Your income
Most obviously your salary, self-employed earnings or income as a director of a limited company, but also:
- bonuses and commission
- overtime
- maintenance payments
- benefits, such as child benefit
- pensions
- dividends on stocks and shares
- profit from property such as buy-to-let income that has been declared to the Inland Revenue
Your expenditure
Mortgage lenders will want to look at all your regular outgoings, including:
- household bills
- loan and credit card repayments
- school fees
- life and medical insurance
- maintenance payments
If you are able to pay off other debts, such as loans and credit cards, they will be taken out of the equation and so could help increase the amount you can borrow with your mortgage.
The maths
Depending upon what your outgoings are, you should be offered a mortgage that is a multiple of your income. The higher your income and the bigger your deposit, the more options you are likely to have: if you have a 25% deposit or if you earn £60,000 or more a year (which can be between you if you are applying for a joint mortgage), you may be offered up to five times your income, with some lenders willing to offer up to six times. If you earn over £100,000 a year, either individually or jointly, you will have even more options.
There is no one-size-fits-all equation when trying to work out how much you might be able to borrow when taking out a mortgage. It’s therefore important to take professional advice to make sure you have as many options open to you as possible, so you can choose the product that is right for you.