Mortgage Affordability Calculator

How much you can borrow: the two tests

Every UK mortgage application has to clear two separate hurdles, and the smaller of the two is your answer. Most people only know about the first.

The first is the income multiple, a cap on borrowing as a multiple of gross annual income. Four to four and a half times is the common range, with some lenders going to five or five and a half for higher earners or certain professions. For a joint application it applies to combined income.

The second is the affordability assessment, which is a real budget calculation rather than a multiple. The lender looks at your actual income against your actual committed outgoings and applies a stress test, checking you could still pay if rates were substantially higher than today's. Under FCA rules in MCOB 11.6 this is mandatory, not a lender preference.

Which one binds you depends on your circumstances. High earners with heavy commitments are usually capped by affordability; modest earners with clean finances are usually capped by the multiple. This calculator applies both and returns the lower figure, which is what a lender does.

Why the stress test decides more cases than people expect

The stress rate is not the rate you will pay. It is a deliberately higher rate, commonly around three percentage points above the lender's reversion rate, used to check your resilience if rates rise. This calculator uses 8% as a representative figure.

The gap it creates is substantial. In the worked example below, the indicative monthly payment at 5% is £1,947, but the stress payment at 8% is £2,570. The lender is asking whether you could pay the second figure, not the first, and that question is what sets the ceiling.

This is why applications sometimes fail despite comfortably affording the actual payment. It also explains why paying off a modest amount of other debt can unlock a disproportionate amount of borrowing, since a commitment that consumes monthly income is assessed against the stressed payment, not the real one.

There are limited exceptions. Remortgaging to a new deal with the same lender without borrowing more can often be done without a full affordability reassessment, which is why someone who could not pass today's test can usually still switch products.

What counts as income, and what counts against you

Basic salary is straightforward. Beyond it, treatment varies sharply between lenders, and that variation is the single biggest reason two lenders give different answers on the same application.

Guaranteed bonuses and allowances are usually counted in full. Commission and overtime are frequently counted at a proportion, often around half, and sometimes require a track record. Self-employed income is typically averaged over two or three years of accounts or SA302s, and a falling recent year is usually the one that gets used. Rental income and some state benefits count with most lenders.

On the other side, committed outgoings reduce what you can borrow. Loans, car finance, credit card balances, childcare costs and maintenance payments all register. A credit card with a zero balance but a large limit can also count, since some lenders assess against the available limit rather than the balance.

The practical implication is that clearing a car finance agreement before applying can increase borrowing capacity by considerably more than the balance you cleared. In this calculator, £250 a month of commitments reduces the maximum by £13,500.

What the deposit really does

A larger deposit does not raise the income-multiple cap. What it does is change your loan-to-value band, and that is where its value lies.

LTV bands tend to step at 95%, 90%, 85%, 80%, 75% and 60%, and the rate improves at each step down. Crossing a band can cut the interest rate meaningfully, which reduces the monthly payment, which in turn helps you pass the affordability test. Being a few hundred pounds short of a band boundary is worth fixing before applying.

The deposit also determines the maximum property price alongside the borrowing. In the example below, £333,000 of borrowing plus a £40,000 deposit supports a £373,000 purchase at 89.3% LTV, just inside the 90% band.

Remember that the deposit is not the only cash you need. Stamp duty, conveyancing, survey and moving costs all come from the same pot, and using every last pound as deposit leaves nothing for them. Our house buying cost and moving budget calculators cover that side.

Getting a bigger answer, legitimately

Clear or reduce committed debt first, because it is the highest-leverage change available and it works on both tests at once.

Check your credit file at all three agencies before applying, not after a rejection. Errors are common, and a rejected application leaves a hard search that makes the next one harder.

Extending the term reduces the monthly payment and therefore improves affordability, though it increases total interest considerably. It is a legitimate lever, not a free one.

Lender choice matters more than most applicants realise. Income multiples, treatment of variable pay and affordability models all differ, and a broker's value is largely knowing which lender treats your particular income shape most generously. If your income is anything other than a flat salary, that difference is usually worth more than a small rate saving.

Finally, an Agreement in Principle is not an offer. It is an indicative check, often on a soft search, and the full underwrite can still change the answer once documents are seen.