Can I borrow more with a bigger deposit?
A common question
When assessing how much you can borrow, the mortgage companies primary concern is "Can they afford to pay this back?"
Gone are the days of just using a simple method of 4.5 x your income, instead each lender uses a different affordability calculator to assess what you can afford.
They'll look at your income, utility bills and debts, but also at your lifestyle expenses - the gym, eating out, childcare costs etc.
As the size of your deposit doesn't affect your monthly cashflow, then no - having a bigger deposit doesn't immediately translate into having a larger mortgage.
What is does impact, is the amount you'll pay for that mortgage.
Mortgage rates are based on loan to value bandings. (95%, 90%, 85% 80% and so on). The bigger the deposit, the lower the loan to value and in turn the lower your interest rate will be.
You'll pay a higher rate if you borrow £200,000 with £20,000 deposit than you will borrowing £200,000 with a £40,000 deposit.
Some lenders will take the fact you can have a lower rate into account for affordability purposes boosting your borrowing power slightly.
So, bigger deposit doesn't necessarily mean bigger mortgage, but bigger deposit does equal lower interest rate - which really, is the bit we all care about.
Since the coronavirus outbreak, lenders have tightened their lending criteria so it is more important than ever to use a mortgage adviser to make sure you get a the most suitable mortgage for your circumstances.
Get in touch to book a free, no obligation meeting.
Call Rachael on 01323 436680 or email Rachael@Willowtree-fs.co.uk