How much can you borrow?
Our mortgage calculator shows you how much you could borrow based on your income
A mortgage in principle, also known as a decision in principle, is the maximum loan amount a lender is willing to offer based on your income, and expenses. Together with your deposit it gives you an idea of the price of property you can afford
Once you find a suitable property, submit a full mortgage application to the lender for a detailed assessment and approval. The mortgage provider will want a valuation completed to be confident that the property is worth the amount it's willing to lend
After the lender approves your mortgage and you purchase the property, you'll make regular monthly repayments, including interest, over the agreed loan term until the mortgage is fully repaid
Most first-time buyers will take advantage of better rates by locking themselves into a mortgage for a set period, often 2, 3 or 5 years. As you come towards the end of the initial period, it’s time to look to remortgage to a better deal
You’ll be classified as a first-time buyer if you – and anyone you are buying with – are purchasing your first residential property. If you’ve owned a house or flat before in the UK or abroad, you're unlikely to be eligible for many of the schemes designed to help first-time buyers on to the property ladder.
This is true whether you owned an entire property or a share in one. For example, as a joint tenant or under a shared ownership scheme. What’s more, you may not qualify as a first-time buyer if you’ve inherited a home, even if you’ve never lived there and it’s since been sold.
Likewise, if someone else – who already owns their own home (i.e. a parent, guardian) – is purchasing the house for you, you won’t be classified as a first-time buyer. That said, different schemes will vary in their rules and criteria, so read any small print before applying.
The greater the cash savings you can put down towards your first home purchase, the less you'll need to borrow through a mortgage. This will also mean you should have a lower loan-to-value ratio and should give you access to better rates.
A mortgage broker will show you how much you can afford to borrow for a first-time buyer mortgage. From this, you can work out what sort of property you can afford in your area – ideally before you start house hunting.
Your level of deposit – expressed as a percentage of your property value – is important. It represents the level of risk to the bank or building society lending you the money. For example, if your first home purchase has a value of £250,000 and you’ve saved £25,000 to pay towards it in cash – that’s a 10% cash deposit.
It means you’ll need to borrow £225,000 in a mortgage from the bank, so the loan to value – or LTV – of the mortgage is 90%.
In contrast, if you’ve saved £50,000 that’s a 20% deposit – so the mortgage (at 80% LTV) you need is less, and this represents less risk to the lender. A bigger deposit will usually also give you access to more competitive mortgage rates. While you can get a mortgage with a 5% deposit, saving up more can be beneficial.
For example, with a 10% or even 15% deposit, you’ll usually have more choice of mortgage deals and at lower rates. This could save you a lot of money over the course of your mortgage.
There are a number of schemes designed to help first-time buyers.
These include the First Homes Scheme – which offers a 30% discount on the market value of new build homes – but it’s only for eligible first-time buyers, with priority afforded to key workers and army veterans.
In addition, many mortgage lenders will lend to any home buyer who may only have a 5% deposit.
This is under the 95% mortgage scheme, where the government has agreed to underwrite a part of the loan.
Eligibility criteria are in place too. For example, it is only available on property purchases worth up to £600,000.
If you’re aged 18–39 and are saving up for a deposit to buy your first home, you can save into a Lifetime ISA where cash is topped up with a 25% bonus by the government.
You can pay up to a maximum of £4,000 a year into the account, which can be a cash ISA or a stocks and shares ISA, and claim an annual government bonus of up to £1,000. You can use this money to buy a property costing up to £450,000.
A fixed-rate mortgage will keep your monthly mortgage repayments at a set rate for two, three, or five years – although in some cases, you can fix it for as long as 10 years. Once the deal has ended, it’s usually best to switch mortgages to avoid paying your lender’s standard variable rate (SVR), which is likely to be much higher than your fixed rate deal.
A discounted variable-rate mortgage usually lasts for between two and five years and is fixed at a set percentage below your lender’s SVR. However, your mortgage rate will change if the SVR changes. So it's important to bear that in mind when you're doing your sums.
With an offset mortgage, you can use a linked savings account to offset the amount you owe on your mortgage. So instead of earning interest on your savings, you pay less interest on your mortgage. This is because your savings balance offsets your mortgage debt – and you only pay interest on the debt balance.
A guarantor mortgage involves a third party, typically a family member, guaranteeing the repayments if you fail to meet them. This provides additional security for the lender, allowing borrowers with limited income or deposit to access mortgage financing.
An interest-only mortgage is a type of loan where you only need to repay the interest charges each month, without reducing the original amount borrowed. This means your monthly payments are lower, but it's essential to have a plan in place to repay the capital at the end of the mortgage term.
Save as much money as possible for a deposit so you can borrow less and secure a better mortgage rate
Improve your credit score to be eligible for the most favourable borrowing terms from lenders
Make sure you have funds available to cover application fees, surveys and legal costs
Decide between fixed-rate, variable-rate or other options based on your preferences and the deals on offer
Decide on the duration of any introductory rate or discounted period, typically 2, 3 or 5 years
Choose a suitable term, considering how much you can afford and are prepared to pay back overall
Assess whether the monthly repayments fit within your budget and financial stability
Review terms and conditions regarding overpayments or clearing the mortgage early
Check if the mortgage is portable in case you want to move house
If you’re planning to buy your first home, the golden rule is to build up as big a deposit as you can. While it is likely to involve careful budgeting, there are government schemes available - such as the Lifetime ISA - to help you do this. Remember, the sooner you start putting money away, the better your chances of building your pot and finding a property you can afford. You might be able to get a 100% mortgage, meaning you need less savings to begin with, but these products usually cost more in the long run."
When you apply for a mortgage, the lender will assess your affordability by looking at your annual salary and any other income you receive, as well as your outgoings, including credit card and loan debts, household bills, childcare, and general living costs.
The lender will also check your credit history to see whether you’re a reliable borrower and will then use this and its affordability assessment to decide how much you can borrow.
The size of your cash deposit towards the home purchase will also have an impact. Mortgage providers usually have a maximum loan-to-value (LTV), or percentage of the property value, they’re prepared to offer.
If, for example, you want to buy a £200,000 property on an 85% LTV mortgage, you’ll need a 15% deposit, which comes to £30,000.
Yes, you can. But, of course, you’ll need to prove your income in order to take out a mortgage.
It's likely you’ll have to provide at least two years of tax statements or company accounts that have been undersigned by an accountant. If these documents show consistent or increasing profit, you’ll be one step close to securing your first-time buyer mortgage.
When you’re ready to start viewing properties, it’s a good idea to get a mortgage agreement in principle from one or more lenders.
This will give you a good idea of how much you can borrow. Estate agents may also want to see this to ensure you’re serious about buying.
Before going ahead with an agreement in principle application, check whether the lender will carry out a credit check. This will usually appear on your credit file.
An agreement in principle is generally valid for between 30 and 90 days and is an estimate rather than a guaranteed mortgage offer.
When you buy a property, you might also need to pay various fees and charges upfront.
It's usually a good idea to instruct a conveyancer or solicitor to help with your purchase, and they'll inform you of the charges you need to pay.
In some cases, some of the legal fees are included as part of your mortgage but not always. Extra costs are likely to include:
You may also need to buy essential items, such as appliances and furniture, and cover the cost of a removal service – or at least a rental van.
If you’re struggling to borrow enough to get onto the property ladder, one way to raise a larger deposit and get a bigger mortgage is to buy a home with your partner or with one or more friends or family members.
You can take out a joint mortgage as joint tenants, which means all parties own an equal share of the property, or as tenants in common, with which the split can be calculated based on how much each person puts in.
Either way, it’s a good idea to seek independent legal advice before taking out a joint mortgage to make sure you all agree on what happens to the property should one of you want to sell or leave.
If you’re a first-time buyer earning less than £80,000 a year (or £90,000 in London), you could be eligible for a shared ownership mortgage.
With this type of home loan, you buy a percentage of a property – say 25% and pay rent on the rest.
This can be a good option if you only have a small deposit, as you only have to find say 10% of the value of the share you buy.
You can often increase the share of the property you own when it becomes affordable, while stamp duty can usually be deferred until you own 80%.
A guarantor mortgage is another way to take out a larger mortgage for your first home. With a mortgage of this kind, the guarantor – most likely a parent or close family member – promises to cover the mortgage repayments if you cannot.
Although the guarantor’s name won’t go on the property deeds, it’s still a good idea to seek independent legal advice before asking someone to guarantee your mortgage – just to make sure everyone understands the rules.
Mortgages that allow you to borrow the full value of the property are rare and come with strict eligibility criteria, such as proving the average rent you’ve been paying for six months or more exceeds the potential mortgage repayments.
There is also an increased risk of negative equity, which means that if the price of the property were to fall, you may owe more to the lender than the property is worth. This can prove problematic if you want to move.
The loan-to-value (LTV) ratio is a financial term that represents the proportion of a property's value that is financed through a mortgage loan.
It is calculated by dividing the loan amount by the property's value or purchase price and is expressed as a percentage.
For example, if you purchased a property for £200,000 and borrowed £140,000 through a mortgage the LTV would be 60% (£140k divided by £200k).
This comes down to personal preference. Hiring a solicitor or conveyancer early in the homebuying process ensures that you have professional legal representation throughout the transaction. They can guide you through the legal aspects, review contracts, conduct searches, and provide advice on various matters.
Alternatively, if you use a broker to help secure a mortgage they might be able to help connect you to a conveyancer who can support you with the legal work when necessary. Whichever route you choose, it’s wise to compare costs, levels of service and customer reviews before making a final decision.
Other mortgage types to consider
Other mortgage types you might want to consider if you’re looking to remortgage include:
Capped-rate mortgage – a capped-rate mortgage is a variable-rate mortgage, but there is a limit to how high the rate can go. This can be useful if you want a variable-rate mortgage, while avoiding unaffordable payments if the rate rises
Discounted mortgage – a discounted mortgage is another type of variable-rate mortgage. This offers a discounted rate on the lender’s standard variable rate for a certain period of time
Offset mortgage – an offset mortgage helps to reduce the overall interest you pay by offsetting your savings against the outstanding balance of your mortgage. But this means you won’t be gaining any interest on your savings during the deal
Fixed-rate mortgages have an interest rate that stays the same for a set period. This could be anything from two to ten years. Your mortgage payments are the same every month and you don't need to worry about fluctuations in interest rates.
If you choose to leave the deal before the end of the fixed term, most will charge you a penalty. This is known as an early repayment charge (ERC).
Interest rates adjust periodically with a variable-rate mortgage, which means repayments may change throughout the loan term. Usually, the interest rate changes in relation to the Bank of England base rate. This is very influential on variable interest rates, as is the base rate of each lender.
For standard variable-rate (SVR) mortgages, each lender has a SVR that they can move when they like. In reality, this tends to roughly follow the Bank of England's base rate movements. SVRs can be anything from two to five percentage points above the base rate (or higher). They can also vary massively between lenders.
The other type of variable mortgage is a discount mortgage. Rather than being linked to the Bank of England base rate (like a tracker mortgage), discounts are linked to the lender's standard variable rate (SVR). For example, if the SVR is 4.50% with a discount of 1%, the payable mortgage rate is 3.50%. If the SVR rose to 5.50%, the pay rate would rise to 4.50%.
The problem with discounts is that SVR changes are at the lender's discretion. So, your mortgage payments could change even if there has been no alteration in the Bank of England base rate. What's more, even if the SVR changes following a move in the base rate, there is no guarantee that it will increase or decrease by the same amount.
As a result, trackers are usually seen as more transparent than discounted deals. They are also often seen as being fairer for the borrower.
For example, when the base rate fell from 5.00% to 0.50% between October 2008 and March 2009, Lloyds TSB was the only top-20 lender to reduce its SVR by the full 4.50%. All the others cut their rates by less.
When the Bank of England raised the base rate from 0.25% to 0.5% in November 2017, anyone who wasn’t on a fixed-rate mortgage was at risk of seeing their repayments increase. A number of leading mortgage lenders followed and increased their tracker and/or SVR rates a month later.
Most mortgage deals carry arrangement fees, which can vary from a few hundred pounds up to a couple of thousand.
Also bear in mind that these set up costs can sometimes be made up of two fees. Lenders may charge a non-refundable booking fee, which is effectively a product reservation fee. If your remortgage falls through and you don’t end up taking the mortgage deal, you won’t get this fee back.
The second type of fee is an arrangement fee which you pay on completion of the mortgage, so you won't have to pay it if, for any reason, you don't take the mortgage.
Calculate how early you could pay off your mortgage. But make sure you read our mortgage overpayment guide first, as overpaying isn’t the right move for all homeowners.
Remember to always factor additional fees into the overall cost of any deal. Even if a lender is offering a seemingly unbeatable rate, steep fees could mean that it actually works out to be more cost-effective to opt for a higher rate with much lower fees or no fee at all.
The best remortgage rate for you depends on how much you are looking to borrow. A high fee is often worth paying in order to secure a low interest rate if you are applying for a large mortgage. But those with smaller mortgages could be better off opting for a higher rate and lower fee.
However, while this is the general rule, you need to work out the total cost over the term of the deal. For example, if you are going for a two-year fixed rate, you need to work out the cost of your repayments over the term. You can do this by finding out what the monthly payment will be using our mortgage calculator – and then multiplying by 24. You then need to add on the arrangement fee to find out the total cost.
You will likely find that you have more mortgage deals to choose from if you have a good credit history, so it’s worth making sure that your credit report is as good as it can be before applying for a remortgage. Paying off any outstanding borrowed credit you owe and making sure your current address is on the electoral roll can help to improve your credit score.
The more money you can save as a deposit, the less you’ll need to borrow as a mortgage loan. What’s more, having a bigger deposit can help you get access to more competitive mortgage rates.
Lenders will often have a maximum ratio they’re prepared to offer you. Instead, the rest will need to be made up with either a deposit or an equity loan like the government's Help to Buy equity loan scheme.
Using a mortgage comparison tool can give you a better idea of how much you’d need to pay in monthly costs and interest, the duration of the deal, the maximum LTV, and any product fees you may need to pay for the remortgage deals available based on your borrowing requirements.
It’s important to remember that the mortgage deals you’re offered when you go to make an application may differ because they will then be influenced by your financial situation and credit history.
Get free mortgage advice and see deals from the whole of the market with broker London & Country. Call free from your landline or mobile on 0800 170 1943 any day. Read more about London & Country
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