How Much Can I Borrow? Borrowing & Affordability Explained
Understanding Your Mortgage Borrowing Power
Knowing how much you can borrow is one of the most important steps in the home-buying process. At PD Finance, we break affordability down in a clear and practical way — so you know what lenders look for, what affects borrowing, and how to put yourself in the strongest position possible.
Whether you're buying your first home, moving, remortgaging or navigating a complex income, this guide will help you understand the “why” behind the numbers.
Want an instant estimate?
Use our Borrowing Calculator here: Go to Calculator
What Determines How Much You Can Borrow?
Every lender uses their own affordability model, but most assessments are based on the same core factors:
Your Income
Salary, bonuses, overtime, commission, allowances, dividends, rental income, etc.
Your Outgoings
Loans, credit cards, car finance, childcare, maintenance, subscriptions, and regular commitments.
Credit Profile
Your credit history, conduct, missed payments, and overall score.
Deposit size (Loan-to-Value – LTV)
Bigger deposits usually mean better rates and higher borrowing options.
Mortgage Term
Longer terms reduce monthly payments, which can increase affordability (but you pay more interest overall).
Interest Rates
Higher rates reduce borrowing power; lower rates increase it.
Age & Retirement Plans
Lenders assess whether your mortgage is affordable now and in retirement.
Number of Dependants
More household dependants can reduce borrowing power because of assumed living costs.
How Lenders Assess Your Income
Different income types are treated differently. Here’s how they’re usually assessed:
Employed income
-
Basic salary: usually accepted at 100%
-
Overtime/commission/bonus: typically 50–100% depending on history
-
Allowances: lender-dependent
Self-employed income
-
Sole traders: last 1–3 years SA302 / tax calculations
-
Limited company directors: salary + dividends
-
Some lenders use “retained profit” for stronger affordability
Contractors
-
Day rate x 5 x 46 weeks (typical model), but varies by lender and industry.
Zero-hours & variable income
-
Usually an average over 3–12 months, depending on stability.
Rental income
-
For buy-to-let: stress-tested rather than affordability-based
For residential: some lenders use surplus rental income if tax returns show a profit.
Your Outgoings & Commitments
Lenders will review:
-
Loans & credit cards
-
Car finance
-
Personal loans
-
Childcare costs
-
School fees
-
Student loans
-
Maintenance payments
-
Overdraft usage
-
Subscriptions or regular obligations
Reducing or clearing commitments can significantly increase borrowing.
If our would like to try our budget tool to help you understand your finances in more detail why not check out our budget planner page or request a free download.
Loan-to-Value (LTV) & Deposit Size
Your LTV impacts:
-
Mortgage rates
-
Product choice
-
Borrowing limits
Lower LTV = more flexibility + stronger borrowing power.
LTV Example:
-
£300,000 property
-
£30,000 deposit
-
= 90% LTV
Credit Profile & Affordability Checks
Lenders run a soft or hard credit search and assess:
-
Missed payments
-
Defaults / CCJs
-
Credit utilisation
-
Length of credit history
-
Stability of accounts
-
Electoral roll status
If your credit isn’t perfect, it doesn’t mean borrowing is impossible — it just affects which lenders may be suitable.
These are simple, high-impact steps:
How to Increase Your Borrowing Power Safely
Reduce your credit commitments
Clearing loans or credit cards can transform affordability instantly.
Add a second applicant
A joint application may improve income vs committed expenditure.
Increase your
deposit
Gifted deposits, savings, or selling assets reduce LTV.
Improve your credit score
Small tweaks (like reducing utilisation below 30%) make a big difference.
Extend the mortgage term
Longer terms lower monthly payments → boosts affordability.
Prepare your documents upfront
Lenders favour well-packaged, accurate cases.
Borrowing FAQs
Why do lenders offer different borrowing amounts?
Each lender uses their own affordability model, so results vary — sometimes by tens of thousands.
Can a mortgage broker increase my borrowing?
A broker understands which lenders are more flexible with income, bonuses, credit, age, dependants and complex income — meaning you get the strongest possible result.
Does having debt reduce borrowing?
Not always — but high monthly payments do. Clearing or reducing debts can increase your borrowing significantly.
What if I’m self-employed?
You can still get a mortgage; lenders just assess income differently. Many accept one year’s accounts depending on circumstances.
Will a credit check reduce my score?
Soft checks don’t affect your score. A hard check may have a small temporary impact.