How Much Can You Borrow?

Mortgages for 100% of the value of a property are no longer available.

However some lenders are offering mortgages up to 95% of the value of a property, subject to certain criteria. Having a larger deposit will enable you to obtain a mortgage with a lower interest rate and lower monthly costs.

If you are employed and in permanent employment you would normally be required to supply your latest 3 months payslips, P60, your latest 3 months consecutive bank statements and evidence of your deposit.

If you are self-employed and have been trading for at least 2 years you should supply your latest 2 years accounts and SA302s which are your self assessment tax calculations issued by HMRC and obtained by contacting you tax office.

The amount you can borrow is assessed on an affordability basis which includes your annual gross salary and a percentage of any overtime, bonuses or commissions. Some lenders will also include state benefits, such as universal tax credits or child benefits.

Included in the affordability assessment are any future ongoing financial commitments such as bank loans, car loans, student loans or credit cards, an allowance for any dependants and the costs for normal day to day living expenses together with a satisfactory credit search from a credit reference agency.

As a general rule the amount you can borrow can vary between 3.5 to 4.5 times your annual gross income either as a single applicant or on a joint basis less any commitments.

However since April 2014, The Financial Conduct Authority, FCA, has issued new guidelines which lenders must follow and an increase of 3% in interest rates, known as a stress factor, is now included in their affordability calculations.

The term of your mortgage is usually determined by the date of your normal retirement age - so if you intend to retire at the age of 67, the mortgage should finish before this age - normally at age 66.

If you wish to extend the term of your mortgage beyond this period, evidence of your retirement income would be required and the amount of mortgage will be based on a percentage of your retirement income to a maximum age of 75.