The amount of money you can borrow will depend in your own circumstances, such as income, if you are purchasing with a partner and how good your have been with credit analysed through your credit history.
Lenders don’t keep things simple by all using the same method for assessing applicants. They use one of two methods as the basis to calculate how much they will allow you to borrow. These are income multipliers or the newest method, affordability calculators.
Income multipliers are still used by many lenders to assess you. Typically income multiples are 3 times a single income and of it is a joint application the norm is 2.5 times income, whichever calculation gives the highest amount. Some lenders are more generous that others (probably depending on how they are exposed to the credit crunch – but that is another matter!). How much you earn does affect the multiple applied, generally a lender will increase the multiple for higher incomes. You may get more if you earn above twenty thousand pounds improving as you climb up the money ladder.
You could use of the many sites on the internet that offers mortgage calculators to work out how much you can borrow with many offering money advice and developments in the mortgage market also.
More and more lenders are switching to affordability calculators to assess applicants. Lenders will be looking at along with income they will take into account expenditure, existing credit commitments and contract agreements to assess your ‘ability to replay’. Generally lenders will only approve mortgage applications for those who have debt commitments of fewer than 40% of income.
Lenders criteria vary depending on their attitude to risk and their own organisational goals, how much they are willing to lend out this month for example. If you are interested in a mortgage deal, if possible find out if a lender uses this type of mortgage calculator as they are more suited towards those with fantastic credit scores, free of any debt commitments and don’t have defendants.