How to Get a Bigger Mortgage

Have you found your dream home, only to be told by your chosen lender that you won’t be able to borrow enough to complete the purchase?

With average UK house prices increasing by 4.6%, leading to an average cost of £268,000, this has become an unfortunate reality for many looking to secure a mortgage today.

The good news – there are a variety of ways that you can improve your financial profile, enhance your mortgage application, and improve your overall borrowing amount. From tips about increasing your borrowing amount, to exactly what affordability aspects mortgage lenders will evaluate – In this article, we explore everything you need to know to secure a bigger mortgage. Let’s dive in.

How Much Can You Borrow?

When you approach a lender for a mortgage loan, lenders will initially assess your affordability. This is essentially a risk assessment that will determine whether or not the lender believes you will be able to afford to repay the loan within a specified mortgage term.

There are two main types of assessments that a lender can use. For those looking for a residential mortgage, lenders will focus on the affordability calculations. If you’re looking at a Buy to Let mortgage, the lender will typically run a rental stress test instead. For the purposes of this article, we will be focusing on residential mortgages and the correlating affordability calculations.

When asking “how much can I borrow for my mortgage?” It’s important to note that lenders will generally allow you to borrow up to around 4.5 times your income. Depending on the lender’s criteria, your affordability calculations, and available mortgage products, some lenders might let you borrow more on a mortgage with enhanced multipliers of up to 6.5 times your income.

How does the income multiplier work? Well, let us take an example of someone who earns £30,000 a year. A lender with a 4.5 time multiplier would allow you to borrow up to £135,000. One of the most common methods of increasing this amount is to add a partner or trusted family or friend to the loan. As long as they have a regular income with a good credit score, their income can be factored into the calculation as well, increasing your overall borrowing amount.

Tips to Increase the Amount You Can Borrow on a Mortgage

Looking for ways to increase your mortgage borrowing amount in order to afford your dream home is completely understandable, and fortunately, there are several methods that can be used to bolster your affordability profile and boost the amount a lender might be willing to offer you.

While adding someone else to your mortgage is one option, there are a variety of different tips that can help you manage your financial budget and improve your chances of an increased mortgage amount.

Lenders will look at a host of factors when assessing your affordability calculations. As such, you can use this to your advantage, with a few smart financial decisions into the build up to your mortgage application can place you in a much stronger position. From improving your credit score to reducing your existing debts or expenses, let’s take a look at some of the best tips you can use to increase the amount you can borrow on a mortgage:

Increase Your Income and Reduce Your Debt

It might sound obvious, but one of the most effective ways to boost the amount you can borrow for your mortgage is to increase your overall income. This of course is often much ‘simpler said than done’, however, making smart financial decisions like cutting back on financial commitments and luxury expenditures can create a stronger financial profile and mortgage application for lenders to assess.

For those who are employed, it can be beneficial to look for opportunities to increase your working hours, earn overtime, hit company targets to achieve a bonus, or even negotiate a new and increased salary. Any additional income would typically need to be demonstrated on your latest 3 payslips to be considered in your mortgage application.

If you’re looking to increase your income in a self-employed capacity, you will need to wait until your next set of tax calculations and tax year overview are published with HMRC before you can use the income to bolster your mortgage application and borrowing power.

As lenders will typically look at the percent of your income you will have available to repay your mortgage, minimising your financial commitments can greatly improve your financial position and increase your favorability amongst lenders. Lenders will assess how much of your income is already tied up in existing debt, this can include personal loans, hire purchases, or credit card balances. As such, the lower your monthly outgoings, the more money you will have available to allocate towards the mortgage repayments, potentially helping you qualify for a higher loan amount.

If you’re applying for a low-income mortgage, this step is especially important. It can show lenders that you have more disposable income to repay your overall mortgage.

It is important to note that any step you take to improve your financial standing, be that through reducing financial commitments, increasing your overall income, or mitigating financial expenditures, any changes will take 4 – 6 weeks for your credit file to reflect these changes.

Increase Your Mortgage Application Deposit

Increasing your deposit size is another way that can also increase your maximum mortgage borrowing amount – especially if you’re currently only meeting the minimum deposit criteria for your specific mortgage loan.

Generally speaking, most high-street lenders will ask for a minimum deposit of 5% of the overall purchase price of the property. For example, if you’re looking to deposit £10,000, your maximum purchase price would be capped at £200,000, with a mortgage loan amount of £190,000. This is regardless of your income or financial position.

Securing a mortgage with a larger deposit will give you access to higher borrowing amounts and potentially better interest rates. For example, if you were able to increase your initial deposit to £20,000, your potential purchase price would rise to £400,000, with an overall mortgage loan of £380,000.

In essence, a mortgage with a large deposit can make you more attractive to lenders, as it reduces their overall risk.

Extend the Loan Term

Another way to increase the amount you can borrow is to extend your mortgage term. By spreading your repayments over a longer period, you will be able to make smaller monthly payments that could allow you access to larger borrowing amounts, depending on your specific lender.

Naturally, this can be seen to have more of an impact when the term is extended significantly. For example, increasing a mortgage term from 10 years to 35 years will make a much bigger difference than extending from 30 years to 35 years.

A longer term can make it much easier to qualify for a mortgage loan, as your scheduled monthly repayments will be massively reduced. However, it is important to consider that while a longer term may boost your borrowing power, it will also mean paying more interest over time.

Read our latest article – How Do I Extend My Mortgage Term – to learn more about the strengths and benefits of extending your mortgage term.

Improve Your Credit Rating / Credit Score

Mortgage credit score requirements play a crucial part in determining which lenders will be available to you, and how much you will likely be allowed to borrow.

While high-street lenders might offer mortgages at five times your annual income, if you’re looking to borrow from a renowned high-street lender, such as Barclays, NatWest, Nationwide, etc., then they will also often have very strict credit scoring criteria.

Utilising services like Check My FIle can provide you with a full data report from the Experian, Equifax, and TransUnion credit agencies, providing you with a complete picture of your current financial standing.

It goes without saying, a strong credit score will help you secure much better mortgage deals. That’s why taking the time to improve your credit score can improve your chances of being accepted by the most competitive lenders. A simple step like registering to vote can improve your credit score.

Read our article – How Does My Credit Score Affect How Much I Can Borrow? – for a comprehensive dive into all the ways credit score can affect your mortgage application.

Organise Your Accounts and Financial Commitments

An important aspect of lenders affordability assessments will be an evaluation of your general spending habits.

Today, we’re all guilty of signing up to lots of different entertainment portals, including Netflix, Amazon, Apple TV, and that just to name a few! However, if your bank statements show lots of subscriptions and direct debit outgoings, it could negatively affect your overall financial standing, and therefore you’re overall borrowing power.

Before you apply for a mortgage, it’s always best practice to take charge of your accounts. Reducing the amount of direct debits by combing through your accounts and cancelling any unnecessary subscriptions can greatly improve your credit score and financial profile.

What Type of Income do Lenders Accept?

Lenders have different rules surrounding the types of income that they will accept, and each lender has their own mortgage criteria. Some lenders will be very strict and specify that the only valid income will be from employed or self-employed work. Other lenders might be more flexible, accepting income from a variety of different channels, including pensions, benefits, overtime, commissions, and more.

When looking at the different income types that are accepted for a mortgage, it’s important that you choose the right lender for your situation. Approaching a lender that offers the mortgage product that best suits your situation can make an enormous difference – and will likely influence how much you will be able to borrow.

Working with a trusted whole-of-market broker – like Boon Brokers – can help you find the mortgage lender that is best matched to your financial circumstances. With access to the whole of the mortgage market, we can help you find a lender that will consider all of your income sources, ensuring you maximise on your borrowing potential.

Other Factors Lenders Consider

There are a few other expenditures that lenders will factor into their affordability calculations that might just catch you by surprise.

For example, some lenders will deduct child maintenance or spousal support from your mortgage affordability checks. While other lenders may consider your current rental payments – regardless of the fact that these costs will undoubtedly disappear after the purchase of a home.

How you manage your bank account will also come into play when establishing if you meet the affordability criteria for mortgages with most lenders. Frequent use of your overdraft can raise potential concerns for lenders, with some even using this as the grounds alone to decline your mortgage application.

Working with a trusted broker can help you understand the affordability criteria for mortgages and specifically for different lenders. Making posting adjustments ahead of time could greatly strengthen your mortgage application and increase your potential borrowing power.

How a Mortgage Broker Can Help Guide Your Mortgage Application

Finding a lender that understands your personal and financial circumstances can be challenging. With a huge mortgage market that consists of over 90 regulated lenders on the market, it’s difficult to grasp a clear insight into what mortgage products are firstly available, and secondly, whether or not they’re the perfect match for you.

That’s why working with a trusted whole-of-market mortgage broker can make all the difference.

Here at Boon Brokers, we work with leading lenders and specialist lenders alike to help match you to the lender that is best for you. With whole-of-market access, our expert advisers can search the entire mortgage market to find the latest mortgage products, deals, and competitive mortgage rates that are available to you.

Unlike many other brokers, Boon Brokers is completely fee-free. We arrange for the lenders to pay our commission so there is no client fee charged at any stage of the process.

Contact Boon Brokers to find out which lender is best for you today.