How much can I borrow

How much can I borrow on a mortgage

Different lenders will have different lending limits

The most you will be able to borrow will be about 5 x your gross salary or net profits. This can be your joint income in the case of joint mortgage applications

The annual payment of any loans or credit agreements should be deducted from your income before applying this multiple. 

But take care...

If your joint or single income is less than about £30,000, or if you are fifty years of age or more then you may be restricted in how much you can borrow

Lenders will consider the overall affordability of an application. If you have any adult or child dependants then this will have the effect of reducing the maximum loan

Please contact us if you wish to maximise your borrowing

Not all income will be accepted...

Most lenders will allow some or all of your commission income, which can be added to your basic salary, providing that you can prove that you have received this commission in the past. 

Some lenders will accept bonuses. The important issue here is that you must be able to prove your income. So bonuses should have been paid in the past, unless these bonuses are guaranteed. Commission income must be shown on your pay-slips

It is important to assess whether you will be able to afford future mortgage payments.

Think about what would happen if you or your partner were unable to work in the future (see insurances) 

Joint Mortgage Application

If the mortgage application is placed in joint names then the income of both parties can be taken into account.

Please bear in mind that if the mortgage is in joint names then the property ownership will also be in joint names

It is possible for parent and child to take out a mortgage together. If the parents income is needed then the parent's age may need to be considered as the maximum term will be to the parents normal retirement age; this would normally be 67 or 70 in some circumstances.

Guarantor Mortgage 

If your income is currently insufficient to cover a mortgage, but you can show that this will change in the near future, then a guarantor mortgage may be available to you. 

A minimum deposit of 10% is required for this type of mortgage

Mainly intended for people on a defined career path who can reasonably expect their income to increase with time. 

A family member, normally the parents, would need to guarantee that the mortgage will be paid until the applicant is ready to take over the mortgage. 

For this to be acceptable, the guarantor would need to have sufficient income to cover both the new mortgage and any existing mortgage. 

A guarantor mortgage differs from a joint mortgage in that the ownership generally stays in the child's name while both the parent and child share the legal responsibility for the payment of the debt

This mortgage is not suitable for students intending to let their property to other students. 

A Guarantor mortgage should not be considered lightly. 

Legal advice should be sought by all parties, prior to entering into a mortgage. 

Company Directors

If your are a company director with over a 20% share of the company, your net income will be your drawings (salary) plus your share of the net profits shown on the annual accounts, or dividends drawn whichever is lower.

Most lenders require that you draw your share of the net profits in the form of dividends

This is a little unfair as you are not obliged to draw all of your profits as dividends. You might decide to leave your profits in the company.

If you do not file accounts, your taxable income will be that declared on your annual tax return. 

Some lenders will average your income over the last 2 or 3 years. 

Please contact us to discuss your situation if you wish to maximise your borrowing