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How Much Can I Borrow?

When you apply for a mortgage, most lenders will cap the loan-to-income ratio at 4.5 times your income.

Affordability Assessment

When working out how much you can afford to borrow, the lender will look at:

1. Your income

  • your basic income
  • income from your pension or investments
  • income in the form of child maintenance and financial support from ex-spouses
  • any other earnings  – e.g. overtime, commission or bonus payments or a second job or freelance work.

Evidence of your income include pay slips and bank statements

If you’re self-employed you’ll need to provide:

  • bank statements
  • business accounts
  • details of the income tax you’ve paid


2. Your outgoings

Check your credit report before applying for a mortgage.

This will give you time to correct any mistakes in it and will notify you of any missed credit payments that could make the mortgage lender turn you down.

Any financial commitments such as student loan payments from your payslips (and the outstanding amount) along with credit cards, these will need to be confirmed in order to give you a more accurate borrowing figure.

  • credit card repayments
  • maintenance payments
  • insurance - building, contents, travel, pet, life, etc
  • any other loans or credit agreements you might have
  • bills such as water, gas, electricity, phone, broadband.

The lender might ask for estimates of your living costs such as spending on clothes, basic recreation and childcare.

They might also ask to see some recent bank statements to back up the figures you supply.


3. Future changes that might make an impact

The lender will assess whether you’d be able to pay your mortgage if:

  • interest rates increased
  • you or your partner lost their job
  • you couldn’t work because of illness
  • your life changed, such as having a baby or a career break.

It’s important that you also think ahead and plan how you’d meet your payments.

For example, you can help to protect yourself against unexpected drops in income by building up savings when you can.


Self Employed

This myth-busting guide to self-employed mortgages explains how you can still get a mortgage if you're self employed.

We have access to a range of mortgages for the self employed and identify what you’ll need to pass the lender’s affordability tests in the same way as any other borrower.



What will I need to provide for a self-employed mortgage?

To prove your income when you apply for a self-employed mortgage, you will need to provide:

  • One, two or more years’ certified accounts
  • SA302 forms or a tax year overview (from HMRC) for the past two or three years
  • Evidence of upcoming contracts (if you’re a contractor)
  • Evidence of dividend payments or retained profits (if you’re a company director)

Lenders also prefer self-employed mortgage applicants to provide accounts that have been prepared by a qualified, chartered accountant; that way they can be sure of your reliability. It’s likely that they will focus on the average profit you’ve earned over the past few years.

If you only have accounts for one year or even less some lenders will still be able to help and potentially use the latest years figures exclusively (rather than an average) for affordability assessment. This is particularly useful for applicants where their first year was low due to setting the business up initially. 

How to boost your mortgage chances

There are a number of steps you can take to increase your chances of being accepted for a mortgage when self-employed, such as:

  • Save as much as you can for a deposit
  • Correct any mistakes on your credit report
  • Get on the electoral roll

Help To Buy

With a Help to Buy Equity Loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest. You won’t be charged loan fees on the 20% loan for the first five years of owning your home. Here is an example:

  • Property asking price: £270,000
  • Mortgage: £202,500
  • Deposit: £13,500
  • Government Loan: £54,000


You will not have to repay the government loan until you sell the property. In addition, you won’t have to begin paying the interest on the government loan until after 5 years. The rate is 1.75% and increases every year after that in line with the Retail Prices Index – RPI – inflation rate, plus 1%. Here at First Class we will take care of the 75% loan - to apply for the 20% government loan please click here:

When you come to sell the property, as it’s an equity loan - rather than a flat amount - you will have to pay the government back 20% of your home’s value at that point. This is the case whether the value has risen or fallen. You can repay the equity loan at any time before this though, without penalty.

As a first time buyer you also benefit from not be charged stamp duty which will save you upfront costs.

Please note the lending criteria is based on affordability assessment and may vary with each applicant.