In recent years, the UK housing market has seen continuous growth, making it increasingly difficult for homebuyers to secure a larger mortgage. Whether you’re a first-time buyer, upsizing, or moving to a more expensive area, it’s important to understand the steps you can take to increase your borrowing capacity. This article will provide guidance on how to get a bigger mortgage in the UK.
How to get a bigger mortgage
Improve your credit score:
A higher credit score is likely to make you a more attractive borrower in the eyes of lenders. To improve your credit score:
- Pay all your bills on time, including utilities and credit card bills.
- Keep your credit utilisation low by not maxing out your credit cards.
- Check your credit report for errors and dispute any inaccuracies.
- Avoid applying for multiple credit lines in a short period.
Reduce your debt-to-income ratio:
Lenders evaluate your debt-to-income (DTI) ratio to assess your ability to repay the mortgage. A lower DTI ratio increases your chances of qualifying for a larger mortgage. To reduce your DTI ratio:
- Pay off outstanding debts, such as credit card balances and personal loans.
- Avoid taking on new debt before applying for a mortgage.
- If possible, increase your income through promotions, side hustles, or additional employment.
Save a larger deposit:
A larger deposit can help you secure a bigger mortgage by reducing the loan-to-value (LTV) ratio. Lenders typically offer more competitive interest rates and terms for mortgages with lower LTV ratios. To save a larger deposit:
- Set a monthly savings goal and stick to it.
- Consider using government schemes, such as Help to Buy, to boost your deposit.
- Explore the possibility of receiving a gifted deposit from a family member.
Choose the right mortgage product:
Various mortgage products are available in the UK, each with different terms and eligibility criteria. To maximise your borrowing capacity:
- Research the different types of mortgages, including fixed-rate, adjustable-rate, and interest-only options.
- Consult a broker or financial advisor for personalised guidance on the best product for your needs.
- Compare deals from multiple lenders to find the most competitive rates and terms.
Extend the mortgage term:
A longer term can increase your borrowing capacity by reducing your monthly repayments. However, keep in mind that this will also result in higher total interest payments over the life of the mortgage. To extend your mortgage term:
- Consider your long-term financial goals and weigh the benefits and drawbacks of a longer-term
- Discuss your mortgage term options with a mortgage broker or lender.
- Ensure you can comfortably afford the monthly repayments over the extended term.
Consider a joint mortgage:
Applying for a mortgage with a partner, family member, or friend can significantly increase your borrowing capacity. This is because lenders will consider both applicants’ income and credit history when determining the maximum mortgage amount. Before entering a joint mortgage agreement:
- Have open and honest discussions about your financial situation and goals
- Consult a solicitor to draft a legal agreement outlining each party’s responsibilities and rights.
- Ensure all applicants have a good credit score to maximise your borrowing potential.
Securing a larger mortgage in the UK can be challenging, but by taking proactive steps to improve your financial profile and carefully considering your options, you can increase your chances of success. Remember to consult with a mortgage broker or financial advisor for personalised guidance tailored to your specific needs and circumstances.
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