How much can I borrow for my first home?

Buying your first home is exciting, but it can also feel overwhelming. One of the first questions many prospective buyers ask themselves is: “How much can I borrow?”

How much you can borrow for your first home in England depends on several factors, including your income, monthly outgoings, deposit size and credit history.

Most lenders typically allow first time buyers to borrow around 4 to 4.5 times their annual income, but this is just a guideline.

Your deposit and financial commitments can affect the amount and it’s important to consider what you can realistically afford to repay each month.

Using mortgage calculators or obtaining a mortgage in principle can give a clearer picture. Understanding your borrowing limit helps first-time buyers plan confidently and make informed property decisions.

Knowing your borrowing potential is crucial to setting a realistic budget and finding a property you can afford without overextending yourself.

In this guide, we’ll walk you through how lenders in England calculate borrowing limits and the factors that influence them.

Understanding mortgage affordability

The amount you can borrow depends on several key factors, with your income and financial commitments being the most important.

Lenders in England will assess your situation carefully to determine what they consider affordable for you. They will look at your annual income including any salary, bonuses or other steady sources of income. Then compare it to your monthly outgoings, such as bills, loan repayments, credit card debt and childcare costs. They will also check your credit score and credit history to evaluate your reliability as a borrower.

The deposit you can afford and the type of mortgage you choose also play a role in determining how much you can borrow.

For example, a larger deposit can make you more attractive to lenders and may qualify you for better mortgage rates.

All of these elements combined help lenders calculate the maximum mortgage amount they believe you can comfortably repay.

Income multiples explained

One of the most common methods lenders use to calculate borrowing limits is called income multiples. Typically, UK lenders will allow you to borrow around four to 4.5 times your annual income.

For example, if you earn £30,000 a year, you might be able to borrow between £120,000 and £135,000. If you are buying with a partner, most lenders will consider your combined incomes, which can significantly increase the amount you can borrow.

While income multiples provide a helpful guideline, it’s important to remember that your actual borrowing potential can vary depending on your individual circumstances and the specific policies of different lenders. Factors such as existing debts, outgoings and credit history will all influence the final decision.

The importance of a strong deposit

The size of your deposit has a significant impact on how much you can borrow and the type of mortgage deals available to you. First-time buyers in England usually need a deposit of at least 5 to 10% of the property’s value. The larger your deposit, the less you will need to borrow, which can reduce your monthly repayments and give you access to better interest rates.

For those struggling to save a deposit, government schemes such as a Lifetime ISA can provide a helpful boost.

For example, if you are looking to buy a £200,000 home and you have a £20,000 deposit, you would need to borrow £180,000. Increasing your deposit further could lower your borrowing requirement and make your mortgage more affordable over the long term.

How your outgoings affect borrowing

Lenders do more than just look at your income, they also assess your debt to income ratio, which compares your monthly outgoings to your income. High monthly commitments, such as credit card balances, personal loans, childcare or even existing rental or mortgage payments, may reduce the amount a lender is willing to offer.

Essentially, lenders want to ensure that you can comfortably make your mortgage repayments each month, even if interest rates rise or unexpected expenses occur. Being realistic about your regular outgoings is therefore just as important as calculating your income when estimating how much you can borrow.

Using mortgage calculators

Mortgage calculators are a useful tool for estimating how much you might be able to borrow before you approach a lender. Many UK banks and mortgage brokers offer online calculators that take into account your income, deposit, monthly outgoings and preferred mortgage term, such as 25 or 30 years.

While these calculators can give you a useful ballpark figure, it’s important to remember that they are only estimates. Your exact borrowing limit will ultimately be determined during the mortgage application process, when lenders review your full financial profile and credit history.

Find out how much you can borrow

To get a clearer picture of your borrowing potential, start by checking your credit report to ensure it is accurate and up to date. Next, calculate your monthly income and outgoings, being honest about what you can realistically afford. Using an online mortgage calculator can help you get an initial estimate.

Once you have an idea of what is possible, consider obtaining a mortgage in principle (MIP). This is a formal statement from a lender indicating how much they might be willing to lend you, which can strengthen your position when making an offer on a property.

Finally, consulting a mortgage advisor can be invaluable, as they can help you find the best deals and guide you through the application process.

Final thoughts

Understanding how much you can borrow is one of the most important steps for first-time buyers in England. By taking into account your income, outgoings and deposit, you can set a realistic budget and make confident decisions throughout the buying process.

It’s important to remember that just because a lender is willing to lend a certain amount doesn’t mean you have to borrow the maximum. Focus on what you can comfortably afford to repay, both now and in the future.

Always factor in additional costs such as stamp duty, solicitor fees and moving costs when calculating your budget, to ensure you don’t face unexpected financial strain after moving in.