How Much Can I Borrow?

What Amount Will Lenders Approve, What Is the Maximum Mortgage I Can Get, and How Much Do I Need for a Deposit or Down Payment?

When you start thinking about buying a home, the very first question almost everyone asks is: “How much can I borrow?” Closely followed by: “How big of a mortgage will a lender approve?” and “How much deposit or down payment do I need?”

These questions matter because they shape everything—from the types of properties you can consider to how long it will take you to save. While the exact figures vary depending on your location and individual circumstances, lenders across most countries follow similar principles when assessing affordability.

This guide explains how lenders calculate maximum borrowing power, what affects your approval amount, how down payments work, and what you can do to increase how much you qualify for.

1. How Lenders Decide How Much You Can Borrow

Although lenders differ in their exact formulas, the decision almost always comes down to a combination of these major factors:

1. Your income

Your income is the foundation of your borrowing capacity. Lenders typically use:

• Base salary or wages

• Bonuses (fully or partially counted)

• Commission or overtime (depending on history and consistency)

• Self-employed income (averaged over 1–3 years)

• Rental income (usually discounted by 20–30% for risk)

The higher and more stable your income, the larger the mortgage you may qualify for.

2. Your existing financial commitments

Lenders look at what you already owe, including:

• Credit cards (even unused limits count)

• Car loans or leases

• Personal loans

• Student loans

• Child support or alimony

• Buy-now-pay-later accounts

• Other mortgages or investment loans

Each commitment reduces the amount a lender is willing to approve.

3. Your credit profile

A strong credit score often:

• Increases how much you can borrow

• Reduces interest rates

• Unlocks better mortgage products

Conversely, a weak credit profile may significantly lower your maximum loan or require a larger deposit.

4. Your monthly expenses

Lenders will account for your living costs based on declared spending or standardized household expenditure models. These include:

• Utilities

• Groceries

• Transportation

• Healthcare

• Childcare

• Insurance

• Discretionary spending

Higher expenses = lower borrowing capacity.

5. The loan’s interest rate

Lenders stress-test your mortgage against higher hypothetical future rates.
For example, if today’s interest rate is 6%, the bank may test whether you can still repay it at 8% or 9%—just to ensure affordability.

This has become one of the biggest limiting factors in borrowing power in recent years.

6. The loan term

The typical mortgage term is 25–30 years.
A longer term reduces monthly repayments, which can increase the maximum loan amount.

7. The type of loan

Certain loan types affect borrowing differently:

• Fixed vs. variable (rates can differ)

• Interest-only (often allowed only for investors or short periods)

• Low-deposit mortgages (higher risk → lower borrowing or higher fees)

2. “What Is the Maximum Mortgage I Can Get?”

Although each lender has its own rules, your maximum borrowing usually falls within one of these approaches:

Income Multiple Method

Many lenders use an income multiplier.

Example ranges:

• 3× to 4.5× your annual income (common range)

• 5× or even 6× (possible with certain lenders for strong applicants or professionals)

If two people apply jointly, lenders multiply the combined income.

Example:
Combined income: $90,000
Lender multiple: 4.5×
Maximum mortgage: 90,000 × 4.5 = $405,000

This method is simple but doesn’t account for expenses or debts—so real borrowing often ends up lower.

Debt-to-Income Ratio Method (DTI)

Used heavily in the US and increasingly worldwide.
DTI = (All monthly debt payments + projected mortgage payment) ÷ monthly income.

Typical maximum DTIs:

• 35%–43% for many lenders

• Up to 50% for some programs or high-income borrowers

The lower your other monthly debts, the higher mortgage you can qualify for.

Full Affordability Assessment

Some lenders run detailed affordability models that incorporate:

• Household size

• Actual monthly spending

• Savings rate

• Stress-tested future mortgage rates

These assessments often lead to more conservative borrowing limits.

3. How Much Deposit or Down Payment Do I Need?

The deposit (or down payment) is the amount you contribute upfront toward the purchase.

The size of your deposit affects:

• How much you can borrow

• Your interest rate

• Whether you need mortgage insurance

• What lenders and mortgage products you qualify for

Here are typical deposit/down payment ranges across common lending thresholds:

1. Minimum possible deposit: 0%–5%

Some programs offer extremely low deposits, such as:

• Government-backed programs (FHA, VA, USDA in the US)

• First-time buyer schemes

• Lender-specific 5% down products

Pros: You can buy sooner
Cons: Higher monthly payments, higher interest, mortgage insurance, stricter rules

2. Standard deposit: 10%–20%

Most buyers aim for this range.

Benefits include:

• Better interest rates

• Wider lender choice

• Lower monthly payments

• No mortgage insurance (at 20% in many markets)

3. High deposit: 20%–40% or more

This is ideal for:

• Lower-income buyers looking to increase affordability

• People with past credit issues

• Investors seeking stronger cash flow

Higher deposits reduce risk for lenders → often substantially lower interest rates.

4. Loan-to-Value Ratio (LTV)

Your deposit is the inverse of the LTV:

• A 20% deposit = 80% LTV loan

• A 10% deposit = 90% LTV loan

• A 5% deposit = 95% LTV loan

The higher the LTV, the riskier the loan, so borrowing limits may be reduced.

5. Why Your Maximum Borrowing Isn’t the Same as What You Should Borrow

Lenders calculate the maximum amount based on minimum requirements. But that doesn’t necessarily mean you should borrow the absolute maximum.

Consider:

• Your lifestyle

• Your savings goals

• Future plans (children, school fees, career changes, retirement)

• Interest rate risk

• Unexpected expenses

Many financial advisors suggest borrowing an amount that keeps housing costs around 25–30% of your take-home pay, not just what lenders allow.

6. How to Increase the Amount You Can Borrow

Even if your borrowing power seems limited, there are proven ways to increase it.

1. Reduce or eliminate debts

This has the biggest immediate impact.

Paying off:

• Credit cards

• Car loans

• Personal loans

• Buy-now-pay-later accounts

…can significantly increase your borrowing capacity.

2. Increase your deposit

A larger deposit:

• Lowers the LTV

• Reduces lender risk

• Improves interest rates

• Boosts affordability models

Even increasing your deposit by 5–10% can meaningfully raise the maximum loan amount.

3. Improve your credit score

Steps include:

• Paying bills on time

• Reducing credit utilization

• Avoiding hard inquiries

• Correcting errors on your report

Higher scores → better borrowing limits.

4. Increase your income

Possible ways:

• Overtime or bonus eligibility

• Taking additional work

• Career progression

• Changing to higher-paying roles

• Adding a co-borrower (partner, family member, or guarantor)

Even small income increases can boost borrowing significantly.

5. Extend the mortgage term

Moving from a 25-year term to 30 years reduces your monthly payment, which raises borrowing capacity.
However, it increases total interest over the life of the loan.

6. Shop around

Different lenders can vary dramatically.
One lender may approve $300,000 while another may offer $420,000 based on the same information.

A mortgage broker can help identify lenders with:

• More generous affordability models

• Better rates

• More flexible policies

• Specialist programs for your profession or income type

7. Real-World Example Borrowing Scenarios

Below are simplified illustrations (figures vary by region and lender).

Scenario 1: Single borrower

• Income: $60,000

• No debts

• 10% deposit

Estimated borrowing range: $240,000–$300,000 depending on lender.

Scenario 2: Couple

• Combined income: $110,000

• Car loan: $300/month

• Credit card limits: $8,000

• 15% deposit

Estimated borrowing range: $430,000–$550,000.

Scenario 3: Self-employed buyer

• Income (average): $95,000

• Business debts

• Strong credit

• 20% deposit

Estimated borrowing range: $350,000–$480,000 depending on how the lender treats irregular income.

8. What Documentation Lenders Require

To determine how much they will approve, lenders typically ask for:

Income documents

• Pay slips

• Tax returns

• Bank statements

• Profit & loss statements (self-employed)

Expense and debt records

• Credit card statements

• Loan statements

• Lease agreements

Identity and residency

• Passport or ID

• Proof of address

• Visa or residency documents (if applicable)

Property and deposit evidence

• Savings history

• Gift letters

• Sale contracts (if selling a property)

The more complete and transparent your application, the more accurate (and often higher) your borrowing capacity assessment will be.

9. Should You Get Pre-Approved?

A pre-approval (or mortgage in principle) is a lender’s initial commitment confirming how much they are willing to lend.

Benefits:

• You know exactly what price range to shop in

• Agents take your offers seriously

• You avoid falling in love with homes outside your budget

• It highlights issues early (credit, debt, income discrepancies)

A pre-approval is usually valid for 60–90 days and can be refreshed.

10. Summary: How Much Can You Borrow and What Deposit Do You Need?

Here’s the big picture:

How much can I borrow?

• Typically 3× to 5× your income, sometimes more for strong applicants

• Dependent on your expenses, credit score, debts, and interest rate stress tests

What is the maximum mortgage I can get?

Your maximum loan depends on:

• Income

• Existing debts

• Living expenses

• Loan term

• Deposit size

• Credit rating

• Lender policies

There is no universal maximum—different lenders may give vastly different results.

How much do I need for a deposit/down payment?

Common deposit ranges:

• 5% = minimum, higher risk

• 10–20% = standard

• 20%+ = best rates, strongest borrowing capacity

How to increase your borrowing?

• Reduce debts

• Improve your credit

• Increase your deposit

• Boost your income

• Use a broker to find a more generous lender

• Consider a longer loan term