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Mortgage Affordability Calculator

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By Pete Mugleston   Mortgage Advisor

Last updated: 8th February 2019 *

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 home mortgage affordability calculators available, 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 advice on mortgage affordability, we’ve gathered all the information you need to know here. This article will be covering:

  • Calculating how much you can borrow in the UK with a mortgage calculator
  • What lenders look at to assess Mortgage affordability?
  • How to calculate cow much deposit you nNeed for a mortgage
  • How much mortgage can You get approved for with adverse credit issues?
  • How to calculate how much mortgage you can afford of a non-standard property?
  • Will retirement affect mortgage affordability checks?
  • How is mortgage affordability calculated for a Buy to Let mortgage?
  • How much can you qualify for on a mortgage for a second home?
  • How to calculate mortgage affordability for secured loans
  • Advice on mortgage calculators in the UK and how much you could borrow

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Calculate how much you can borrow in the UK with a mortgage calculator

Some customers use a mortgage income calculator to work out their mortgage affordability based on their yearly income.

However, these 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:

  • Income.
  • Employment.
  • Age.
  • Credit history.
  • Property type.

How do lenders calculate mortgage amounts 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 earnings at 4x 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.

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:

  • Are self-employed.
  • On maternity leave.
  • Have fluctuating income.

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. 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:

  • Bonuses.
  • Overtime.
  • Commission.
  • Allowances.
  • Additional Income.

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 80%, 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 expenses to give you a clearer overview of your finances.

How to calculate how much deposit you need for a mortgage?

If you’re wondering how to calculate how much mortgage you can get then you’ll most like 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 100% 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.

How much mortgage can you get approved for with adverse credit issues?

Although mortgage affordability checks are the same as those that are carried out for applicants with good credit versus those with bad credit, there may be fewer lenders who are willing to loan to an applicant who has previously had financial problems. Lenders who consider bad credit applicants may also loan a smaller amount, and typically require a LTV of 75%.

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.

Such credit issues (ranging from lowest to highest risk), include:

  • Low credit score.
  • Late payments.
  • Mortgage arrears.
  • Defaults.
  • County Court Judgements (CCJs).
  • Debt Management Plans (DMPs).
  • Individual Voluntary Arrangements (IVAs).
  • Bankruptcy.
  • Repossession.

Thankfully, there are some specialist lenders who provide mortgages specifically for people with bad credit. For more information on this see our bad credit information section.

How to calculate how much mortgage you can afford on a non-standard property?

When it comes to calculating your affordability for a non-standard property mortgage, the same checks for a standard mortgage usually apply.

Lenders can ask for a higher deposit for non-standard buildings because of the perceived risk they pose (they can be harder to resell if the lender has to repossess). As such, some lenders can have strict lending criteria when it comes to lending on buildings such as:

  • Listed buildings.
  • High rise flats.
  • Ex local authority.
  • Uninhabitable properties.
  • Non-standard construction.
  • Concrete builds.
  • Flats with balcony access.
  • Properties with timber frames.

For more advice on this, make an enquiry. Alternatively, see our non-standard property section.

Will retirement affect mortgage affordability checks?

Lenders tend to view retired applicants as a higher risk and can offer them shorter borrowing periods and therefore smaller loans. Some lenders have upper age limits and won’t lend to borrowers over 75, whilst with others the maximum age is 85.

There are a handful of lenders that will lend into retirement, based on your retirement income. They may take into consideration other forms of income to calculate your affordability for a mortgage which could include your pension or other savings.

Alternatively, if you are a homeowner aged 55 or over and need a loan to finance another property, then equity release could be an option.

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.

How much can you qualify for on a mortgage for a second home?

When lenders calculate your affordability for a mortgage on a second home, the same affordability checks apply. The big difference is that lenders will usually factor in the mortgage payments of your other mortgage so the amount of loan you can borrow is sometimes lowered to ensure that you can afford both.

How to calculate mortgage affordability for secured loans

Some secure loan lenders follow similar criteria to that of main mortgages when calculating your affordability for a secured loan, but you may find that some can be more generous and provide loans up to 10x your income. With most lenders, the amount of the loan you can apply for depends on how much equity you have on your property.

There may also be alternatives to secured loans that could be more financially beneficial to you. Speak to a specialist before making any applications as they can assess your financial situation and find a solution that is most affordable and suitable for you.

Advice on mortgage calculators 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 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.

Updated: 8th February 2019
OnlineMortgageAdvisor 2019 ©

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.