The basics: how do lenders calculate what you can borrow?
Most UK mortgage lenders base their lending decisions on an income multiple — typically between 4 and 4.5 times your annual gross income. Some specialist lenders will stretch to 5 or even 5.5 times income for certain applicants, particularly those in professional occupations such as doctors, lawyers, and accountants.
So if you earn £60,000 per year, you could expect to borrow between £240,000 and £330,000 as a rough starting point. But that is just the beginning — lenders also run a full affordability assessment that looks at your outgoings, existing debts, and lifestyle spending.
The affordability assessment: what lenders really look at
Since the Mortgage Market Review in 2014, lenders are required to carry out a full affordability assessment — not just check your income. This means they will look at your monthly commitments including credit cards, car finance, student loans, childcare costs, and general living expenses.
They will also stress test your mortgage — checking whether you could still afford the repayments if interest rates rose by 2–3%. This is designed to ensure you are not stretching beyond your means if economic conditions change.
What helps your affordability?
The following factors can increase the amount a lender is willing to offer:
- A larger deposit — the higher the deposit, the lower the risk to the lender
- A clean credit history with no missed payments or defaults
- Low existing debt commitments relative to your income
- Stable, long-term employment (particularly permanent contracts)
- Professional qualifications in certain occupations
- A strong track record of saving
What reduces your affordability?
Conversely, these factors can reduce what lenders will offer:
- High credit card balances or multiple credit commitments
- Being in the early stages of self-employment (less than 2–3 years of accounts)
- Recent missed payments or a low credit score
- Large numbers of financial dependants
- Having recently changed jobs or employer
Joint applications: how do they work?
If you are buying with a partner or co-buyer, most lenders will combine both incomes and apply the income multiple to the combined figure. Two applicants each earning £45,000 could therefore borrow between £360,000 and £495,000 — significantly more than either could achieve alone.
Some lenders will also use a higher income multiple on joint applications, recognising that two earners represent lower risk. It is worth noting that both credit histories will be assessed, so if one applicant has adverse credit it could affect the available deals.
How much deposit do you need in London?
The minimum deposit for a residential mortgage in the UK is typically 5%, though most mainstream lenders prefer 10% or more. In London, where average property prices exceed £500,000, this means most buyers need at least £25,000–£50,000 saved before they can purchase.
A larger deposit unlocks better interest rates. The most competitive mortgage deals are typically available at 60% or 75% loan-to-value (LTV) — meaning a 25% or 40% deposit respectively. While these thresholds are harder to reach in London, they can save thousands over the life of a mortgage.
Government schemes that can increase your borrowing power
For first time buyers in London, the Shared Ownership scheme allows you to purchase a share (typically 25–75%) of a property and pay rent on the remainder. This can dramatically reduce the purchase price you need to mortgage, making London more accessible.
The Lifetime ISA (LISA) allows first time buyers to save up to £4,000 per year and receive a 25% government bonus — up to £1,000 per year — to use towards a deposit. If you are not already using a LISA, opening one as soon as possible is strongly recommended.
It is also worth checking with your employer whether they offer any shared ownership or key worker housing schemes, particularly in the public sector.
Use a whole-of-market broker to maximise your borrowing
One of the most important steps you can take is working with an independent, whole-of-market mortgage broker. Going directly to your own bank means you only see one lender's criteria — and you could miss a lender who would offer £50,000 more, or a much better rate, for your specific circumstances.
At Mortgage International, we compare deals from over 90 lenders including some that are only available through broker. We can often find solutions for applicants who have been turned down elsewhere, including those who are self-employed, have complex income, or have had past credit issues.