Knowledgebase - How much can you borrow?

At this stage, you have to decide on a mortgage lender to get an “Approval in Principle”. The lender will tell you how much they are willing to give you, which helps you estimate how much you can pay for your property. Furthermore, the Approval serves as a guarantee to the Estate Agent and the potential vendor that you have obtained the necessary funds; this make dealing with them much easier.

You do not have to decide on your mortgage type yet. However, you might want to get informed and read about the Mortgage Code which sets out minimum standards in order to protect the borrower. For details on the code or any other enquiries regarding mortgages please contact the Council of Mortgage Lenders.

Council of Mortgage Lenders
3 Savile Row, London, W1S 3PB
Tel: 0207 437 0075

It is advisable not to go for the first mortgage you are being offered, but to shop around for a bit. You can compare mortgage lenders yourself by visiting banks and building societies and using internet resources. If you would rather pay someone to do it for you, employ a mortgage broker who will search a big database of lenders to find a suitable loan for you.

In order to calculate the how much they are willing to lend you, the lender will require:

  • evidence of your income and employment status
  • evidence of financial commitments, such as mortgage and bank statements
  • information form credit reference agencies, your employers and your landlord

Another important aspect the lender will take into account is how much you are willing and able to pay as a deposit (they are not going to cover the entire cost of the property). If the lender covers more than 75% of the property price, you might have to pay an insurance premium called Mortgage Indemnity Guarantee.