How much can I borrow?

The amount of money you can borrow to buy a property depends on how much you can afford.

When you apply for a mortgage your lender will usually carry out an affordability assessment to help them calculate how much they are willing to lend you.

Each lender has its own way of assessing affordability but most, if not all, will calculate your total income and take into account any credit commitments you have, such as loans and credit cards, and also your monthly expenditure (household bills, living expenses, etc). The resulting disposable income figure will help the lender determine the size of your loan.

In some cases, you may be quoted a loan figure that is based on a multiple of your annual salary, before tax.

Responsible lending

All lenders have a duty to lend responsibly to their customers. This means that your mortgage provider or broker that you have received advice from must consider your ability to repay the mortgage throughout the term of the loan before recommending a suitable mortgage product.

As well as encouraging you to only borrow what you can afford to repay, lenders also have an obligation to:

• provide a clear and concise explanation about the product on offer
• check your creditworthiness before offering or increasing credit

Tips

Work out your mortgage budget

Before applying for a mortgage, you should take some time to work out how much disposable income you have each month as this will give you an idea of the size of the mortgage you can afford. You can then use our mortgage calculator tool to see how much you will have to repay each month at different rates on the amount you wish to borrow. You can also check what your monthly mortgage payment will be if interest rates rise.

Note; your monthly mortgage payment will be based on:

• the amount you borrow;
• the length of the mortgage term;
• the type of mortgage you opt for; and
• the interest-rate deal you choose.

Don’t lie on your mortgage application

When filling out a mortgage application form you must ensure all the information you have provided is accurate and complete. Some people fall into the trap of lying on their application (for example, exaggerating their income) to get a bigger loan. But by doing so, they often end up with a loan that they can’t afford and run the risk of having their home repossessed, as well as a criminal record against their name (providing false information is regarded as fraud!).

If you’ve been advised to lie on your application by a mortgage broker, or anyone involved in your application, you should notify the mortgage lender, the Financial Services Authority (the UK’s financial services regulator) or the police.