Most people that call in are ultimately trying to find out “how much mortgage can I get?”. If you are a first time buyer, or trying to move home to your new dream home, the amount you can borrow makes a huge difference on the decisions your making.

Your first step is to contact us for your individual and personalised figures!

Even when you start looking at property you will be asked this question and this is one of the reasons that estate agents often ask to see your agreement in principle from the mortgage lender. They also want to know how much you can realistically borrow!

The amount you can borrow is influenced by several factors, with lenders primarily assessing your income, expenses including current commitments like cars and student loans as well as the national average for spending based on your household type. They consider your credit history, and the property value. Your ‘risk profile’ or how the banks view you can also determine what they can lend to you.

Lenders typically apply a maximum loan-to-value (LTV) ratio, which determines how much you can borrow relative to the property’s value. As an example, if a lender offers 95% LTV, you would need at least a 5% deposit.

Mortgage Affordability

Affordability is a critical consideration in mortgage borrowing. Lenders assess your income and outgoings to ensure you can comfortably afford repayments. They calculate an ‘affordability ratio’ by examining your income against existing debts and estimated mortgage payments.

Generally, your total monthly mortgage payments should not exceed a certain percentage of your income (typically around 35 – 45%).

If you would like us to help you to work out how much you can borrow on a mortgage, we will ask you the following:

• Your date of birth – your age determines your available mortgage term
• Your address – the national average spend of a household is determined by the region you live in.
• Any dependents – this helps us to understand the household makeup.
• Current credit commitments – these need to be taking into account
• Current income, job title, and how long have you worked for the company – the amount you earn is key, but also the type of work might suggest you could be retiring early or able to work longer, for example a firefighter compared to a university lecturer. The length of time you have held that job helps to show your income resilience.
• A copy of your credit report – this shows us how well you have managed financial commitment in the past and is a key consideration for lenders when determining if they will offer you a loan and how much deposit is needed for a mortgage with them.

If any of these questions or answers give you pause and cause you concern, please know that as advisers, that’s exactly what we are here for!

Advisers guide you through the eccentricities, complications and unique elements of your needs. Maybe you just got a fantastic promotion, or a new job. Perhaps you feel age isn’t on your side, or you think you need to clear your debts before you can move forwards. Maybe you had a situation in the past that caused you to have bad credit and you don’t know how to get a mortgage with bad credit.

I can give you examples of each of these situations where we have guided, advised and helped people move forward and obtain that home they wanted.

Can borrow enough?

I had a call from a client with payslips that made his pay so complex even he wasn’t completely sure how much he earned over a year in overtime and additionals without his P60.

He had been to other mortgage advisers and been told the most he could borrow on his own was nowhere near needed for his area, despite him having a good deposit and an established job with a good salary. The payslips were confusing even the mortgage lenders!

Knowing the industry he was in and the lenders that have the experience to consider all elements of his pay, allowed me to double his borrowing power to allow him to buy the home he wanted, and at a very competitive rate too.

Age a concern?

At 20 my first time buyer had been told by another adviser to wait until her next birthday to look at mortgages, we were able to find competitive lenders for her straightaway.

On the other end of the scale, a couple I spoke to own their home as an extended family, and mum at 73 is a registered owner of the property and was included on their current mortgage. The existing lender was unable to help.

We found a mortgage lender who helped them remortgage with the amount they needed. With a 29 year mortgage term, basing it on the younger working couples ages, instead of mums age, this allowed them to borrow enough but also made sure the monthly payments were comfortably affordable.

And unlike the other mortgage brokers they had spoken to our advice allowed for mum to stay on the mortgage and the property as this was their preference and requirements at the time.

Should I clear my debts before I apply for a mortgage?

We helped a couple who had been looking for over 3 years to get on the property ladder. Paying a large rent and having helped family in the past, they had debts that they were struggling to reduce. What was more frustrating for them is that they knew a mortgage would cost them less than their rent in their area.

But, saving a deposit, clearing the debt and renting was holding them back.

Every adviser they spoke to said they same thing, clear the debt then come back.

We took  the time to go through each of the debts, work out what needed to be reduce to have the most impact on their borrowing power and looked across our entire range of lenders to get them the best possible outcome, within 3 months they had secured their mortgage and a couple of months after that they were celebrating moving day!

I’ve spoken to many people who have been told no, or wait 3 years, or that they can’t borrow enough, and we have been able to help. So make that one more call – it could make all the difference!

We take the time with our clients to understand and help. It’s key to have a full picture of your situation, as every single circumstance is unique and should be treated like that. Not told to wait until your situation is easier for the mortgage adviser to get a yes for you!

Our clients matter to us, and here’s another key thing – we want to make sure you don’t just get the home but you get to keep it too. So here’s some more tips to keep you well informed.

To stay on top of paying back a mortgage loan, consider these key tips:

Budgeting: Establish a detailed budget that considers all your income sources and monthly expenses, including the estimated mortgage payments. This helps you understand what you can realistically afford.

Income resilience: Let’s face it, no mortgage would have been possible without your income, so what do you do if your income stops.

We can help you to secure your income over and above your current sick pay, if you have any. One more thought to consider is this – if your sick pay states SSP, you may receive much less than you thought, consider that during the covid pandemic they had to produce a brand new ‘furlough scheme’ and not just use the existing SSP.

Check out our blog to help with your income resilience: Income Protection for First-Time Buyers and home owners (evergreen-mortgages.com)

Emergency Fund: Maintain an emergency savings fund to cover unexpected expenses or temporary financial setbacks. This buffer can prevent you from missing mortgage payments during challenging times.

Regular Reviews: Periodically review your mortgage and financial situation. Consider refinancing if interest rates drop significantly, which could lower your monthly payments. It’s important to check if you have an Early Repayment Charge (ERC) to pay before remortgaging.

Overpayments: If financially viable, make overpayments on your mortgage. This reduces the principal amount owed and can shorten the loan term, saving on interest payments. Most lenders allow up to 10% of the outstanding mortgage balance per year. This may vary, so check with your lender to confirm the exact amount without incurring penalties. We can provide calculations on this for you and you would be surprised what £50-£100 a month might save you over the mortgage term.

Seek Advice: Consult with your mortgage adviser or financial experts when needed. They can provide guidance on managing mortgage debt and navigating changes in your financial circumstances.

For more information, contact your adviser who can support you and discuss the options available to you