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Mortgage Borrowing Limits

For PAYE employees, the majority of mortgage lenders will calculate the maximum size of a mortgage or remortgage loan based on your salary.

If you are applying for a mortgage in your sole name, most lenders will offer an amount up to three times your salary. In the case of joint applicants, the maximum offer is traditionally either:
  • Up to three times the larger salary, plus one times the other salary, or
  • Up to two and a half times the combined salaries.
For example, if Mr Jones earns £40,000 per annum and his wife earns £20,000 then they could expect to borrow either:
  • 3 x £40,000 + £20,000 = £140,000, or
  • 2.5 x £60,000 = £150,000
The definition of salary is usually your full basic salary plus 100% of any guaranteed bonuses or 50% of regular bonuses/over time. Before applying the multiples shown above the mortgage lender will deduct from your salary the annual payments to any existing loans, but if a loan finishes within the next year it will normally be ignored.

Some lenders will often allow higher salary multiples. Loans of up to four times salary are not uncommon these days, and some will even go as high as five times salary for certain occupations.

Whatever maximum amount you are offered, it is very important to make sure you can afford the mortgage repayments. You need to consider the situation as it is now, and also what would happen in the future if interest rates were to increase.

A mortgage calculator can give you an idea of the figures, or you can talk things through with an independent financial adviser or a mortgage broker.

They can help you decide on a sensible level of borrowing, taking into account your present requirements and the likely impact of any future rises in interest rates.

If you would like to know more, just complete our online enquiry form and we will arrange for a mortgage specialist to contact you.

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