How much can I borrow?

Posted on 3 May 2010 by Marianne


I am 49 years old and on an income of 24,000 per year.  I have never owned property before, but would like to buy one now. I have about £20,000 as a deposit.  How much would I realistically be able to borrow?

Marianne

In the past I could have easily given you a figure as all Lenders used a multiple of your income to determine the amount they would lend. For instance, Halifax had a standard multiple of 3.25x which would have given you £73,846.

However, as Lender's systems and underwriting has developed they have switched to using Affordability calculators to determine the loan size and these take into account both your income and outgoings each month to ensure that there is sufficient left to cover your mortgage payments. These will typically result in a higher loan amount and a quick round of High Street Lender's websites gave a range of between £102,000 - £115,000.

All these figures are for guidance only and it is not until you have completed a credit score, which takes into account you matrimonial status, the number of dependents you have, your previous credit history and numerous other factors that you will get a concrete answer from a Lender.

That said, I would expect you to be able to get between £90 - £100,000, which together with your deposit means you can look at properties up to £120,000. However, you need to be aware that the interest rate you pay will increase the more you borrow against a properties value and you may well be better off looking at properties around £100,000.

I recommend that you speak to an independent mortgage broker who can obtain a decision in principle for you from a Lender and armed with this you will know at what price range you can start looking for a property.

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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