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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: November 30, 2021

How do I work out how much I can borrow?

We get many enquiries from customers who want to work out how much they can borrow by using a mortgage calculator. With so many of these tools available online, it can be tricky to calculate how much mortgage you can afford.

The good news is that the advisors we work with are whole of market, so they can give you the right advice, even if you’ve been declined or have bad credit.

To give you clearer information on mortgage affordability, we’ve gathered all the information you need to know here.

Where can I find a mortgage affordability calculator?

They are available on lenders’ websites as well as other online financial hubs, including this one!

How to calculate how much you can borrow

Some customers use a mortgage income calculator to work out their mortgage affordability based on their yearly income – but they will only give you a rough idea of the amount you could borrow.

These tools don’t factor in each lenders’ varying criteria so this can make working out what size mortgage you can afford difficult, unless you have in-depth knowledge about the current market and each lender’s criteria.

One of the expert mortgage advisors we work with can look at your income as well as other factors that lender’s assess to calculate affordability and work out how much mortgage you can afford.

Contact us here and we’ll put you in touch with an advisor who can help you.

What do lenders look at when assessing mortgage affordability?

To calculate the mortgage you can afford the lender will carry out affordability checks.

Most lenders have their own criteria (which often changes regularly) and they use this to decide whether or not someone is eligible for a mortgage.

They may look at your:

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How do lenders calculate how much they’re willing to lend based on income?

Lenders will look at your income to determine how much can you can afford to borrow on a mortgage and they may use a salary mortgage calculator.

Typically, mortgage lenders will cap loans to a multiple of your earnings. If you want to calculate a mortgage based on salary, most lenders will cap mortgage at 4.5x your yearly income – so, for example, someone earning £25k would not usually be able to borrow more than £100k for a mortgage.

However, depending on your circumstances, some lenders can offer up to 5x your income, and a handful even up to 6x your income.

If you are applying for a shared mortgage with a partner, lenders may assess your application by using a dual income mortgage calculator which will take both incomes into consideration, so applicants with a joint income of £50,000 would be able to borrow £200,000 from a lender using 4x.

Types of income to calculate mortgage affordability

When calculating income for a mortgage, lenders will also look at the type of income you earn, as well as any other financial commitments you have that could potentially prevent you from keeping up with your mortgage payments.

Some lenders also look less favourably at applicants who have less reliable income which could apply if you:

If you have less reliable income, this can affect how much you can borrow on a mortgage and there may also be fewer lenders who are willing to lend to you for a contractor mortgage. However, this doesn’t mean that it is impossible to get a mortgage with any of the above.

For more information on this, make an enquiry here and one the advisors we work with will be in touch.

Mortgage calculator based on other forms of income

As well as how much you earn and the reliability of your income, lenders may also want to look at any other forms of income you have.

This gives them an accurate reflection of your overall income which could include:

However, not all banks and lenders will take into account every form of income when assessing your affordability. Some lenders will factor in all of the above forms of income when assessing affordability, others will only consider 50%, and some won’t take them into account at all.

Many people turn to us rather than use an income to mortgage calculator because the advisors we work with take the time to look at all of your income to give you a clearer overview of your finances. For help with this, contact us here.

What else will the lender take into account when calculating affordability?

Most lenders’ mortgage affordability calculations come down to more than just the amount of income you have.

They will also consider…

Your outgoings

Many providers will also factor in any significant outgoings to make sure you’re capable of making mortgage payments on top of your existing financial commitments.

Most lenders would factor the following outgoings into their assessments…

  • Credit card debt
  • Outstanding loans
  • Dependent children/family members
  • School fees
  • Travel expenses
  • Bills: Council Tax, mobile phone etc

Acceptable debt-to-income ratios tend to vary from one lender to the next, which is why it’s important to seek specialist advice if you have significant outgoings. The whole-of-market brokers we work with can connect you to the lender whose affordability calculator is most likely to return favourable results for you.

Your credit history

Although mortgage affordability checks are the same as those that are carried out for applicants with good credit vs. those with bad credit, there may be fewer lenders who are willing to loan to an applicant who has previously had financial problems.

How much mortgage can you get approved for with bad credit?

Lenders who consider bad credit applicants may also loan a smaller amount, and typically require a loan to value (LTV) ratio of 75% although for less severe of more historic credit issues this can be as high as 90-95%.

That being said, all lenders are different and have varying criteria on how much they will loan on a bad credit mortgage as well as the types of credit issues they accept.

Thankfully, there are some specialist lenders who provide mortgages specifically for people with bad credit.

For more information on this see our bad credit mortgages section.

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How to calculate how much deposit you need for a mortgage

If you’re trying to calculate what you can afford then you’ll most likely want to know how much deposit you’ll be expected to raise.

The amount of deposit can vary depending on many factors such as the lender, your affordability, property type and your credit score.

If you have a solid credit history, you could potentially be considered for a 5% deposit, however these are harder to obtain and only approved in the right circumstances.

Most lenders request a minimum of a 5-10% deposit which would give you a maximum Loan to Value (LTV) of 90 – 95%.

However, if your situation is perceived as a higher risk to the lender, then you may be required to deposit a larger percentage of the property value.

You can read more about mortgage deposits here.

How is mortgage affordability calculated for a Buy to Let (BTL) mortgage?

Affordability checks still apply for mortgages on BTL properties but rather than base your affordability on personal income and use an annual salary mortgage calculator, lenders will look at your potential rental incomes. Depending on your tax position, most lenders will accept 125-170% of the rental income.

Providers are also likely to ask how many tenants occupy your property, and whether you can afford to pay your mortgage if you are unable to secure tenants.

Advice on mortgage calculations in the UK and how much you could borrow

We’re often asked, “Is there a calculator I can use to see how much mortgage I can afford?” Quick online mortgage affordability calculators can give inaccurate estimates because they don’t take into consideration that each lender may accept or not accept varying factors.

This can make calculating how much you can borrow for a mortgage confusing, so to get a more detailed picture about the mortgage affordability checks for your situation, speak to a mortgage broker.

Talk to an expert advisor about mortgage affordability criteria in the UK

If you like anything in this article or you’d like to know more, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry online.

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.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the 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 information 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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