How much you can borrow as a first time buyer is dependent upon many different factors. In fact it’s impossible to give you an accurate answer without understanding your specific situation. As a very generic guide, usually you will be able to borrow four to five times your annual income. However, there are many elements that can impact the exact number. That’s why we don’t have a calculator on our website – to put it bluntly, they’re a load of rubbish! So what impacts how much you can borrow as a first time buyer?
The greater your deposit in percentage terms, the lower the risk to the lender. As a result lenders may be more generous with the amount they are willing to lend.
Lenders will consider your income figure as your basic salary plus a percentage of any variable income such as commission or bonuses. The amount of variable income that can be included will be dependent upon the frequency and size of payments received.
Whilst a small number of lenders will allow your latest years income figure to be used when calculating your income, most will lend on the following basis:
– If the latest year’s income figures are higher than the previous year, the average of the two income figures will be used.
– If the latest year’s income figures are lower than the previous year, the latest year’s income figures will be used.
To understand how lenders assess your income, check out our dedicated page here.
In addition to the income types mentioned above, some lenders will also allow income from other sources such as benefits to be included.
The greater your outgoings, whether that be living expenses, loans, hire purchase agreements or otherwise, the lower your disposable income. The lower your disposable income, the greater the risk to the lender, which results in the amount they will be willing to lend also reducing.
Assuming you are looking to have your mortgage cleared by the time you retire, the older you are, the shorter the term available. The shorter the term, the more expensive the monthly repayments. As a result, and based upon your disposable income, potentially means lenders offering lower income multiples.
If you’ve had any difficulties repaying credit in the past, whether that be late payments, County Court Judgements (CCJs), or otherwise, it might impact how much lenders are willing to offer you.
Before you even start thinking about how much you can borrow, or what type of property to buy, the first important step is to make sure you’re likely to be eligible for a mortgage. To help you with this, we’ve created a short quiz that will indicate whether or not you’re likely to be accepted.