How Much Can You Borrow When Remortgaging?
Remortgaging can be a great way to secure a better deal on your mortgage, reduce your monthly payments, or even release equity for other financial needs. However, one of the most common questions homeowners ask is: How much can I borrow when I remortgage? In this guide, we’ll break down the key factors that determine your borrowing potential and how to maximise your chances of getting the best deal.
Loan-to-Value (LTV) Ratio
Your Loan-to-Value (LTV) ratio plays a crucial role in how much you can borrow. LTV is the percentage of your property’s value that is covered by your mortgage. For example, if your home is worth £300,000 and your mortgage balance is £150,000, your LTV is 50%. Generally, the lower your LTV, the better the mortgage rates available to you.
Lenders typically offer remortgage deals for LTVs up to 90%, though some specialist lenders may go higher. If your LTV is low, you’ll have access to more competitive rates and a wider range of products.
Income and Affordability Assessment
Lenders will assess your income and outgoings to determine how much you can afford to borrow. They will typically look at:
- Your salary or self-employed income
- Any additional income (e.g., rental income, bonuses, or benefits)
- Monthly outgoings, including existing debts, household bills, and living expenses
Most lenders use an income multiple to determine your maximum borrowing limit. This is usually between 4 to 5.5 times your annual income, depending on the lender and your financial situation. For example, if you earn £50,000 per year and the lender offers a 4.5x multiple, you may be able to borrow up to £225,000.
Credit Score and Financial History
Your credit score is another key factor. A strong credit history demonstrates that you are a responsible borrower, which can increase your chances of securing a higher loan amount and a better interest rate. Lenders will review:
- Your credit score
- Payment history on loans, credit cards, and other debts
- Any missed payments, defaults, or County Court Judgements (CCJs)
If your credit score is low, you may be offered a smaller loan amount or higher interest rates. Checking your credit report before applying and addressing any issues can improve your chances.
Employment Status and Stability
Lenders prefer borrowers with stable employment and consistent income. If you are self-employed, you may need to provide at least two to three years’ worth of accounts to prove your earnings. Full-time employees with a steady income and a strong employment history may find it easier to qualify for higher borrowing amounts.
Purpose of Remortgaging
The reason for your remortgage can also impact how much you can borrow. If you are remortgaging simply to switch to a better rate, lenders may not require additional borrowing assessments. However, if you are looking to borrow more—such as for home improvements or debt consolidation—lenders may scrutinise your finances more closely.
How to Maximise Your Borrowing Potential
If you want to borrow more when remortgaging, consider the following steps:
- Improve Your Credit Score: Pay off existing debts, make payments on time, and avoid taking out new credit before applying.
- Reduce Your LTV: Increasing your property’s value through renovations or paying down your mortgage can improve your LTV.
- Increase Your Income: If possible, demonstrate higher earnings, such as through pay rises or additional income sources.
- Lower Your Outgoings: Reducing existing debts and unnecessary expenses can improve your affordability.
Final Thoughts
The amount you can borrow when remortgaging depends on multiple factors, including your property value, income, credit history, and financial stability. Speaking to a mortgage advisor can help you understand your options and find the best deal tailored to your needs.
If you’re considering remortgaging and want expert advice, Impact Specialist Finance can help guide you through the process. Get in touch today to explore your options and secure the best deal for your circumstances.