Maximum borrowing

How much can you borrow?

“YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.”

Residential mortgage borrowing limits

Your borrowing limit is assessed using affordability criteria that vary between lenders. These limits are typically calculated based on your annual income and expenditure, combined with income ratios or multiples. Since affordability is calculated differently by each lender, it’s possible to obtain larger mortgages from one lender than from another based on the same income and expenditure figures.

Borrowing limits on residential homeowner mortgages are also subject to maximum loan-to-value (LTV) ratios, typically ranging from 75% to 95% of the property value. This means borrowers require a minimum deposit or a minimum amount of equity if remortgaging of between 5% and 25% of the property’s value.

The maximum LTV and minimum deposit required can be influenced by the applicant’s credit profile. Borrowers with below-average credit scores generally need a larger deposit and may be subject to higher mortgage rates.

Buy-to-let mortgage borrowing limits

Buy-to-let affordability and borrowing limits are calculated differently than those for homeowner mortgages. Assessing affordability for buy-to-let mortgages can involve a two-step process. Some lenders require borrowers to have a minimum combined annual income to be eligible for a buy-to-let mortgage, and this minimum income varies between lenders.

Borrowing limits on buy-to-let mortgages are assessed based on the property’s rental value. The property should ideally be self-financing; if it is not, most lenders will not approve the requested mortgage amount. However, this does not mean your application will be declined. Instead, lenders may consider a smaller mortgage in line with the market rental valuation, and borrowers can provide a larger deposit.

During the affordability assessment for buy-to-let mortgages, lenders apply a stress test using mortgage rates that are higher than the interest rate being charged. This approach ensures that mortgages are approved with consideration for potential interest rate increases, protecting borrowers from future rate hikes.

Borrowing limits on buy-to-let mortgages are also subject to maximum loan-to-value (LTV) ratios of around 80% of the property value. This means borrowers require a minimum deposit or a minimum amount of equity of 20% of the property’s value to be approved for a mortgage.

“Your Property may be repossessed if you dO not keep up repayments on your mortgage.”
”Not all Buy-to-Let mortgage advice is regulated by the Financial Conduct Authority.”