How much can you borrow when buying a house?

Scottish Mortgage Podcast

When it comes to buying a house, one of the most important things to consider is how much you can borrow from a lender. There are a number of factors that lenders take into account when determining your borrowing amount, including income and outgoings.

All lenders have their own criteria and systems for determining what you can borrow. Some may have online calculators that you can use to get a rough idea of what you may be able to borrow. However, it's important to note that every lender has their own internal algorithms and they all assess things differently.

One thing to keep in mind is that lenders will not only look at your situation at the point of application, but also what it will be like when you move in and six months after you move in. They may be able to discount certain expenses, such as loan payments, car payments, and credit cards if they will be paid off before you move in.

A general rule of thumb is that you can typically borrow around four and a half times your income. However, this can vary depending on the lender and your individual circumstances. It's important to reach out to a mortgage broker or your bank to get a personalized affordability calculator and to explain your situation. This way they can take all of your unique circumstances into consideration when determining how much you can borrow.

For example, if you are self-employed, your lender may need to see evidence of your business expenses and income. A letter of comfort from your accountant can help in this situation. Also, if you plan on paying off certain debts, such as credit cards, before moving in, you can tell the lender this and it may help you borrow more.

Ultimately, the best way to find out how much you can borrow is to talk to a mortgage broker or your bank. They can look at various lenders and see which one will offer the most amount of money for you. If you prefer not to talk to a broker or bank, you can use one of the many online calculators available, but keep in mind that these generally don't take your outgoings into consideration.

In summary, the amount you can borrow from a lender will depend on a number of factors, including income and outgoings, and it may vary from lender to lender. A mortgage broker or your bank can give you a personalized affordability calculator and take your unique circumstances into account. Make sure to also tell them about any plans to pay off debts or expenses before moving in, as this can help increase the amount you can borrow.

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