How much money would you borrow for a mortgage?

Before you apply for a mortgage, you can consider more than just whether you can afford the monthly payments. Mortgage lenders will examine your income and outgoings to determine if you will be able to make payments if interest rates increase or your circumstances change. Learn more about how lenders determine how much money you can borrow.

  • How lenders determine how much you can afford
  • What factors the lender considers
  • How much money should I borrow?
  • Your next move is to

How lenders determine how much you can afford

Mortgage lenders used to base the amount you could borrow primarily on a multiple of your salary.

This is referred to as the loan-to-income ratio.

For example, if your annual income was £50,000, you might have borrowed three to five times that amount, resulting in a mortgage of up to £250,000.

When you apply for a mortgage, the lender will now cap the loan-to-income ratio at four and a half times your annual income. How much can I borrow for my mortgage based on my income?

Use our Mortgage Calculator to estimate how high your monthly payments will be if interest rates rise in the future.

They must also determine what amount of monthly payments you can handle after taking into account your income and different personal and living expenses.

This is referred to as an affordability assessment.

The Financial Conduct Authority implemented these reforms in 2014 after thoroughly analysing the mortgage industry.

The lender must also consider the future and ‘stress test’ the willingness to repay the loan.

This takes into account the impact of potential interest rate increases as well as changes in your lifestyle, such as:

  • Resigning
  • raising a child
  • taking a career break

If the lender believes you will be unable to make your mortgage payments under these circumstances, they will restrict the amount you may borrow.

  • To find out how much you can borrow, use our mortgage affordability calculator.
  • To calculate the interest and repayment rate, use our Mortgage Repayment Calculator.

Comparison websites are a good place to start for those looking for a mortgage that is customised to their specific needs.

We suggest the mortgage comparison websites mentioned below:

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Keep in mind:

Comparison websites will not always produce the same results, so use more than one before making a decision.

Before making a purchase or switching suppliers, it’s also a good idea to do some research on the type of product and features you need.

More information can be found in our comparison site guideopens in a new window.

What factors the lender considers

The lender can consider the following factors when determining how much you can afford to borrow:

1. Your earnings

Your basic income income from your pension or savings child care and financial assistance from ex-spouses any other earnings you have, such as overtime, fee or bonus payments, or a second job or freelance work

Pay stubs and bank statements would be needed as proof of income.

If you are self-employed, you must provide:

Bank statements, corporate reports, and details about the income tax you’ve charged

2. Your Expenses

Repayments on credit cards

Maintenance payments insurance – construction, contents, travel, pet, life, and so on all other loans or credit agreements bills such as water, gas, electricity, internet, and broadband

The lender can request estimates of your living expenses, such as clothing, basic recreation, and childcare.


They can also request recent bank statements to back up the statistics you provide.

3. Potential future changes that could have an effect

The lender will determine if you will be able to pay your mortgage if you:

Interest rates have risen.

You or your wife lost your job; you were unable to work due to illness; or your life changed, such as raising a baby or taking a career break.

It’s also important that you prepare ahead of time to figure out how you’ll make your payments.

For example, you can help to protect yourself against unforeseen income declines by saving whenever possible.

Make sure it has enough money to cover three months’ worth of expenses, including the mortgage payments.

How much money should I borrow?

Based on your income and outgoings, our mortgage affordability calculator will show you how much a lender would give you and if you’d be able to afford the monthly payments.

You can also use our Mortgage calculator to determine how high your monthly payments will be if interest rates rise in the future.

You may also prepare for interest rate increases by remortgaging or overpaying.

Considerations Before Buying a Home

Consider the following issues in addition to the lender’s conditions when determining your ability to pay a mortgage:


Are you dependent on two salaries to cover your expenses? Is your work secure? If you lose your current employment, would you be able to quickly find another job that pays the same or higher wages? If meeting your monthly budget is dependent on every dime you receive, even a minor cut can be disastrous.


The majority of your existing debt payments will be included in the estimate of your back-end ratio, but you can remember future costs such as education for your children (if you have them) or hobbies when you retire.

Way of life

Are you able to alter your lifestyle in order to obtain the home of your dreams? If less trips to the mall and a slight tightening of the budget don’t bother you, a higher back-end ratio might be sufficient. If you are unable to make any changes or have numerous credit card account balances, you may want to play it safe and take a more cautious approach to house hunting.


No two people, regardless of income, have the same personality. Some people will sleep soundly knowing they owe $5,000 a month for the next 30 years, while others worry about a payment half that size. Some people would be terrified at the thought of refinancing their home in order to make payments on a new vehicle, while others would be unconcerned at all.

Costs Other Than the Mortgage

Although the mortgage is unquestionably the most significant financial obligation in homeownership, there are several other costs, some of which persist long after the mortgage is paid off. Smart shoppers should keep the following points in mind:

Taxation on real estate

Expect to pay property taxes if you own a house, and knowing how much you would owe is a vital part of a homebuyer’s budget. Your property tax is determined by the city, municipality, or county based on your home and lot size, as well as other factors such as local real estate conditions and the economy.

According to the Tax Foundation, the effective average rate for property taxes nationally is 1.1 percent of the assessed value of the house. This varies by state, with some having lower property taxes than others. For example, New York’s is 1.4 percent on average, but Oklahoma’s is 0.88 percent. 8 Even if your mortgage is paid off in full, you will still have to account for paying property tax.

Homeowners Insurance

Any homeowner requires home insurance to cover their property and belongings from natural and man-made disasters such as tornadoes and burglary. If you’re buying a house, you’ll need to figure out what kind of insurance you’ll need. Most mortgage lenders will not let you buy a home unless you have home insurance that covers the entire purchase price. In reality, your mortgage lender can require evidence of home insurance before approving your loan.

According to the most recent figures available as of early 2021, the average premium for the most popular form of home insurance in the United States in 2018 was around $1,200.9. However, the cost varies depending on the type of insurance required and the state in which you live.

Repair and upkeep

Even if you build a new house, it will not last forever, and neither will the costly major appliances such as stoves, dishwashers, and refrigerators. The same is true for the roof, boiler, driveway, carpet, and even the paint on the walls. If you are house poor when you make your first mortgage payment, you may find yourself in a tough position if your finances haven’t changed by the time your home needs major repairs.

Services and products

Heat, insurance, power, water, sanitation, garbage disposal, cable television, and phone service are all expensive. These costs are not accounted for in the front-end ratio and are not measured in the back-end ratio. Nonetheless, they are inevitable for the majority of homeowners.

Fees for Membership

Many condominiums and cooperatives, as well as exclusive gated developments or planned communities, charge monthly or annual association fees. These fees can range from less than $100 a year to several hundred dollars per month. Lawn care, snow removal, a community pool, and other programmes are available in some areas.

Some fees are only used to cover the community’s administrative expenses. While a growing number of lenders provide affiliation fees in the front-end ratio, these fees are likely to rise over time. Visit: Finance guide

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