How much can I borrow?

Before you start arranging property viewings, the big question is always “How much can I borrow?” In the past, the answer to this would have been a rule-of-thumb multiple based on your salary or your joint salaries if you were a couple.

Post credit crunch and the financial crisis, mortgage lenders were required by the Financial Conduct Authority (the regulator of the financial services industry), to adopt an affordability-based approach to lending. This means that banks and building societies are now required to scrutinise borrowers’ incomes, outgoings and credit history closely and apply strict affordability criteria, ensuring that borrowers can comfortably afford their repayments now and in the foreseeable future.

This is where your mortgage advisor fits in. Although lenders are all bound by the same general principles and criteria, there are slight variations in the way they apply them. So it really pays to work with a mortgage advisor. Their knowledge of the market and understanding of the approach adopted by individual lenders means they can help you present your application in a positive light, to the right lender, saving you time and stress.

The bigger the deposit, the better the deal

Having a large deposit really matters in the current market.
The more you can put down, the lower the interest rate you are likely to be offered.

While many lenders are prepared to lend purchasers up to 95% of the property price, with the borrower putting in the remaining 5% as a deposit, better deals and rates are available to those who can put down, say, 20% or even more.

If you’re thinking of remortgaging and the equity in your property (the difference between the value of your property and the amount of mortgage you have left to repay) has increased, then you can use it as a larger deposit and secure a lower mortgage rate.

This is where your advisor’s knowledge of the marketplace really helps. They will be able to provide examples that illustrate what you would pay, depending on how much deposit you’re able to provide.