How Much Can I Borrow When Remortgaging?

Income Multiples and Borrowing Limits

Most UK mortgage lenders use income multiples as a starting point for determining how much you can borrow. Typically, you can borrow between four and four and a half times your annual income. Some lenders may stretch to five times income for higher earners or those in certain professions.

For joint applications, both incomes are usually combined. So if you earn £40,000 and your partner earns £30,000, your combined income of £70,000 could allow borrowing of £280,000 to £350,000 at standard multiples.

However, income multiples are only part of the picture. Lenders also carry out detailed affordability assessments that look at your overall financial position, which can result in a lower or higher borrowing amount than the simple multiple suggests.

Affordability Assessments

Since the Mortgage Market Review introduced by the Financial Conduct Authority (FCA), all lenders are required to carry out thorough affordability assessments. This goes beyond simply looking at your income.

Lenders will examine your regular outgoings, including:

• Existing debts – credit cards, personal loans, car finance, and student loans.
• Living expenses – childcare, school fees, insurance, travel costs, and regular household bills.
• Committed expenditure – any regular payments you are contractually obliged to make.
• Future changes – some lenders consider potential future changes such as interest rate rises, planned retirement, or changes to household income.

The affordability assessment aims to ensure you can comfortably afford the mortgage payments, not just at the current rate but also if rates were to increase. This is known as stress testing.

Property Value and LTV Limits

The amount you can borrow is also limited by the value of your property and the lender's maximum LTV ratio. Even if your income supports a higher loan, the lender will not offer more than their maximum percentage of the property's value.

For remortgages, most lenders offer up to 85 or 90 per cent LTV. Some specialist lenders may go higher, but the rates are likely to be less competitive. If you are looking to release equity, the maximum LTV becomes particularly important as it determines how much additional borrowing is available.

For example, with a property worth £400,000 and a lender's maximum LTV of 85 per cent, the maximum total mortgage would be £340,000. If you currently owe £200,000, you could potentially borrow an additional £140,000, subject to passing the affordability assessment.

How to Maximise Your Borrowing

If you need to borrow more when remortgaging, there are several steps you can take to improve your position:

• Pay down existing debts – reducing credit card balances and clearing loans frees up more of your income for mortgage affordability calculations.
• Close unused credit accounts – lenders may factor in the credit available to you, not just what you have borrowed. Closing unused credit cards can help.
• Increase your deposit or equity – making overpayments on your current mortgage reduces the amount you need to borrow and improves your LTV.
• Consider a longer mortgage term – extending the term reduces monthly payments, which can improve affordability. However, you will pay more interest overall.
• Speak to a broker – different lenders have different criteria. A broker can identify which lenders are most likely to offer you the amount you need.

Your home may be repossessed if you do not keep up repayments on your mortgage.