How much can I borrow for a mortgage
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How much can I borrow for a mortgageMortgages
Compare rates and lenders with Mojo Mortgages to find the right mortgage deal for you[1]
What types of mortgage are there?
The right mortgage isn’t quite as simple as choosing the deal with the best interest rate. The type of mortgage you need depends on your financial situation, your future plans and the type of property you’re looking to buy.
Fixed rate mortgages
With a fixed rate mortgage, your repayments are guaranteed to stay the same for a set term, usually two or five years.
The advantage of a fixed interest rate is this security – knowing that your mortgage payments will stay the same for a certain length of time.
Fixed rates are sometimes higher than variable rates, but that’s not always the case.
The main disadvantage of them is that you won’t benefit from a reduction in costs if interest rates fall.
Variable rate mortgages
If you’re on a variable rate mortgage, your monthly payments can change, because your lender can change the rate of interest it charge you. That can make it more difficult to budget for.
Variable rate mortgages will generally change when the Bank of England changes its base rate.
Interest rates and fees for variable mortgage deals can sometimes be lower than for fixed rates.
There are a few different types of variable rate mortgages:
- Standard variable rate (SVR) mortgage – your lender’s standard interest rate for mortgages. You’ll be moved onto this at the end of a time-limited mortgage rate if you don’t switch and it’s likely to be much higher than the rate offered on a new deal.
- Discount mortgages – your interest rate tracks your lender's standard variable rate minus a set percentage. If your lender’s SVR goes up by 1%, the rate you pay will go up by 1% as well.
- Tracker mortgage – your interest rate tracks the Bank of England base rate plus a set percentage. So if it reduced by 1%, your mortgage interest rate will also reduce by 1%.
Offset mortgages
An offset mortgage links your savings to your mortgage and 'offsets' their value against the loan balance.
In practice, this means you'll pay less interest on your mortgage. For example, if you had a mortgage of £100,000 and savings of £20,000, you’d only pay interest on £80,000 of your mortgage.
But it also means your actual savings won't earn any interest and you might not have unrestricted access to your money.
An offset mortgage can make sense when mortgage rates are high or savings rates are very low.
How much can I borrow for a mortgage?
Your mortgage lender will look at your affordability and decide how much you can borrow. It’ll base this decision on:
- Your salary. Or a combination of your salaries if you’re applying for a joint mortgage
- Any additional income you have, like bonuses or tax credits
- The size of your deposit. You’ll usually need at least 5%-10% of the total loan value
- Any financial outgoings you have – bills, credit cards or insurance payments
- Your credit history. A good credit history of meeting repayments will give you access to better deals
To get an estimate of your how much you could borrow and your repayments, try our mortgage calculator.
How much deposit do you need for a mortgage?
If you’re looking to buy a home, most lenders will expect you to have a deposit of at least 5%-10% of the property’s value.
A larger deposit will let you access better mortgage deals.
If you’re struggling to build a deposit, government schemes like Help to Buy and Right to Buy will help you to buy a home with a smaller deposit.
How does a mortgage work?
There are two different ways to pay for your mortgage – repayment or interest-only.
Repayment mortgages
With a repayment mortgage, you’ll pay back what you’ve borrowed, plus any interest, over the term of your mortgage.
Each month, your mortgage will get a bit smaller, until you’ve repaid the whole loan. Then, you’ll own your home outright.
Interest rates are usually lower on a repayment mortgages than an interest-only mortgage,you’re your monthly repayments will be higher as you’re paying off the capital and the interest.
Interest-only mortgages
On an interest-only mortgage, you only pay the interest that builds up on your mortgage each month. You pay nothing towards the capital (the amount you borrowed). This will make your monthly repayments lower.
At the end of your mortgage term, you’ll need to repay the capital. You’ll need a plan for how you’ll do this – separate investments, or simply selling the property.
Interest-only loans are most common for buy-to-let mortgages and aren’t widely available for residential mortgages.
What type of mortgage do I need?
Get one step closer to your perfect mortgage deal by viewing a range of mortgages you’re eligible for before you apply. First, decide what type of mortgage you need.
First home
First home mortgages are for those who have never owned or inherited residential property before.
You won’t qualify as a first-time buyer if you’ve ever owned a commercial property with living accommodation, or if you’re looking to buy a property with someone else who’s previously owned a home of their own.
Moving home
These mortgages are suitable for those who are planning on or considering moving house.
Some mortgages can be taken with you your new home (known as ‘porting’). Just be aware that your credit score will be rechecked and there might be complications if the new property is worth significantly more or less than your current one.
Remortgages
If your current mortgage deal’s ending in less than six months or you’d like to see if you can save money on your existing repayments, you need a remortgage.
A remortgage deal might also be right for you if you want to borrow more money, or to switch to a repayment mortgage from interest only.
Buy-to-let mortgages
If your mortgage is for a property that you plan to rent out to tenants, you’ll need a buy-to-let mortgage.
Interest rates and fees are usually higher than residential mortgages, and you may need previous experience of being a landlord to be eligible.
What information do I need to apply for a mortgage?
Get your details together before you start, so we can find you the best deal. We’ll ask for things like:
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Your current situation
Whether you’re a first-time buyer, moving to a new property or remortgaging your existing one
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Your details
Your name, address, and whether you’re making a single or joint application
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Details of the property you’re buying
Whether it’s a new build, a house or a flat
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How much you want to borrow
Usually the value of the property you’re buying, minus your deposit. If you're not sure, you can give an estimate based on your budget
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How much you earn
Your salary before tax, plus any extras like bonuses or overtime
Tips to help you find a better mortgage rate
Comparing mortgage deals isn’t the only way to find great rates. Here are five more tips to help you get the deal you want:
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Improve your credit score
Lenders will check your credit history against their criteria when deciding how much to lend
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Get on the electoral register
A really simple but effective step towards improving your credit score
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Build your deposit
A bigger deposit means you won’t need to borrow as much and you’re likely to be offered better rates
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Pay your bills
Paying your bills regularly and on time will be reflected in your credit score and shows lenders you’re reliable
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Check your eligibility
Use an eligibility checker to find out which mortgages you qualify for without affecting your credit score
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Start planning early
It can take a while to build or repair your credit score. Mortgage lenders can check the last six years of your credit history, so it’s worth preparing early
81% of mortgage applications led to an offer between July and September 2020
According to the Intermediary Mortgage Lenders Association Mortgage Market TrackerFrequently asked questions about mortgages
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Agreement in principle (AIiP) means that your lender is willing to lend you a specified amount, based on some basic checks on your income, spending and debts. It’s sometimes also called a mortgage in principle.
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No, only a soft credit check is used for a mortgage in principle, so it shouldn’t leave a mark on your credit score. When you make a full mortgage application.
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Most mortgage terms are between 15 and 35 years, but you can get terms for longer or shorter periods.
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Yes, as long as a provider thinks you can afford it you might be able to get a mortgage if you’re on income-related benefits like Employment and Support Allowance, Income Support or Universal Credit.
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Yes, you can. There are no legal reasons why you can’t make an offer on more than one house, but you might end up having both offers accepted which could leave you in the difficult position of having to withdraw one of your offers.
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Most people can. If you have a stable income, enough savings for a deposit and a good credit score then you’ll have more choice. But there are mortgages for those with bad credit scores and government schemes are available to help you get on the property ladder.
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There are three main credit reference agencies and they all have different scoring systems. Experian considers a score above 881 to be good, while Equifax say it’s anything over 420. TransUnion rate scores over 604 as good.
But in reality, these ‘scores’ are just a guideline. Each lender will have its own criteria that it scores you against, so just because you don’t fit the profile of one lender, it doesn’t mean you won’t be able to get a mortgage anywhere.
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A broker is a mortgage expert with knowledge of all products and lenders on the market. They work on your behalf to search the mortgage market to find a mortgage you can afford and apply for successfully.
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Once they've reviewed your income and expenditure, the size of your deposit and the amount you want to borrow, the broker will advise you which mortgage products are are right for your circumstances.
They'll make you aware of the interest rate, benefits (like cashback) and fees that apply to your mortgage.
Brokers usually have access to the whole market unless the lender chooses not to give them access to their products. Even then, the broker can see the details of the mortgage, but won't be able to complete the transaction for you.
To get access to these mortgages, you'll have to approach the lender directly. But there’s a risk that you’ll apply for an unsuitable or unaffordable mortgage, or that the lender rejects you, which could adversely affect your credit record.
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Brokers either charge a flat fee, of around 1% of the mortgage value, or a commission based on the size of your loan. The broker must tell you what you're going to pay before you agree to the mortgage.
The cost's illustrated in the 'key facts' document outlining your mortgage repayments, fees and charges.
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- Arrangement/booking fee – what it costs to set up your mortgage
- Valuation fee – to check the property’s adequate security for the lender
- Survey fee – you want a more in-depth check of the property for your own peace of mind
- Broker fee – what you usually pay for mortgage advice – but our advice is free
- Stamp duty – a tax homebuyers pay, which goes up with value
- Conveyancing fee – the legal cost associated with buying your house
- Land Registry fee – what you pay the Land Registry to update the property records
Looking for something more specific?
Bad credit mortgages
If you have problems with your credit history, it can be harder to find a mortgage. But there are some lenders that will consider your application.
You might be asked to provide more evidence that you can afford repayments and you’ll be asked about your previous credit problems.
Cashback mortgages
You’ll get a lump sum after completion, which can be great to pay off fees or buy essentials for your new home.
They don’t necessarily offer the best rate, and may come with larger fees, so compare and get advice on the overall cost.
Low-deposit mortgages
Mortgages that let you put down a smaller deposit, such as 5%.
For really small or no-deposit mortgages, you might be limited to products like guarantor mortgages, where a family member commits to making repayments if you can’t.
Self-employed mortgages
If you're self-employed, you'll need to provide two to three years’ worth of accounts to prove you can afford a mortgage.
Other than that, they’re the same as for employed applicants.
Mortgages for unusual homes
Lenders are less likely to lend on homes of non-traditional or unusual construction.
You might have to put down a larger deposit and you’ll probably have less deals to choose from.
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Page last reviewed: 17 March 2022
Next review due: 17 June 2022
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
PLEASE NOTE: THE FCA DOES NOT REGULATE MOST BUY TO LET MORTGAGES
[1]For online mortgage comparison and advice Gocompare.com introduces customers to Mojo Mortgages which is authorised and regulated by the Financial Conduct Authority. Mojo Mortgages is a trading name of Life’s Great Limited. Gocompare.com’s relationship with Life’s Great Limited is limited to that of a business partnership, no common ownership or control exists between us. Please note, we cannot be held responsible for the content of external websites and by using the links stated to access these separate websites you will be subject to the terms of use applying to those sites.