Use our mortgage calculator to quickly work out how much you could afford to buy your next home. With just a few simple details, we can show you how much you could be eligible to borrow, as well as breaking down your monthly repayments.
|Your home or property may be repossessed if you do not keep up repayments on a mortgage.|
How much can I borrow?
The amount you could borrow will largely depend on your income. However, mortgage lenders will also consider any financial commitments you may have, including outstanding loans, credit cards or debts.
*The borrowing amount we display is based on 4x income. Some lenders will use multipliers slightly lower or higher than this but we believe this represents a mid-point to give you a good indication of how much you may be able to borrow. In practice, lenders will base the maximum borrowing amount on an affordability assessment which takes into account your outgoings and committed expenditure. This may give a lower maximum loan amount.
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*Find out how much you can borrow
The borrowing amount we show in our mortgage calculator is based on 4x income. Some lenders will allow you to borrow multipliers of your salary slightly lower or higher than this, but we think this represents a mid-point to give you a good indication of how much you may be able to borrow. For example, if you were earning £30,000 a year, you might be able to borrow £120,000 – before any other financial commitments are taken into account. Adding this borrowing amount to the deposit you’ve got will help guide you towards the kind of properties you can afford.
In practice, lenders will base the maximum borrowing amount on an affordability assessment which takes into account your credit score, your outgoings and expenditure. This may give a lower maximum loan amount than shown in our calculator.
Any potential lender will run a credit check and look at your credit file to see how responsible you’ve been about paying your bills regularly and paying back debt like credit card repayments and loans. This is so they can be reassured about how likely it is that you’ll be able to pay your mortgage.
The size of your deposit makes a difference too. The larger your deposit in proportion to the value of the property you’re buying, the happier the lender will be. That’s because if you fail to pay your mortgage and your home is repossessed, it’s more likely the lender will get all their money back, even if there’s a fall in house prices.
For buyers, once you’ve compared mortgage offers it can be very helpful to get an agreement in principle (AIP) (or sometimes called a decision in principle) from your chosen lender. This is an indication from lenders about how much they’ll be willing to lend you, if you make a formal application once you’ve found a property. But this isn’t a guarantee that they’ll lend you that amount of money. That will still depend on many things, including whether a survey shows that the property is worth what you offered to buy it for, together with the full details of your financial situation and any changes that have happened since the AIP was given.
To get an AIP, you’ll have to provide some financial details. AIPs usually last for 90 days, to give you a chance to find your new home. Your potential lender will run a credit check at this point, and you might want to find out if they run a hard check,which will show on your credit record, or a soft check, which won’t.
If you’re planning on buying your first home, or trading up, it’s always advisable to check your credit record and get it into shape at least six months before you start looking for your new property.
How much can I afford to borrow?
When getting a mortgage, you shouldn’t only focus on the absolute maximum you can borrow, but on how monthly mortgage payments will affect your budget and what you can afford to pay comfortably. Our calculator can help by showing you what your monthly payments would likely be for particular rates of interest, based on the value of the property and the size of your deposit. Again, as a rule of thumb, the larger your deposit, the lower the interest rate is likely to be.
If you’ve got a poor credit history, there’s a strong chance that the interest rate you’ll be charged will be higher, as you’re a higher risk for the lender. You may want to increase the interest rate in the calculator to get a more accurate picture of what you might be charged.
If, for example, you’re a first-time buyer and have been renting, you could compare the cost of a mortgage with what you’re paying in rent. If you’re trading up or downsizing, you’ll be able to compare your new potential mortgage payment with the existing one, to see how affordable it is. Also take into account any other expenses that might increase if you move to a bigger home. These need to be included in your own affordability calculations, based on what you’ll have left once the mortgage is paid.
You can use the calculator to see what difference a larger deposit might make to your monthly payments and see if you can save more now for your deposit, to reduce the cost of your mortgage in the long term.
Don’t forget, as well as a deposit, you’ll need money for all the other costs that come with buying a home. For example, legal fees, surveyor’s fees and possibly stamp duty. Take all this into account when deciding what you can afford.
With interest rates low at the moment, it’s a good idea to check what your payments could go up to if they started rising again. A fixed rate mortgage will give you certainty about what your payments would be for the length of the fix.
When thinking about mortgage affordability, you might also need to consider how your personal situation could change over the coming years. Factors to think about could include how secure your job is, or whether you’re thinking of making changes that may affect your income. For example, you might:
- Have children
- Change your working hours
- Set up a business
If you’re wondering what percentage of your salary roughly could or should go on your mortgage, experts advise you should spend no more than 28% of your household’s gross monthly income on total housing expenses, and no more than 36% on all your borrowing, like mortgage, loans, credit cards and car payments.
How do lenders assess affordability?
The way lenders assess affordability won’t be exactly the same for each provider, but essentially, they follow the same principles. They’ll look at your situation in more detail than our calculator does. Although our calculations give a good estimate, a lender may come to a slightly different conclusion.
Essentially, the mortgage lender have their own mortgage calculators and their scorecard will look at things like:
- The amount of money you want to borrow
- How much deposit you have
- Your employment status and job security
- Your income – and lenders may view things like overtime, commission and bonuses differently from basic salary as they’re not guaranteed
- Your outgoings – the money you spend on bills and on your lifestyle
- Any existing debts
- Your credit report
When looking at your credit report, it’s not just your overall score that potential mortgage lenders consider. They’ll also look in detail at:
- Any other recent loan or credit applications – if you’ve been applying for lots of loans recently this could signal financial problems.
- Your debt-to-income ratio – to see how much of your income is used to pay debts.
- Your credit utilisation ratio – this shows how much of the credit available to you is already being used. Most lenders prefer a ratio of under 30% as it shows you’re not having to borrow up to your limits.
- Your payment history – this shows how responsible you are at paying back debt on time. Even things like paying your credit card bill a few days late can have an impact.
- Your credit history – if you have bankruptcies, County Court Judgements (CCJs) or debts awaiting collection, these will give the impression that you’re a risky borrower.
- If you have a dispute – If you’re disputing something on your credit report, ideally you should get it resolved before you apply for a mortgage.
Lenders are likely to look at your bank statements for the last three to six months to show them what your spending is going on and how well you manage your money and finances. You’ll need your most recent P60 as proof of earnings too. You could also provide information about your savings accounts and other assets like shares, on your application form, as evidence of your ability to save and manage money.
Lenders may also look to “stress test” your ability to pay. For example, if you have a two-year fixed mortgage with a low introductory rate, how well could you afford to pay when the mortgage returns to its usual standard variable rate? You can look into this yourself with our mortgage calculator, to see how affordable your mortgage could be.
How much deposit do I need for a mortgage?
In an ideal world, as much as possible. This means you’ll need to borrow less, so you’re likely to pay less interest overall. To see what kind of impact having a larger or smaller amount of deposit could make to you, simply use the sliders on the deposit amount in section 2 “How much will I pay?”
You’ll see the monthly amount you need to pay going up or down according to the size of potential deposit.
This is because one of the most important things for mortgage lenders to consider is the loan to value (LTV) ratio – the amount you’re borrowing compared to the overall cost of the property. Often, the lower the LTV, the lower the rate of interest you might be charged. The higher it is, the riskier it is for a lender as they might not get all their money back if they had to sell the property, should you default on the loan.
Some lenders will have different rates for 100% mortgages, 95% mortgages, 90%, 85%, 80% mortgages and so on. Being able to move down to a lower band could save you money over time. It’s worth checking to see if increasing your deposit, even by a few thousand pounds to help you switch to a different band, could positively impact your monthly payments.
Because of recent shocks to the economy with the coronavirus pandemic, it could be tricky to find 100%, 95% or even 90% mortgages, as lenders have become more risk averse. So you’ll probably need to save for a deposit of at least 10% of the cost of your new home. The calculator will show options for 5% deposits – but currently, few lenders are offering 95% mortgages.
Also remember that your deposit isn’t the only factor that lenders consider when deciding what rate to offer you.
How much can I borrow if I’m self-employed?
This will vary between lenders. When using our calculator, aim to get as close to what you think your monthly salary would be.
Some lenders will expect to see at least three years’ worth of accounts. If you’ve got an accountant, then your accountant should be able to provide you with the necessary paperwork. If not, you’ll need to provide a solid record of your accounts yourself.
If you’re self-employed, it could be helpful to use a mortgage broker. A broker will be familiar with what evidence lenders need in terms of business accounts, tax returns and the number of tax years you’ll need documentation for.
Brokers are also likely to have insights into what kind of calculations mortgage providers make, when considering the maximum mortgage they’ll lend, and who is more willing to lend to self-employed people. Some lenders calculate the amount you can borrow based on several years’ income. Others base it on your previous year of trading.
Get more information about mortgages and the self-employed.
Frequently asked questions
Do mortgage calculators require a credit check?
No, our mortgage calculator simply uses the information you enter (salary, income, deposit etc.) to calculate how much you might be eligible to borrow, along with the value of a home you could afford. You won’t even be required to enter your name.
Only when you apply for a mortgage will you undergo a full credit check, which will be marked on your file and potentially impact your credit score.
How much can I borrow if I have bad credit?
How much you can borrow will vary between lenders, as some may be more risk averse than others. Because lenders want to reduce the risk of lending to you, having bad credit could affect you in several ways:
- You may need a big deposit so that you don’t have a high loan-to-value ratio
- You’re likely to have to pay a much higher rate of interest than a borrower with good credit would, so you’ll pay more for your mortgage
- You could have a smaller range of options to choose between as some lenders will be unwilling to lend to you at all
You can check your credit score to see what your credit rating is. You can do this for free with the three main credit reference agencies - TransUnion, Equifax and Experian. If you know you’ve got a bad rating, the calculator can help you assess how affordable a loan with a high interest rate, would be for you.
Fill in part one with your salary and the size of your deposit, click on the ‘calculate’ button, then go on to the second part to see what difference increasing the interest rates will make to your monthly payments.
A mortgage broker could help, as they’ll be familiar with lenders who’ll grant mortgages where there’s been a history of bad credit, and also alert you to the level of interest you could pay.
Ideally, do what you can to repair your bad credit history before you apply for a mortgage.
How are mortgage repayments calculated?
To calculate a mortgage’s monthly repayment, you’ll need to know the value of the home you’re buying, your deposit, the interest rate and the length of term.
- House value - £250,000
- Deposit - £50,000 (20% of the value of the home)
- Mortgage amount - £200,000
- Mortgage term – 30 years
- Mortgage rate – 2%
If the mortgage rate in this example was fixed for the length of the 30-year term, you’d pay 360 monthly instalments of £739.24. This pays off the £200,000 loan in full, along with a total interest amount of £66,126.
It’s important to remember that, as you begin to pay off your mortgage, the interest owed begins to fall in line with the outstanding amount on your mortgage that’s owed. This means you’ll slowly be charged less in interest as the years go on. During a fixed term however, you’ll be charged a fixed, regular amount.
|Year of mortgage||Mortgage balance||Total interest paid|
However, this system only works for a fixed term. For a variable rate, or if your rate were to change after agreeing a new mortgage deal, this would be subject to change.
Should I take the maximum I can borrow?
Just because you’re eligible to borrow a certain amount, doesn’t mean you should. It’s purely a judgement call for you, based on your personal financial situation, but you should consider any potential future impacts you may face.
For example, are you a couple buying a house but are planning to have children in the next few years? If so, you should consider the financial impact of one of you taking time off work, working part-time, along with potential nursery fees and other extra costs. If you’re expecting a situation like this, you may want to avoid stretching yourself by borrowing at your absolute limit, as you may later struggle to continue paying off your mortgage comfortably.
You should also consider the event of interest rates rising over the course of your mortgage term. If mortgage rates rose, your monthly repayments would also increase. Therefore, you need to ensure that you’ll still be able to comfortably meet your payments.
Only borrow an amount that you feel comfortable with. It’s your responsibility to meet your repayments. Failure to do so could result in significant penalties, or even having your home repossessed.
How can I drop an LTV band?
LTV is the loan to value ratio between the amount you’re borrowing and the value of the home you’re buying. LTV bands are typically split into increments of 5%, and with each band you qualify for new mortgage rates. This means that, the less you need to borrow against the property, the better your mortgage rate tends to be.
Therefore, if you can increase your deposit amount, or buy a cheaper property in relation to your deposit, you’ll drop into a lower LTV band. With each band you drop, you could receive a better mortgage rate, which will save you hundreds, potentially thousands, over the full term.
Compare affordability in your area
Now you know what mortgage you can afford, you’ll quickly get an idea of whether you can afford to buy in a certain area. Income is one of the things mortgage providers will look at when deciding how much to lend you. You’ll usually only be able to borrow around four times your annual income. With this in mind, we’ve looked at the average salary and average house price per local authority to find the most and least affordable places to buy in the UK.
Based on the ratio of average salary to average house price, the most affordable places to live are Copeland in Western Cumbria, East Ayrshire in Scotland and Barrow-in-Furness, also in Cumbria.
There’s a clear north/south divide when it comes to affordability, with all of the top ten most affordable areas located in the north of the UK, while all of the ten least affordable areas are in the south.
Unsurprisingly, nine of the ten least affordable areas are in London.
The difference in affordability between the most and least affordable place is enormous. In Copeland, the average home costs just 2.6 times the average salary, while in Kensington and Chelsea, the ratio of average home price to average salary is a staggering 42.7.But are the most affordable areas the most popular?
Up-and-coming locations for homeowners around the UK
Google search data analysis reveals the locations around the UK that saw the biggest increase in searches between 2018 and 2020. Whitby, Dore and the county of Kent saw the biggest surge in interest, followed by Padstow, Ayr and Ilfracombe.
The top 20 locations have one important thing in common: they’re all rural.
Seven are coastal towns, five are countryside villages, and the remaining eight are home counties, perhaps evidence that more and more of us are choosing to swap urban life for more rural settings.
Check out the most up-and-coming locations around the UK based on Google search data from the past two years. Find out the cities where residents have shown the most interest in moving there and compare average house prices to see whether you could afford to buy there yourself.
The average house price in these 20 locations ranges between £132,734 (in Bothwell) and £448,030 (in Surrey), so their affordability depends largely on your income and the size of mortgage you can get.
Let’s take a look now at the cities where people show the most interest in getting a mortgage.
Mortgage interest in the UK
Getting a mortgage is one of life’s great milestones. From 2018 to 2020, there was a 63% increase in Google searches related to getting a mortgage and buying a home.
We’ve delved deeper into these searches to find out where people are most eager to get on or climb the property ladder.
We found that people in Bristol, Reading and Oxford are searching the most for mortgages and buying a home.
Bristol has also seen the second biggest rise in interest since 2018, with 74% more searches in 2020 than two years previously.It is topped only by Liverpool, where people were searching for mortgages almost twice as much in 2020 than in 2018.
In all but one of the top 15 cities, searches increased by more than 20% from 2018 to 2020, showing that there’s a growing urge to own our own homes.
When we look specifically at searches related to first-time buyers, people in Dundee, Liverpool and Aberdeen showed the biggest increase in interest.
Once their mortgage has been approved and they’ve bought a new home, where are people in the UK is the most proud of their achievements?
The UK’s most positive property owners
Successfully getting a mortgage and getting on the property ladder and is something to celebrate.
We’ve looked at social media data to find out where in the UK people are most positively vocal about their mortgage and buying their home. Have a look at the map below for the results, as well as the top emojis used to celebrate.
Birmingham and Leeds are home to the most vocally proud and passionate homeowners, with more than half of social posts about moving to a new house featuring positive sentiment. They’re closely followed by people in Manchester and Portsmouth.
When it comes to moving into their first home, people in Exeter, Cambridge and London are the most vocal on social media, while those in London and Leicester are the most positive.
Methodology and References
Compare affordability in your area – Calculated by taking the 2020 average house price per local authority and dividing it by the 2019 average salary per local authority to estimate a house price to income ratio.
Up-and-coming locations – 2018-2020 Google search data around buying houses/properties was analysed for different areas across the UK. The 30 most populated cities across the UK were included in the analysis. Search terms were analysed on a city level, ONS population figures were factored into the analysis to draw representative insights. Data from the Land Registry provided the average house price for local areas/counties.
Mortgage interest in the UK – We reviewed mortgage-related Google search data from 2018-2020. The 30 most-populated cities across the UK were included in the analysis. Search terms were analysed on a city-level, ONS population figures were factored into the analysis to draw representative insights.
Positive property owners – 2018-2020 Social media data was analysed using Brandwatch for social posts across the UK around buying a home or moving to a new house. Location segments provided insights for the top 30 most-populated cities across the UK.