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Mortgage affordability Explained

How to find out how much mortgage your qualify for

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One of the most frequent questions that we are asked is “how much mortgage can I afford to get?”

Indeed, mortgage affordability is a key issue and will determine the size of the mortgage offered to you, but the amount you earn isn’t the only factor the lender will take into account when deciding how much you can borrow on a mortgage.

Mortgage assessment can be complex but the good news is that the advisors we work are experts when it comes to affordability, and they’ll be able to offer you the right advice, even if you’ve been declined a mortgage in the past or have bad credit.

Here, we’ll answer the most common questions we receive including:

  • What is mortgage affordability?
  • How much mortgage could I get?
  • How much mortgage can we get if we combine income?
  • What affects affordability for a mortgage in the UK?
    • How much deposit do you need for a mortgage?
    • How bad credit can affect affordability
    • How the property type can be a factor
    • Retirement and mortgage affordability
    • How your employment capacity impacts affordability
    • Will my outgoings be a factor?
  • How much mortgage can I borrow for a mortgage with Help to Buy?
  • How much can I borrow for a buy to let mortgage?
  • How much can I borrow for a second property mortgage?
  • How much can I borrow for a guarantor mortgage?
  • How much can I borrow if I’m buying a property in London?
  • Speak to a mortgage affordability expert

What is mortgage affordability?

Let’s start with the basics… mortgage affordability refers to whether a borrower has the means to pay off a mortgage loan each month and still have enough money left over to cover their other outgoings.

Lenders will calculate this by assessing your income and outgoings, as well as other factors such as the amount of deposit you have and your credit report.

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How much mortgage can I afford?

Customers often ask us things like “how do I find out how much I can borrow for a mortgage?” and this article will hopefully give you a clearer idea.

Every lender is different and most use their own affordability models based on net disposable income, and then apply a cap based on income multiples. The amount that you can borrow is typically determined by multiplying annual salaries.

Most lenders will work on 3 or 4 times income, some will allow mortgages of up to 5 times income and a few will lend 6 times your income.

Below is an example of how different multiples can affect how much how much mortgage you can get.

Income 3x Income 4x Income 5x Income 6x Income
£35,000 £105,000 £140,000 £175,000 £210,000
£40,000 £120,000 £160,000 £200,000 £240,000
£45,000 £135,000 £180,000 £225,000 £270,000
£50,000 £150,000 £200,000 £250,000 £300,000
£55,000 £165,000 £220,000 £275,000 £330,000
£60,000 £180,000 £240,000 £300,000 £360,000
£65,000 £195,000 £260,000 £325,000 £390,000
£70,000 £210,000 £280,000 £350,000 £420,000

The above table is for comparative purposes only. You should talk to your lender or broker for the most up-to-date information for your circumstances

How much mortgage can I get approved for if I’m buying with someone else?

Couples often ask us things like “how much mortgage will we qualify for?” and the answer is usually a multiple of the combined salary of everyone who’ll be named on the mortgage. If you’re buying a property with someone else, whether that’s a partner, a family member or a friend, the lender will tally up your combined income.

If you have more than one income, this usually means you’ll able to afford a higher mortgage as the most lenders are willing to offer home loans based on 3-4 times the total salary of every applicant, some will go up to x5, and a minority will stretch to x6, under the right circumstances.

To find out how much you can afford, it’s always best to talk to one of the advisors we work with, they’re experts when it comes to finding mortgages, even if you have bad credit, and it won’t cost you anything or leave marks on your credit rating.

Is salary the only thing that affects my mortgage affordability?

No! Most lenders would only be willing to offer you a mortgage based on a higher income multiple (x5 or x6 your salary) if they deem the level of risk acceptable.

Most lenders assess the amount of risk based on the following factors…

  • The amount of deposit you have
  • Your credit report
  • The property type
  • Your age
  • Your employment capacity
  • Your outgoings

How deposit affects affordability

Put simply, the more deposit you’re able to put down, the lower the risk the lender is taking on, so it’s often worth putting down more than the minimum if you’re hoping to convince a mortgage provider to offer you a higher income multiple.

Most lenders will expect a minimum of 10% deposit for a residential property, although some will be happy with just 5% under the right circumstances.

You should also keep in mind that the more deposit you’re able to save up, the less you will need to borrow to buy the property you’ve got your eye on.

Can I afford a mortgage with bad credit?

Bad credit can drive up the level of risk a mortgage application involves, especially if it’s a severe issue such as a recent bankruptcy or repossession. If you have any of these problems on your file, some lenders might offer unfavourable rates, lower income multiples or even turn you away altogether.

If you have any adverse against your name, it’s important to speak to a whole-of-market advisor, like the ones we work with, as this is the best way to ensure you’ll end up with the best deal that you qualify for.

They know who the specialist providers are who often take a more flexible approach to mortgage customers with a bad credit score, or have a history of credit problems, and may be able to offer a higher income multiple mortgage to these borrowers.

You can read more about bad credit mortgages here.

How much can I get a mortgage for if I want to buy an unusual property?

How much can you get for a mortgage loan will also depend on the type of property you’re buying, as some lenders consider non-standard construction buildings (e.g. anything with a thatched roof or timber frame) to be higher risk.

To allay their concerns, some lenders may offer unfavourable rates for these properties or lower income multiples, while other might turn you away. So it’s important to seek specialist advice before pressing ahead.

For more information on this and how much mortgage you can get, see our non-standard property section here, or make an enquiry for expert advice.

How age can affect affordability

If you’re looking for a mortgage based on a higher income multiple in later life, you might find it more difficult to get the deal you want, due to their being fewer approachable lenders. Some mortgage providers won’t lend to anyone over 75, others over 85 and a minority have no upper age limits, as long as they’re confident the borrower can meet the monthly payments during their retirement.

The advisors we work with have access to every lender on the market and connect you with the lender best positioned to offer mortgages based on higher income multiples to borrowers who are in, or approaching, their retirement.

They can also discuss later life mortgage products, such as equity release, with you as these could also make affordability less of an issue. For more information on lending in later life, visit our section here or contact us for expert advice.

How employment capacity affects affordability

If you’re self-employed or make a significant amount of your income through things like bonuses, commission or regular overtime, a specialist lender is often required to get the best rates and the highest income multiples.

You can read more about mortgages for self-employed borrowers here or make an enquiry to speak with an expert about how to get the best rates and deals if you’re income is non-standard.

How outgoings can affect affordability

Having significant outgoings such as dependent children or outstanding loans to pay can affect the amount some lenders are willing to let you borrow. There are no hard and fast rules on how heavily this can impact your borrowing capacity – what some lenders consider a risky debt-to-income ratio, others might be comfortable with, so should speak to a whole-of-market broker to give yourself the best chance of finding the right lender for your needs and circumstances.

How much mortgage can I afford as a first time buyer?

Affordability for first-time buyer mortgages is calculated in exactly the same way as for standard mortgage products. Some providers will cap their lending at x3-4 your salary, others x5 and a minority x6, under the right circumstances.

However, there are a number of government schemes for first-time buyers that help make a mortgage more affordable, including…

  • Help to buy ISAs
  • Help to Buy

Help to Buy ISAs

Help to Buy ISAs are a good choice if you’re a first-time buyer and you need to save for a deposit. You can earn up to 2.58% interest tax-free and then the government will add 25% free cash, and it could be up to £3,000 on top of what you save.

The Equity Loan scheme is available to first-time buyers or existing homeowners who want to buy a ‘new build’ house.

The purchase price must be no more than £600,000. Using this scheme, you can borrow 20% of the purchase price interest-free for the first five years, but you need to have saved at least a 5% deposit.

How much mortgage can I borrow for a mortgage with Help to Buy?

Help to Buy involves the borrower putting in 5% deposit, then taking an interest free equity loan from the government for 20%, and a 75% mortgage with a participating lender to cover the remained of the amount you need.

You can buy any new-build property up to £600k in value, with no fees or interest to pay on the equity loan for the first 5 years of borrowing, after which you are charged a very reasonable 1.75% in the 6th year, increasing 1% + RPI every year onwards.

As it’s an equity loan, when you sell the property you give the government back their share of any profit – so if you bought for £100k using a 20k equity loan and then sold the property for £120k a few years later, you’d need to repay 20% of the £120k = £24k. You can find out more about Help to Buy here.

We’re regularly asked how much can I borrow with help to buy. You can use a help to buy mortgage calculator to find out. Help to buy mortgage affordability calculators  can help you to work out what you’ll be able to borrow under the scheme and the advisors we work with can crunch the numbers for you.

How much could I get a mortgage for in buy to let?

Buy-to-let mortgages work in a similar way to residential mortgages, although the fees, rates and required deposit amounts tend to be higher (with minimum deposits varying between 20-40% of the property value, for example).

In addition, most BTL loans are interest-only, meaning that borrowers repay the monthly interest rates on their principal balance only and repay the capital in full once their mortgage term ends.

Moreover, the amounts that can be borrowed are calculated according to expected rental incomes, with most lenders stress-testing incomes at between 20-30% higher than monthly payments to cover all eventualities (such as periods of non-residence).

What about second homes?

We’re often asked ‘how much mortgage will I get for a second home?’

Affordability assessments work in a similar way to residential mortgages (with incomes, outgoings and credit scores all scrutinised thoroughly), although lenders will tend to be more cautious in these cases as they will need to be satisfied that customers are capable of servicing monthly repayments on both their primary and secondary homes.

Models for determining this vary from lender to lender, although many will cap the loan to value (LTV) ratio at around 75-85% and will often charge higher deposits than for conventional loans. You may also find that the number of lenders who are prepared to lend against second properties is much lower than for other mortgages.

How much can I borrow with a guarantor mortgage?

Lenders are often willing to allow customers to borrow more on a guarantor mortgage than if they were applying for a standard residential mortgage.

Home loans with a 100% loan to value (LTV) are available from some lenders if a family member or friend has agreed to act as a guarantor for you, which basically means you can borrow enough to cover the full amount you need.

Moreover, some providers might be more comfortable offering a higher income multiple (x5-6 your salary) if you have a guarantor behind you, providing the guarantor passes their affordability checks.

You can read more about guarantor mortgages and how they work here or make an enquiry to speak with an expert advisor about them.

How much mortgage can I borrow for a property in London?

Although property prices are generally higher in the UK capital, the amount you can borrow for a residential property would be assessed in exactly the same way as it would for a home anywhere else in the country.

Location would only be a factor if you were purchasing a buy to let property, as whether the property is based can have an impact on the projected rental income. With this in mind, it may be possible to borrow more for a buy to let property in a prime location in London than for one elsewhere in the UK.

Talk to an expert on mortgage affordability today.  

If you want to know how much mortgage you can get or how much mortgage you can afford with UK lenders, contact us today! The specialist brokers we work with are all accredited by us, can access the whole of the market and already know the lenders who are most likely to be able to help.

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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