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What is the maximum mortgage you can get?

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Jan 8, 2023

Emma Lunn

Fact Checked By:
Emma Lunn - Finance Editor

What is the largest mortgage you can borrow?

Many people contact us asking about the biggest mortgage they can get.

Although this figure might be handy to know, it’s not always a good idea to borrow the most you possibly can. It’s important to work out if you can afford the mortgage, both now and in the future.

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What is the maximum amount of mortgage you can get?

The following factors will affect the amount you can borrow.

  • Your income
  • Your outgoings
  • Credit history
  • Your loan to value

You and your lender may have different ideas about your maximum mortgage amount.

While the lender will ultimately decide whether or not it will lend to you, you can make your own decision about how big you want your mortgage to be.

This will be determined based on your financial situation and your outgoings.

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What amount should you borrow?

Instead of asking, “What’s the maximum amount I can get for a mortgage?” consider what you can afford and how it would affect your ability to borrow.

Lenders will do thorough affordability checks, but it’s important that you are also happy with the repayments and can afford them.

One of our experts can help you with guidance if you need it.

1. Your income: The mortgage-to-income ratio

In what is known as the ‘mortgage-to-income ratio’, your lender will use a multiplier on your annual income. The multiplier is normally 4 or 4.5 but can be as high as 6, depending on your circumstances.

If your salary is £40,000, at 4 times your income you’d be able to borrow £160,000. At 6 times your income you could borrow £240,000.

People who have other sources of income in addition to their salary can find things a bit more complicated. If you are looking for a mortgage because you’re self-employed or your earnings depend on overtime or bonuses, lenders may only be able to offer you a portion of your total earnings.

This guide will explain how to get a mortgage with commission and bonus income.

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2. Your outgoings: The affordability test

A lender will not only look at your income but also how much you spend and any financial obligations you have. This could be more detailed than you think.

They will scrutinize your expenses, both discretionary and otherwise, taking into consideration:

  • Unsecured debts – like personal loans and credit cards
  • Household bills and council tax
  • Childcare, child maintenance, and expenses related to dependents
  • Other expenses, such as gym memberships, holidays, and haircuts.

Lenders must also carry out a ‘stress test’ to determine your ability to make mortgage payments if interest rates rise.

3. Your credit score

Another important factor that influences how much a lender will offer you is your creditworthiness. The better your credit history, the better the mortgage rates you’ll be offered.

Having a bad credit score will impact how much you can borrow – but it doesn’t mean every mortgage lender will turn you down.

Get in touch with Loan Corp who can help you determine the maximum amount of mortgages you are eligible for with bad credit.

Credit history can be negatively affected by these things:

  • Bankruptcy
  • Credit score low
  • Late payments
  • Multiple credit problems
  • Mortgage payments not made
  • Defaults
  • CCJs
  • IVAs
  • Payday loans
  • Debt Management Schemes
  • Repossessions

4. Your loan-to-value (LTV)

The LTV calculates how much your mortgage is relative to the property’s value. For example, let’s say you wanted to purchase a £200,000 house with a £100.000 deposit. That would give you an LTV ratio of 50%.

The general rule is that the lower your LTV, the more likely the lender will approve your application. Higher LTVs are considered riskier.

Most lenders also impose LTV limits on certain mortgage sizes. Many lenders won’t lend more than 75-80% at £1,000,000 or higher – regardless of other factors.

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There are disadvantages to getting the maximum mortgage that you can afford.

You’ll be charged a higher interest rate

If you are borrowing at a high LTV, you’ll be charged a higher interest rate. The best rates are for borrowers with a LTV of 60% or less (40% deposit or equity).

By taking steps to lower your LTV, you can save thousands of pounds in the long term.

You could have affordability problems in the future

If interest rates go up or you lose your job, you could have problems paying your mortgage in the future.

How do you get a bigger mortgage?

Save up a bigger deposit.

A larger deposit will mean borrowing at a lower LTV, all other things being equal.

Improve your credit score

You can improve your credit score by paying your bills on time, settling debts, closing unused accounts, and becoming registered on the electoral roll. You should do as many of these as possible to improve your credit score.

Our guide to building and repairing credit for a mortgage might be of interest to you.

Pay off debts

Before you can get a large loan, lenders will first assess your debt so do your best to clear overdrafts, loans and credit cards before you apply.

Borrow over a longer term

Most mortgages last for 25 years. However, some lenders will extend the term to 35 years. While this will reduce your monthly payments, it will also cost you more over the long term.

Spend less

Lenders also consider your outgoings in their affordability calculations. At least six months before you plan to make a mortgage application, cut down on things like holidays, expensive restaurants and leisure activities.

Get a guarantor

Guarantor schemes allow you to increase your mortgage with the help of your family, who will need to put down cash or their property as security.

Remember that your guarantor has a legal obligation to make your mortgage payments if you default.

Get a joint mortgage.

You can increase your purchasing power by buying with someone else, such as a partner or friend.

Talk to Loan Corp today for free advice.

Some lenders will offer better terms or more flexible terms; here at Loan Corp, we can help you find them.

Our mortgage calculator is an excellent starting point. However, if you want a better idea of the amount you could borrow, send us an inquiry today.

Our team will match you with a mortgage broker who will assess your financial situation and preferences. Then, they’ll find the right lenders for you using their whole-of-market access.

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