carry out a full affordability assessment again. That is not guaranteed, and it depends on the lender and the product.
A remortgage is a move to a new lender. This normally involves a new affordability assessment, a credit check and a valuation of the property, whether you are simply switching deals or looking to borrow more.
If you want to borrow additional funds, your lender may offer a separate further advance, or you may need to consider remortgaging. Additional borrowing is normally subject to an affordability assessment and the lender’s criteria.
At Step by Step Financial Solutions, we can help you compare a product transfer with a remortgage, so you can see which may suit you. We do not charge a service fee for a product transfer with your current lender. You may have to pay an early repayment charge to your existing lender if you leave a deal early. We cover this in our remortgage guide and on our remortgage advice page.
How much mortgage would I get if I'm self-employed?
Being self-employed does not mean you cannot get a mortgage, but you will usually need to show more evidence of your income. MoneyHelper says self-employed applicants will need to provide bank statements, business accounts and details of the Income Tax they have paid, and that you are typically asked for two or three years’ worth of tax returns and business accounts.
Documents lenders often ask self-employed applicants for include:
- SA302 tax calculations and tax year overviews. GOV.UK explains that you can get evidence of your earnings (your “SA302”) for the last four years once you have sent your Self Assessment tax return, and that you can also get a tax year overview for any year. You can print these yourself through HMRC’s online services or your commercial software, but not until 72 hours after you sent your return, and GOV.UK advises you to check that your mortgage provider accepts documents you have printed yourself.
- Business accounts, often prepared by an accountant.
- Bank statements, both personal and business.
- Proof of identity and address.
Lenders can assess self-employed income differently for sole traders, partners and limited company directors, so the figure one lender will lend can differ from another’s.
If you are a limited company director, lenders may calculate your income differently. Some assess salary and dividends, while others may consider salary and your share of company profits, subject to their criteria. This matters in particular if you take a modest salary and dividends and leave profits in the company. Looking only at your salary, or only at one lender’s method, can understate what may be available. Choosing the right lender can make a significant difference to your borrowing options.
You will often be asked for two or three years of tax returns and business accounts, but not every lender requires that length of history. Some will consider applicants with a shorter trading record, provided their criteria are met. Our self-employed mortgage page explains how we help self-employed clients prepare.
Deposit and LTV: how much mortgage loan can I get?
Your deposit and the amount you borrow are two sides of the same calculation. Your loan to value (LTV) is the mortgage as a percentage of the property’s value. MoneyHelper explains that most mortgage deals require a deposit of at least 5% of the property’s value, and that a larger deposit usually gives you access to more mortgage deals, often at lower rates. It says the cheapest deals are typically available with a deposit of at least 40%.
A 5% deposit is a common minimum on many deals, but it is not the only path. If you are looking at buying with a very small deposit, or none at all, some 100% loan-to-value mortgages may be available, subject to criteria. Our guide to 100% loan-to-value mortgages covers that separately.
Here is how the arithmetic works on an example purchase price of £250,000. This is a worked example of the maths only. It is not a quote and does not mean a lender would lend these amounts to you.
| Deposit | Deposit amount | Mortgage needed | Loan to value (LTV) |
|---|---|---|---|
| 5% | £12,500 | £237,500 | 95% |
| 10% | £25,000 | £225,000 | 90% |
| 25% | £62,500 | £187,500 | 75% |
| 40% | £100,000 | £150,000 | 60% |
A bigger deposit means you borrow less for the same home and may open up a wider range of deals, sometimes at a lower rate. It does not automatically increase how much a lender will let you borrow. Affordability is still based on your income and outgoings. In practice, your budget is usually limited by whichever is lower: what your deposit allows, or what your affordability allows.
Agreement in principle vs a full mortgage offer
Once you have a rough figure, the next step is often an agreement in principle (AIP). You may also see it called a mortgage in principle (MIP) or decision in principle (DIP). They all mean broadly the same thing.
MoneyHelper describes it as a written document from a lender stating how much it might be willing to lend you. It is not a formal offer. A full mortgage offer comes later, after you have found a property, made a full application and the lender has completed its checks, including a valuation of the property.
| Agreement in principle | Full mortgage offer | |
|---|---|---|
| When | Usually before or while you search for a home | After your offer on a property is accepted and you make a full application |
| What it is based on | The information you give and, usually, a credit check | Verified documents, the lender’s required credit checks and the lender’s valuation of the property |
| Is it a guarantee? | No. It is an indication only. | It is the lender’s formal offer, but it can still be withdrawn in some situations, for example if your circumstances change. |
| How long it typically lasts | Often 30 to 90 days, though this varies by lender. | Often around six months, though some lenders offer a longer period. Always check the lender’s terms. |
- Credit checks. Some lenders use a soft credit search for an AIP, which does not affect your credit score and is not normally visible to other lenders. Others may carry out a hard search, which can affect your credit score. GOV.UK’s How to buy a home guide recommends finding out which type a lender uses, as too many hard enquiries could affect your credit score.
- You are not tied in. Getting a decision in principle from one lender does not mean you have to take out a mortgage with that lender.
- The property matters too. MoneyHelper points out that even with an AIP, a lender can still decline an application if it is not comfortable with the property itself.
At Step by Step Financial Solutions, we do not charge for an Agreement in Principle.
Frequently asked questions
How much mortgage could I get on my salary?
There is no fixed answer based on salary alone. Lenders look at your income alongside your outgoings, credit history, deposit and the mortgage you want. 4.5 times annual income is often used as a general starting point, and many people are offered less. Some lenders may consider a higher multiple, depending on their criteria and your circumstances. Treat any income multiple as a rough guide only, not a figure you will be offered.
Does an agreement in principle guarantee I will get a mortgage?
No. An agreement in principle is an indication of how much a lender might be willing to lend, based on the information you have given. The lender still needs to check your documents, run its full checks and value the property before it makes a formal mortgage offer.
Will finding out how much I can borrow affect my credit score?
A calculator simply gives you an estimate from the figures you enter. When you apply for an agreement in principle, the lender will usually run a credit check. Some use a soft credit search, which does not affect your credit score and is not normally visible to other lenders. Others may carry out a hard search, which can affect your credit score. It is worth asking which type will be used before you apply.
Can I get a mortgage if my bank says I cannot borrow enough?
Possibly, but not always. Your bank can only offer what fits its own criteria. Another lender may assess the same income, overtime, bonuses or self-employed figures differently, and may arrive at a higher or a lower amount. A mortgage adviser can review your circumstances and compare suitable options across the market. That does not mean a higher figure will always be available, and we will be honest with you if it is not.
Can I borrow more if I have a bigger deposit?
A bigger deposit lowers your loan to value and can give you access to more mortgage deals. It does not automatically increase your borrowing capacity. The amount a lender will lend still depends on whether the monthly payments are affordable for you based on your income and outgoings.
What documents do I need if I am self-employed?
Lenders often ask for SA302 tax calculations and tax year overviews, business accounts, bank statements, and proof of identity and address. MoneyHelper says you are typically asked for two or three years of tax returns and business accounts. Exact requirements vary by lender, and some will consider a shorter trading history where their criteria are met.
Is a mortgage calculator result what a lender will offer me?
No. A calculator gives an estimate based on the figures you enter. Our borrowing calculator, for example, uses a simple 4.5 times income estimate. A lender applies its own criteria, verifies your income and outgoings, checks your credit history and values the property before deciding how much to lend.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for arranging a mortgage and the precise amount will depend on your circumstances i.e credit history, employment record. This will typically be £395 for purchases, remortgages £199 and we will not charge for a Product Transfer. We will provide you written confirmation of your fee prior to the commencement of any chargeable activity.
Step By Step Financial Solutions Ltd is an appointed representative of Stonebridge Mortgage Solutions Limited which is authorised and regulated by the Financial Conduct Authority.