“How Much Can I Borrow?” A Guide to UK Mortgage Affordability for Residential (and Buy-To-Let) Properties

Whether you're buying your first home or expanding your property portfolio as a landlord, one of the first questions you'll ask is: how much can I borrow?

In the UK, lenders use affordability criteria to calculate mortgage borrowing limits. These criteria differ depending on whether you're applying for a residential mortgage (to live in the property) or a buy-to-let mortgage (to rent it out).

This guide explains how UK mortgage lenders assess affordability for both residential buyers and property investors - and how you can estimate your borrowing power.

Residential Mortgages – How Much Can I Borrow?

A residential mortgage is designed for properties you intend to live in. Lenders assess your income, outgoings, and credit history to determine how much they are willing to lend.

Income Multiples (The General Rule)

A traditional method used by lenders is multiplying your gross annual income by a certain number - usually around 4 to 4.5 - to estimate borrowing capacity.

• Typical range: 4x to 4.5x your income

• Higher multiples (up to 5–5.5x): Possible for high earners or professionals in certain fields (e.g. doctors, solicitors, engineers)

Example:

If your gross salary is £40,000:

* 4.5x = £180,000 potential borrowing

If you’re applying as a couple:

* £30,000 + £40,000 = £70,000 joint income

  → 4.5x = £315,000 potential mortgage

Affordability Assessments

Since regulatory changes post-2008, lenders place greater emphasis on full affordability checks. They assess not just your income but also your outgoings, debts, and lifestyle.

Lenders will evaluate:

• Income (salary, bonuses, benefits, pensions)

• Credit commitments (loans, credit cards, car finance)

• Number of dependents

• Essential expenses (utilities, insurance, travel)

• Discretionary spending

• Future affordability under higher interest rates (stress testing)

The lower your outgoings and debts, the more you can usually borrow.

Deposit and Loan-to-Value (LTV)

Your deposit size plays a significant role. Lenders express this as a Loan-to-Value (LTV) ratio.

• 95% LTV → 5% deposit

• 90% LTV → 10% deposit

• 75% LTV or lower → Better rates, more lender options

Example:

Buying a £250,000 property with a 10% deposit (£25,000) means borrowing £225,000.

A larger deposit often allows access to better mortgage rates and higher borrowing limits.

Buy-to-Let Mortgages – How Much Can I Borrow?

Buy-to-let (BTL) mortgages are for properties you plan to rent out. Unlike residential mortgages, affordability is usually based on rental income rather than personal income.

Rental Income-Based Affordability

Lenders use the expected rental income from the property to determine how much they are willing to lend.

A key metric is the Interest Coverage Ratio (ICR) - the amount by which rental income covers the mortgage interest.

• ICR requirement: Typically 125%–145% of the mortgage interest payment

• Stress-tested interest rate: Often 5.0%–5.5%, even if your actual rate is lower

Example:

• Monthly mortgage interest: £500

• Required ICR: 145%

• Minimum rental income needed: £725/month

If the property is expected to rent for £1,000/month, you can borrow more, subject to the lender's maximum LTV.

Loan-to-Value (LTV) in Buy-to-Let

Typical LTVs for BTL mortgages are:

• 75% LTV→ Common limit for most lenders

• 80% LTV → Possible in certain cases

• 60–65% LTV → May give access to best interest rates

Example:

Property price: £200,000

At 75% LTV → You can borrow £150,000

You’ll need a £50,000 deposit

Top-Slicing and Personal Income

If rental income doesn’t quite meet the lender’s criteria, some lenders may allow top-slicing, using your personal income to top up affordability.

This is especially relevant for:

* High earners with modest rental income

* Lower-yielding properties in premium areas

However, your own income and outgoings will be scrutinised closely.

Landlord Experience and Portfolio Size

While first-time landlords can access BTL mortgages, some lenders prefer borrowers with experience. If you own multiple rental properties, you may be classified as a portfolio landlord (typically 4+ properties), which brings stricter lending criteria.

Portfolio landlords must often provide:

• Full property portfolio details

• Business plans

• Proof of rental income and liabilities

Other Factors That Affect How Much You Can Borrow

Credit Score and History

Your credit rating affects not only whether you qualify for a mortgage but how much you can borrow. A higher credit score may give you access to better rates or higher income multiples.

Missed payments, defaults, or CCJs can reduce your borrowing power or restrict your choice of lenders.

Employment Status

• Salaried employees with a steady income face fewer hurdles.

• Self-employed applicants usually need 2–3 years of accounts, SA302s, or accountant's references.

• Contractors and freelancers may be assessed on average earnings or daily rates.

Age and Mortgage Term

Your age can affect your borrowing capacity. Younger borrowers can access longer mortgage terms, reducing monthly repayments and increasing potential borrowing. Older borrowers may be limited to shorter terms, especially if the loan runs into retirement years.

Some lenders now allow terms into retirement age, provided there’s a clear repayment strategy or sufficient pension income.

Online Mortgage Calculators – Estimating Your Borrowing

Most banks, lenders, and brokers offer online mortgage calculators that provide a quick estimate of how much you could borrow.

These tools typically ask for:

* Income (individual or joint)

* Monthly outgoings

* Deposit amount

* Property price (for LTV calculation)

* Rental income (for buy-to-let calculators)

Tips to Increase Your Borrowing Potential

• Pay off or reduce unsecured debts before applying

• Improve your credit score

• Increase your deposit to reduce LTV

• Consider extending the mortgage term (where appropriate)

• For buy-to-let, target higher-yield properties

• Use a mortgage broker to access specialist lenders

Speak to Brancaster House Financial Planning

“How much can I borrow?” is a crucial question that depends on a mix of factors - including income, expenses, deposit size, and the type of mortgage. For residential properties, affordability is based on your income and financial commitments. For buy-to-let, it’s mainly driven by the property’s rental income and LTV limits.

While income multiples and online calculators offer quick estimates, the final decision rests with lenders' underwriting teams. Speaking to one of our friendly, qualified mortgage early in the process can help you understand your options. Email us at info@brancasterhouse.co.uk or call us on 01603 633344.

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