“How to get a bigger mortgage?” – this is one of the most common questions that many homebuyers ask. And why not? The higher your mortgage affordability, the more options you have to choose from! So, you are in a better position to haggle with the lender for a lower interest rate, better repayment terms or even an increase the mortgage amount.

If you want to purchase a home and get onto the property ladder in 2024, there are some potential challenges you may face.

Higher buying costs: Houses continue to be expensive in the UK, with the average cost standing at approximately £284.691 as of December 2023.

Rising rates of interest: To address the ongoing financial crunch, the Bank of England has increased the base interest rate. This has affected mortgage interest rates and repayments too.

Stringent regulations to test mortgage affordability: Higher interest rates have triggered lenders to follow stricter regulations to determine the borrower’s affordability score.

Considering the above potential issues, it is crucial to act fast and increase your borrowing power. According to Moneyfacts, a mortgage deal in the UK comes with an average shelf life of only 20 days as of November 2023. So, you will always feel the pressure to act quickly to ensure you get the right deal before it expires.

In this article, we will share a few tips to keep your finances healthy and increase your affordability score.

What is Mortgage Affordability?

Congratulations, you are planning to buy your first home!! That’s an investment of a lifetime and you will get most of it through a mortgage. But do you have enough borrowing capacity for the mortgage to cover at least 95% of the home’s value? Well, you’re not alone. Lenders follow the below equation to determine your affordability score, i.e., your ability to repay the mortgage.

Mortgage Affordability = Your Monthly Income x 4

In addition to your income, lenders will also assess your living expenses and debts. The heavier you are in debts and expenses, the more it will drag down your financial stability and the capacity to repay the loan.

So, it is extremely important for you to boost your mortgage affordability before you apply for a loan.

Best Ways to Get a Mortgage by Increasing Your Borrowing Power

If your borrowing power is low and you do not have enough savings to put down a substantial deposit amount, there are ways you can fix it.

1. Improve Your Credit Score
   Let’s get it straight – without a good credit score, you cannot get a bigger mortgage. It is one of the most important factors that lenders consider when determining your borrowing capacity.
   There are various ways you can improve your credit score with a few outlined here –

   · Check your credit report regularly to ensure all the information is accurate. Immediately
   report erroneous or duplicate entries which may pull down your credit score.

   · Pay your bills and EMIs on time to ensure you do not default on any repayment.

   · Catch up on your past dues or close unused accounts.

   · Always use 30% or less of the total credit available to you.

   You can consult a financial advisor to understand how to increase your credit score which may help getting a mortgage.

2. Pay Off Your Debts Before Applying for a Mortgage
   It is not the right time to apply for a mortgage when you are deeply stuck in debt. This may
   significantly impact the amount you can borrow. Before applying for a mortgage, try to pay off your debts entirely. Even if you are unable to clear all your debts, try to keep your outstanding credit below 50%. This shows a better picture of how effectively you manage your finances.
3. Cut Down on Your Costs
   In addition to your income, lenders also consider your living costs when assessing your
   mortgage affordability. Hence, you should create a practical monthly budget and strive to trim your monthly expenditures such as your rent, utility bills, ongoing payments, etc.
4. Get 100% Mortgage
   If you are a first-time home buyer and do not have enough money for deposits, you can apply for a 100% mortgage. It means you get the entire amount as a mortgage on your home, without having to pay any deposit amount. This way, you can have a bigger mortgage. But keep in mind the higher interest rates and stringent regulations that come with this type of mortgage.

However, if you are looking for an affordable mortgage, consider saving more for your deposit.

The Final Words

Not everyone’s financial situation is the same when it comes to buying a home. Thankfully, you have various options for improving your borrowing capacity. A key step to this is to understand how to determine mortgage affordability.
Attention: Late repayments can cause you serious money problems. For help go to moneyhelper.org.uk