What Mortgage Can I Afford Calculator?

Calculate Your Mortgage Qualification Based on Income

In this calculator you can inclue investments, annuities, alimony, government benefit payments in the other income sources. Be sure to select the correct frequency for your payments to calculate the correct annual income.

This calculator defaults to presuming a single income earner. If your household has 2 income earners then you can expand the "spouse or partner" section to enter their income information. We calculate the mortgage qualification ranges using the following maths:

* If one earner makes the vast majority of the income to where the two income limit is lower than the single income limit, we will return the single income limit below. We compare both low end and high end limits for each scenario and then publish whichever option is higher for each.

General Guideline: 3X to 4.5X Annual Income

Lenders typically like to see borrowers put at least 5% down on their property. When borrowers put down less than 5% they are typically charged a significantly higher interest rate to offset the additional risk the lender is taking.

Borrowers can typically borrow from 3 to 4.5 times their annual income. Lenders may allow borrowers to borrow up to 5 times their annual income, though regulatory restrictions prohibit lenders from having more than 15% of their loans above 4.5 times annual income.

How Are Joint Applications Treated?

For joint applicants the limit is typically slightly lower with them either offering a full multiple on the first income and then adding in the second income, or lowering the multiplier across all incomes down to 3. Examples are shown in the table below.

The reason why limits are lower for joint incomes is it is more likely someone will either get laid off or want to voluntarily quit to start a family or go back to school.

How Much Can I Borrow? Detailed Considerations

In addition to your income level, lenders consider recent financial troubles, missed payments, and general living expenses when they determine suitability and lending limits.

• Loan-to-value: Lenders specify different limits for how much they are willing to loan for each type of loan product on offer. Typically LTV is the percent of the home's value not covered by your downpayment. So if you deposit 25% on a home that would mean the LTV is 75%.
• Pretax Income: basic income, pension, finacial support from ex-spouses & any other earnings like overtime, sales commissions or workplace bonuses. Some lenders may count overtime income in full while others may count it at a reduced rate of 50%. Self-employed people need to show additional documentation including their bank statements, business accounts, as well as their recent income tax payments.
• Outgoing Expenses: debt service fees on credit cards and other loans, insurance policies, council tax, vehicle expenses, utilities, and other basic living costs like recreation and childcare. Beyond the headline numbers, some lenders may lower your total limit for each additional child in the family. If your numbers sound off they may ask to see recent bank statements to authenticate them.
• Anticipated Personal Living Changes: risk of job loss, illness, and major life changes like having a child or taking a career break to obtain further education.
• Anticipated Market Condition Changes: lenders want to ensure you will still be able to make payments if interest rates rise in-line with typical historical shifts.

Money Advice Service offers an affordability calculator which takes into account your outgoings. In general lenders do not like more than 60% of a person's income going toward their mortgage and monthly outgoings. Nationwide also offers a similar calcualator, though it has quite a few steps in it and collects some personal data like your birthday.

Cleaning Up Your Creidt Profile

• Be sure you check your credit report 6 months in advance of purchase consideration so you can clear up any outstanding issues like missed payments or identity theft.
• If you have significant credit card debt lenders will presume you need to spend 3% to 5% of the balance to service the debt each month.
• If you have multiple credit cards with outstanding balances it is best to try to pay down your small debts and the cards with a lower balance (unless they are at a 0% APR or other special rate) in order to make your overall credit profile cleaner.
• If you decide to cancel unused credit cards or cards that are paid off be sure to keep at least one old card so you show a long opened account which is currently in good standing.
• Do not apply for new credit cards or other forms of credit ahead of getting a mortgage as changes to your credit utilization, limits and profile may cause your lender concern.

Estimate Your Monthly Mortgage Payments

In addition to using the above affordability calculator, you may want to check out our monthly mortgage repayment calculator to estimate your monthly payments for various loan scenarios.

The following calculator automatically updates payment amounts whenever you change any loan input, so if you adjust the interest rate, amount borrowed or loan term you will automatically see the new monthly fixed-rate and interest-only repayments.

We also offer a calculator with amortisation schedules for changing loan rates, so you can see your initial loan repayments and figure out how they might change if interest rates rise.

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