Find out how much you can afford to borrow for a mortgage and how much house you can afford without over-stretching yourself or committing to repayments that you can’t meet.
When buying a home, often the first step is understanding how much can you afford to borrow for a mortgage. Most people want to buy as much house as they can afford, without being overstretched or with too little money to pay the monthly bills.
How much can you afford to borrow for a mortgage?
When deciding how much can you afford to borrow for a mortgage, you’ll need to take a number of factors and costs into account, including:
Your income – how much you earn, job security and prospects for pay rises
How much you expect moving costs and any renovation costs to be
How much money you need a month for your living costs
What your expectations are in terms of house prices and mortgage rates
How much house you want. Are you happy being “house poor”, with a big house but little disposable cash? Or would you prefer a more modest house with more cash in your bank account?
What safety net you have in terms of savings – or family support?
Your appetite for risk – how much debt you are comfortable with
Understanding these points will help you calculate what additional costs you’ll incur when you move, how much money you need to maintain your desired lifestyle, and how comfortable you are to stretch yourself financially.
Mortgage calculators
Our how much can I borrow for a mortgage calculator is a good place to start to see how much you can afford to borrow for a mortgage. It looks at how much you are likely to be able to borrow and afford based on your income.
While online calculators are helpful in giving you a rough idea, you can find out exactly what you can borrow by speaking to our fee-free mortgage broker partners at L&C. They can give you no-obligation mortgage advice and set out your options today, for free.
Lenders usually let you borrow up to between 4.5 and 5.5 times your salary. But lenders must also assess the monthly payment you can afford, after considering your outgoings as well as your income. This is called an affordability assessment.
How much can you afford to borrow for a mortgage: What lenders take into account
Your income: Including your basic income, any other income such as overtime, bonus payments or a second job, income from your pension or investments, any child maintenance or financial support from ex-partners. You’ll need to give evidence of your income in the form of payslips and bank statements. If you’re self-employed you’ll usually need to provide two or three-years’ worth of tax returns and business accounts.
Your outgoings: The lender will also consider your household spending each month, such as your council tax and bills for gas and electricity, water, broadband, loan or credit cards, car payments, childcare costs, any school fees and insurance. They’ll also take into account your every day expenses such as spending on food, holidays and leisure.
Lenders will also assess whether you could keep up with your repayments if things change, such as if interest rates increase or if your income changes.
In terms of how much deposit you need, you’ll usually need at least a 5% deposit. But the bigger the deposit you have, the bigger the choice of mortgages you will have and you’ll usually get access to better first time buyer mortgage rates.
To work out the size of deposit you’ll be able to save, the first step is to draw up a household budget so that you’ll understand how much money you have at your disposal to pay for everything.
The size of deposit you’ll be able to save depends on:
What savings you have. If you are saving to buy a house, you may want to consider a Lifetime ISA
What capital you can raise from selling an existing home, or extending a mortgage on a property you are not selling
Once you’ve added these amounts together, you need to deduct any costs of buying a home, moving and renovating, as well as the savings safety-net you want to keep (you will need to have some savings after you move, in case of emergencies). The final sum is the amount you have available as a deposit that you feel you can afford to put down towards the cost of your home.
Can I get a mortgage without a deposit?
Typically, most lenders offer mortgage deals which require at least a 5% deposit to buy a house. A 5% deposit means you’ll need to get a 95% loan to value mortgage. A lot of lenders prefer a 10% deposit and having a larger deposit means you can access lower mortgage rates, making your monthly payments more affordable.
However, it’s possible to buy your first home with no deposit by taking out a 100% mortgage, such as Skipton Building Society’s 100% Track Record mortgage or by taking out a guarantor mortgage with help from your parents or a relative. We explain all your options and what to consider in our guide on how to get a mortgage with no deposit.
Once you’ve calculated how big your deposit is, you’ll be able to work out how much are able to borrow for your mortgage depending on:
The size of your deposit. 100% mortgages do exist and with the government mortgage guarantee scheme, there are 95% mortgages out there and Deposit Unlock if you are buying a new build, but ideally, your deposit would be at least 10% of the value of the property. Put simply, the bigger your deposit, the more you can borrow.
Your income. Some banks can lend up to five times salary, although these are maximum figures. Lenders all have slightly different ratios, taking into account joint incomes, bonuses etc.
The stability of your income. If you are freelance, have just set up a new business, or have unpredictable income, then mortgage lenders will usually only be prepared to offer you smaller mortgages
The mortgage term. 25 years is the most common term chosen for mortgages but more people are opting for 30 year mortgages to lower their monthly repayments. Bear in mind, the mortgage can cost you more over the long term as you will pay interest for longer.
How much can you borrow for a mortgage if you’re self-employed?
Don’t forget the estate agent fees you have to pay if you are selling your existing home
There are also the costs of furnishing your home. On average, home movers spend £5,000 on new goods.
The cost of renovation works. What are the emergency works you have to do that can’t be put off – such as getting the boiler to work? Or are you thinking of replacing the kitchen urgently?
So, how much house can I afford?
The amount you can afford to spend on a house will take into account how much capital you have to play with and how much you can borrow from a mortgage lender (both being your total home-buying budget). The total amount of money available to you needs to cover the total cost of buying your home. If not, you will need to scale back your ambitions – or find some more money. But being able to afford to buy your new home is only the first step – to avoid repossession or mounting debts, you need to be able to afford to live in it.
Will I be able to afford to pay my mortgage and other household bills?
Once you have decided the rough size of the mortgage you are going for, you should find out what the rough monthly costs would be, which will depend on the type of mortgage. It’s important to ask yourself:
Is the monthly mortgage a payment you can easily afford? A good rule of thumb is that no more than 35 per cent of post-tax income should go on mortgage payments.
Will the mortgage be more or less than your current rent? If you are struggling to pay your rent, and the mortgage is more – think again
Will there be bills – such as council tax, water or insurance – that you are currently not paying? These can add up to thousands of pounds a year (out of your post-tax income)
What happens if interest rates go up, by 1, 2 or 3%? You need to stress test the mortgage for different scenarios.
What happens if you lose your job, or suffer a fall in income because you have children and go on maternity leave? If you are planning kids, you can’t plan on the basis of dual-income-no-kids lifestyle
Can you cover the basic maintenance costs of a house? Many new homeowners struggle to pay the always surprisingly large wear and repair costs that go with owning a home (but not renting one)
Once you have shopped around for the best mortgage offer, see if you will qualify by getting a mortgage in principle, sometimes called an agreement in principle (AiP) or decision in principle (DiP). It’s a statement from a lender on how much they would lend you ‘in principle’ based on information you have provided about your income and outgoings.
You can get a Mortgage in Principle in just a few minutes with ourMortgage Finder powered by the mortgage experts at L&C. This allows you to check your eligibility against a wide range of lenders’ criteria to see which deals you qualify for, how much you can borrow and what it will cost. You can then click ‘submit’ to receive an online Decision in Principle certificate, which will typically last up to 90 days.
What if the lender refuses to give me a big enough mortgage?
If a lender has refused to give you a big enough mortgage or you’ve had an application for a mortgage declined, don’t just apply for another mortgage elsewhere – if you get declined again this will leave a mark on your credit file.
Start by asking the lender why they declined your application. Then speak to a fee-free broker for mortgage advice; they know the mortgage market and may be able to match you to a lender that will lend you the right amount. And if the lender who declined your application doesn’t give a reason why they rejected you, a mortgage broker can assess your previous application and work out where you went wrong.
If the broker advises you that it’s unlikely that you’ll be able to borrow as big a mortgage as you’d hoped, while this may be frustrating, it’s in your best interest to ensure that you’re not financially overstretched because you don’t want to have your home repossessed in the future.
What percentage income should go to your mortgage?
A good rule of thumb is that no more than 35 per cent of post-tax income should go on mortgage payments. However, on average, homeowners with mortgages paid approximately 17.8% of their income on mortgage in 2023, according to research by Statista. But don’t get hung up on what percentage of your income should go on your mortgage as this will be different for everyone. The key thing to consider is that your mortgage must be affordable for you.
Is it better to use a mortgage broker or go directly to my bank?
Don’t just go to your bank for a mortgage, always shop around so that you know you’ve got the best mortgage deal. The easiest way to do this is by using a fee-free mortgage broker. Not only will they scour the market for the best mortgage deal for you but they’ll also match you with a lender that’s most likely to accept your application.
The amount you should spend on a mortgage will vary depending on circumstances. If your outgoings are low and you’re happy to take on the risk of a larger amount of debt, you may be happy taking out the biggest mortgage a lender offers you. Alternatively, you may prefer to be more cautious in the amount you borrow to keep your mortgage payments as low as possible.
How much can you afford to borrow for a mortgage if you have bad credit?
If you have bad credit you may need a bigger deposit and you may not be able to borrow as much. But this will depend on your circumstances including what your credit issues were and how recent they were. Find out more in our guide on Bad credit mortgages.
What salary do you need to afford a house?
The salary you need to afford a house depends on the price of the house you want to buy. As lenders generally offer up to 4.5 to 5.5 times your annual salary, if you earn £50,000, you may be able to borrow up to £275,000 on a mortgage. If you’re buying with someone else their income will also be taken into account.
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