How much can I borrow for a mortgage?

How much a mortgage lender will let you borrow comes down to two things: your income and whether you can afford the payments. The first sets a rough ceiling, usually a multiple of your annual income. The second, the affordability check, often sets the real figure, because it takes account of your outgoings, your debts and what would happen to the payments if interest rates rose.

As a starting point, banks will generally allow a maximum of around four-and-a-half times your annual salary¹, and for joint applications lenders usually allow a maximum of 5 times your combined annual income². But these are ceilings, not promises. The amount you are actually offered depends on things like your credit score, your income and outgoings, and the value of the home you want to buy³. All potential borrowing is subject to affordability checks and credit status⁴.

Income sets the ceiling, affordability checks set the figure

The income multiple is where most people start, and it is a useful rough guide, but it is only the first step. Lenders usually allow you to borrow a maximum of 5 times your annual income on a joint application², and generally speaking banks will allow a maximum of around four-and-a-half times your annual salary for a single applicant¹. For self-employed applicants, the usual allowance is up to four-and-a-half times your annual household income, although this varies between lenders¹⁰.

The affordability check is what turns that ceiling into an actual figure. Lenders assess the full range of your income, regular outgoings and any debt, and stress test whether you could still afford the payments if interest rates were to rise¹¹. Since 26 April 2014, mortgage rules have required lenders to make sure you only take out a mortgage you can afford⁵. That means the offer can come in below the income multiple if your commitments are high, and it can be reduced further by the way you are paid, self-employment, your deposit size, your age and whether the borrowing would run beyond your retirement date⁴.

For joint applications, how much you can borrow depends on both incomes¹², and lenders run a credit check on each applicant. If one party has a poor credit score, it could affect the lender's decision². The check is genuinely about spending as well as income: an ombudsman case study about a borrower named Kevin considered whether the lender should have looked at his income and spending and taken into account the nature of his illness¹³, which shows the depth of scrutiny a lender is expected to apply.

The result of all this is that two people on the same salary can be offered quite different amounts. Someone with no dependants, no debts and low commuting costs may be offered the full multiple. Someone with childcare costs, a car loan and credit card balances will usually be offered less, because the lender's calculation starts from the money left after those commitments.

Worked examples: what different salaries could borrow

The clearest way to see how the income multiple works is with real numbers. If you earn £43,000, you might be able to borrow £193,500, which is enough to buy a £200,000 home with a 5% deposit¹⁴. If you earn £35,000, you might only be able to borrow £157,500¹⁴. On a joint application, if you earn £30,000 and are buying alone you might be able to borrow up to £150,000, and if your partner also earns £30,000 that figure doubles to £300,000².

For a household with two buyers earning £30,000 each, so £60,000 in total, you will typically be able to borrow between £210,000 and £300,000, subject to meeting the lender's other affordability criteria¹². The width of that range is worth noticing: the same income can support a difference of £90,000 in borrowing depending on outgoings, debts and the lender's own criteria.

Some borrowers are offered more than the standard multiple. Mortgage lenders may lend up to four-and-a-half times your salary as a general rule, but some borrowers can borrow up to six times their salary¹⁵. The catch is what that does to the payments. A couple with a joint income of £100,000 taking out a £450,000 mortgage at 4.5 times income would face monthly repayments of £2,435.30 at a mortgage rate of 4.24%. If that loan increases to six times income, or £600,000, monthly repayments rise by more than £800 to £3,247.07¹⁶.

That jump explains why lenders are cautious about higher multiples. A bigger loan does not just mean bigger payments, it means much less room in the household budget if anything goes wrong, which is exactly what the stress test is designed to catch.

Your deposit sets the loan-to-value, and 95% mortgages have limits

The deposit does not just reduce the amount you need to borrow, it shapes the deal you are offered. You will usually need a deposit of at least 5% of the property's value to get a mortgage⁶, which means getting a 95% LTV mortgage, although it is possible to borrow more than 95% of the property's value in some cases¹⁷. A 95% mortgage is a loan for 95% of a property's price, where you put down a 5% deposit to cover the rest¹¹. In Scotland, the guidance is that you will usually need at least 5% to 10% of the value of the home you want to buy³.

The loan-to-value ratio, or LTV, is the loan expressed as a percentage of the property's value, and it is the single biggest factor in which deals you can access. The lower the LTV, the wider the choice and the cheaper the rates tend to be. A worked example shows the arithmetic: on a £200,000 property with a £10,000 deposit, the mortgage is £190,000, which is 95% LTV⁷.

A bigger deposit can also raise the income multiple itself. If you have a deposit of 25% or more, some lenders may be willing to offer you a higher multiple¹². The reason is straightforward risk: the more equity you have in the property from day one, the less the lender stands to lose if prices fall or payments stop.

Buy-to-let mortgages work on different rules: you will usually need at least a 20% deposit for one, which means a maximum loan to value of 80%¹⁷. The dedicated guide to loan to value explains how the ratio is calculated and how it changes as you pay the mortgage down.

Maximum loans with a 5% deposit: up to £750,000

Even with a 5% deposit accepted, there are limits on how much you can borrow at that LTV. Some lenders set a maximum loan amount at 95% LTV, often in the region of £500,000 to £750,000⁷. This cap exists because lending a large sum against a small deposit leaves the lender exposed if property prices fall, so they restrict their biggest 95% loans.

In practice this means that if you need a mortgage above roughly £500,000 with only a 5% deposit, the number of lenders willing to consider you shrinks sharply, and above £750,000 at 95% LTV there may be none. The way round it is a bigger deposit: each step down in LTV, from 95% to 90% to 85%, opens up more lenders and higher loan caps.

The Nottingham's guidance gives a concrete example of how the deposit and the loan fit together: on a £250,000 property with a £12,500 deposit, the mortgage amount is £237,500⁷. Multiply that up to a £750,000 property and the same 5% deposit would be £37,500, with a mortgage of £712,500, which is why large 95% loans are reserved for buyers who can show strong affordability as well as the deposit.

Borrowing bands: why the offer is a range, not one number

You will often see borrowing quoted as a range rather than a single figure, and the examples above show why. The same £60,000 household income typically supports between £210,000 and £300,000 of borrowing¹². The range exists because each lender applies its own criteria to the same facts: one may cap the multiple at 4.5 times income, another at 5, and each weighs outgoings differently².

Several factors move you within, or shrink, the range. All potential borrowing is subject to affordability checks and credit status, and depends on regular commitments, pay type, self-employment, deposit, age and borrowing beyond retirement date, as well as the lender's own criteria⁴. For self-employed applicants, the usual multiple is up to four-and-a-half times annual household income, although this varies between lenders¹⁰. For older borrowers looking at retirement interest-only mortgages, the amount you can borrow is based on an affordability assessment looking at income and outgoings once your only sources of income are from pensions, savings or investments, and not employment¹⁸.

Where you are buying can also matter, because the same income goes further in some parts of the country than others, and lenders' appetite can differ by region and property type¹⁵. The practical implication is simple: do not treat the first figure you are given as fixed. Different lenders can offer materially different amounts to the same household, which is one reason people use advisers or apply to more than one lender.

Interest rates change what you can afford

The affordability check is done against the interest rate you would pay, and rates move. On a mortgage balance of £250,000 over a 20-year term at an interest rate of 4.5%, an increase of 0.5 percentage points in the base rate would add £68.27 to the monthly payment, or £819.24 a year¹⁹. That is the kind of change the stress test is designed to anticipate: lenders check whether you could still afford the mortgage payments if interest rates were to rise¹¹.

The type of rate you choose determines how exposed you are to those movements. On a standard variable rate mortgage, your mortgage payments can go up or down²⁰, and a standard variable rate is what you will be transferred onto when a fixed, tracker or discount deal comes to an end²⁰. More generally, if you are borrowing on a variable interest rate, your repayments may change if the bank's interest rate changes²¹. Under Financial Conduct Authority rules on communicating with customers, a change to a rate of interest should always be considered material, except where the balance of the account is less than £100 at the time the firm would provide the notice²².

A fixed rate removes that uncertainty for the length of the deal, but only for the length of the deal. At the end of your fixed period you will need to remortgage, and if you do not you will be moved to your lender's standard variable rate, which is usually much more expensive²³. The guides to fixed rate mortgages, tracker mortgages and standard variable rates explain each option, and what to do when your fixed rate ends covers the transition.

Mortgage term: typically up to 25 years, often longer

The term is the number of years over which you repay the mortgage, and it changes both the monthly payment and the total interest. The mortgage is usually for a long period, typically up to 25 years, and you pay it back by monthly instalments²⁴. Lenders offer different mortgage terms, usually 25 to 30 years⁸, and the Bank of England uses the example of a £130,000 mortgage paid off over 25 years to explain how payments work²⁵.

Longer terms have become more common. In the not-so-distant past most people took out 25-year terms, but terms of 30, 35 and 40 years have become increasingly common for first-time buyers¹. A longer term lowers the monthly payment, which can make a bigger loan affordable, but it increases the total interest paid over the life of the loan. The guide to mortgage terms and extending your mortgage term covers the trade-offs.

The term also interacts with age limits. Lenders will want the mortgage to be repaid by a set age, often around retirement, unless the loan is specifically designed for later life. That is one reason borrowing beyond your retirement date is treated as a special case in affordability assessments⁴. The fixed-rate deals that sit within the term are most commonly two-year or five-year fixes, although three, seven, ten and even fifteen year terms are available²³.

How to find out what you could borrow

The quickest way to get a number is a mortgage in principle, also called an agreement in principle or decision in principle, where a lender looks at your basic details and gives an indicative figure. You will usually need a deposit of at least 5% of the property's value to get a mortgage⁶, and the lender will check your income and outgoings before giving a firm offer. The guide to the mortgage in principle explains what it involves and what it does not commit you to.

An adviser can help you find the figure before you apply. Most mortgage advisers give advice for free, and they charge a fee if you choose to take financial products they have found for you²⁶. Some firms charge differently: some branches of Mortgage Advice Bureau may charge a fee for mortgage advice if you go direct, with the fee up to 1% but a typical fee of 0.3% of the amount borrowed⁴. The guide to mortgage advice: brokers, advisers and applying direct sets out the options.

There are also free tools and sources of help. A MoneyHelper tool can show you the different ways to borrow up to £50,000, compare different borrowing options and help you choose²⁷, though a mortgage will usually be far larger, so for mortgages the more useful free resources are the affordability calculators on lenders' own sites and advice from the services above. Anyone considering being a guarantor on someone else's mortgage is advised to get independent legal advice and talk to a mortgage adviser before agreeing to it²⁸.

Your home is security: what happens if you cannot pay

A mortgage is the most common form of secured lending⁹, and secured means exactly what it says: the loan is tied to your home. If you cannot afford to pay the mortgage, the lender, a bank or building society, could seek possession of the home, which means they can sell it and you must leave. This is sometimes called repossession²⁶. If you are unable to keep up repayments on your mortgage, your home could be repossessed by your lender²⁰.

There are protections in the process. If you miss your mortgage repayments and cannot agree a repayment plan, your mortgage lender might start court action to repossess your home²⁹, and if the property is your home they will normally need a court order to do this⁹. Repossession is a last resort, not an automatic consequence of one missed payment, and lenders are expected to try to agree a repayment plan first. The guides to mortgage arrears, the pre-action rules a lender must follow and repossession in England and Wales explain the process and your rights, with separate guides for Scotland and Northern Ireland.

Help exists at every stage. The government's Support for Mortgage Interest scheme will pay the interest on up to £200,000 of your mortgage, direct to your mortgage lender³⁰, and you can usually claim help with interest payments on loans up to £200,000³¹. If no arrangement is made to pay future mortgage or secured loan payments, those payments will stop and you may begin to run up arrears, which could mean your mortgage lender eventually takes court action to evict you from your home³². Free, impartial help is available from debt charities such as StepChange and National Debtline, and from Citizens Advice.