Feeling unsure about how lenders decide what you can borrow for a mortgage? You’re not alone — and we’re here to simplify it for you.

Lenders start by looking at your annual basic income before tax and typically calculate this looking at an average of the last 3 payslips.  If you earn overtime, commission & bonuses, this can be included often by averaging out the last 3 months earning.  Annual bonuses rather than ones paid monthly generally need to be evidenced on a couple of P60s.

Some lenders will also consider other income and benefits such as:

Universal Credit
Disability income
Carers Allowance
Child benefit
Maintenance income
Pension
Income from rental properties
Income from investments

Once they have added everything together and got a total annual pre-tax figure, they will then deduct annualised expenses such as:

Loan & credit card payments
Car finance
Child care
Maintenance payments
Leasehold or ground rent costs
Existing residential mortgages
Student loans

This leaves you with a figure that they can then use to work out what you can borrow. Each client is different and some lenders are more generous than others, but on average, lenders will look to lend up to 4.5 times this net figure on a mortgage although some banks will stretch this to 6 times income in certain circumstances .

Increasing the mortgage term and choosing a longer term fixed rate can boost affordability too.

Our website can help guide you further with tools and calculators as well as an online booking link to arrange a free appointment with one of our consultants.

www.keymortgageadvice.co.uk

Sharon Duckworth
Director – Key Mortgage Advice 

01772 620000
sharon@keymortgageadvice.co.uk