Head of Content
Mortgage Advisor & Director
How much can I borrow for a mortgage in London?
House prices in London remain much higher than the national average, with many first-time buyers priced out of the market altogether. There is no doubt that buying a house in London is harder than ever. The average price in Central London tops £1m, and even on the outskirts, you will struggle to find a property for less than £300k.
As a general rule of thumb, mortgage lenders loan up to 4.5 times your salary.
If you are buying as a couple, your combined salary is taken into account. There are other factors that will affect the lender's decision, for example, your credit record, dependents and other financial commitments.
At Teito, we search thousands of mortgages to find you the best deal possible and work with hundreds of lenders. Complete our simple online form now to get started on your London mortgage journey.
How to get a mortgage in London
Several government schemes can help you to get on the property ladder in London.
Help to Buy London
The Help to Buy scheme is designed to help first-time buyers towards their deposit contribution. In London, the scheme is more generous, with applicants able to borrow up to 40% of the value of the property. You contribute 5% towards the deposit, and the government provides the other 40%.
For the first five years, there is no interest to pay. After the first five years, there is a monthly admin fee of 1.75% applied, which increases annually in line with the Retail Price Index +1%.
To qualify, you must:
- You must not own any other property when you buy your new home under the scheme.
- The home must be newly built.
- The purchase price must not exceed £600,000.
- You must take out a repayment mortgage.
- The equity loan must be repaid after 25 years or when you sell, whichever comes earlier.
- You must repay the same percentage ratio as you initially borrowed from the proceeds of the sale should you sell your home.
From April 2021, there are regional price caps that will apply, but the cap will remain at £600k in London.
Read more about the Help to Buy Equity Loan Scheme.
Shared Ownership
Under shared ownership schemes, you own between 25% and 75% of a property and pay rent on the remaining share. You can increase your ownership incrementally over time until you own 100% of the property.
Read more about Shared Ownership.
Rent to Buy
The Rent to Buy scheme allows you to rent a home at 20% below market value for up to five years, after which you can then buy the property with a standard mortgage or a shared ownership scheme.
Other initiatives for buying a home in London
Two other schemes have announced by the government and are still in the planning phase: First Dibs for Londoners and the Starter Home Initiative. Both schemes are designed to address affordable housing for Londoners, with launch dates yet to be finalised.
Our team of advisors work with hundreds of lenders to find you the perfect mortgage. Get started now, and we promise to make getting your London mortgage as straightforward and stress-free as possible!
How do I start looking for a property in London?
London is too big to simply search the whole of London. It’s made up of smaller boroughs, each with their own identities. Do your research, and choose two-three smaller areas at most to consider. You may want to look at transport links, schools, access to shops, nightlife, or how green the area is. Even localities that are situated right next to each other can have very different property prices.
The type of property on the market in London differs compared to the rest of the UK. With much less space available, you’ll be more likely to be looking at flats rather than the traditional semi-detached. Garden and outdoor space will likely be a premium too, so look for how close you are to local parks if this is important to you.
As many properties are situated in the same building, such as in converted town-houses, you’ll find that many of the properties are leasehold. Check the length of the lease to get an idea of how difficult the property might be to sell when you move on. Make sure you’re also fully informed of associated service changes. Your lender will consider costs like this when they assess whether you can afford the mortgage you are applying for.
Is it easier to buy outside of London?
If you want your money to go further, you may wish to look outside of London, at the so-called commuter belt. You’ll get more square footage for your money, though you’ll pay for this with a longer commute and higher day to day travel costs - which again, your lender will ask about when assessing your affordability. Looking outside of London will mean that Help to Buy schemes have much tougher thresholds (you'll only be able to borrow 20% of the property value, rather than 40%). Although property prices may be lower than central London, you'll still be paying a premium thanks to their proximity to the capital.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
