How Much Can I Borrow for a Mortgage in Croydon?

If you are planning to buy in Croydon, one of the first questions is how much a lender will let you borrow. Online calculators give a rough idea, but the figure a lender actually offers depends on its own affordability assessment. This guide explains how that works and what you can do to improve your position before you start viewing.

Income multiples: the starting point

Many lenders lend around four to four-and-a-half times your annual income, or your combined income for a joint application. Some lenders offer higher multiples to applicants with larger incomes or in certain professions. Bank of England rules also limit how much lending each lender can do at higher multiples, so these options are not available to everyone.

As an illustration only, if two buyers earn £42,000 and £30,000, their combined income is £72,000. At four-and-a-half times income, that suggests a maximum of around £324,000 before the lender’s detailed checks.

Affordability: what lenders deduct

The income multiple is a ceiling, not a promise. Lenders run an affordability assessment that looks at your regular outgoings, including:

• loans, car finance and credit card balances;

• childcare costs and the number of dependants in your household;

• student loan repayments and other deductions from your pay;

• for flats, service charges and ground rent, which many lenders include in their calculations.

Lenders also check that you could still afford the payments if interest rates rose. As a result, two lenders can offer very different amounts on the same income.

Why the type of Croydon property matters

Croydon has a wide mix of homes, from new-build and converted flats near East Croydon station to Victorian terraces in Thornton Heath and family houses in Selsdon and Sanderstead. For leasehold flats, service charges can be significant and reduce the amount a lender will offer. Some lenders also apply lower loan-to-value limits to new-build flats. Check these costs before you set your budget. Our leasehold flat checklist explains what to ask.

Your deposit changes the maths

Your borrowing and your deposit together set your price range. A bigger deposit means a lower loan-to-value, which usually unlocks better rates and can make the monthly payments more affordable. Using the example above, a deposit of £36,000 alongside a £324,000 mortgage would suggest a price range up to about £360,000, before allowing for stamp duty, legal fees and moving costs.

How to improve what you can borrow

• Reduce or clear credit card balances and small loans before you apply.

• Check your credit reports and correct any errors.

• Consider whether a longer mortgage term is sensible, remembering that it increases the total interest paid.

• If you earn bonus, overtime or commission, gather evidence of a consistent track record.

• Ask whether a lender that offers higher income multiples could suit your circumstances.

Do not borrow the maximum without checking the monthly cost

The most a lender will offer is not always the amount you should borrow. Work out a monthly payment you are comfortable with, allowing for bills, council tax, commuting and saving. Our mortgage calculator can help you test different scenarios.

Get a personal affordability check

We compare lenders’ affordability for your circumstances before you apply, so you can house-hunt with a realistic budget. Find out more about our residential mortgage advice, our mortgage broker service in Croydon, or read our first-time buyer checklist for Croydon.

General information, not a personal recommendation. Lender criteria, rates and availability can change. Your home may be repossessed if you do not keep up repayments on your mortgage. PMS Mortgages will explain any broker fee before you proceed.