Mortgage affordability calculator

Two different questions hide inside that one. A lender's answer is the most it is willing to lend you. Your answer is the largest payment you can keep making for the next twenty-five years without the rest of your life getting tighter. They rarely land in the same place, and it is the lender's number that gets quoted.

The lender runs two tests and gives you the lower of the two answers. The first is a multiple of income, typically around 4 to 4.5 times what you earn and sometimes more. The second is an affordability assessment: your committed outgoings come off your income first, and what is left has to cover the payment at an interest rate higher than the one you are being offered. That stress test is why two households on the same salary are offered figures tens of thousands of pounds apart. One of them has childcare and car finance and the other does not.

The multiple half you can do without a calculator. Four and a half times a £45,000 income is £202,500, and at 4.5% over 25 years that borrowing costs about £1,125.56 a month. Whether that is affordable is the question the multiple never asked. It is the half this calculator does: it takes a payment, a rate and a term, and gives you the balance that payment clears in time.

The same question with the ends swapped, and the more useful way round if you already know what you can pay. A fixed monthly payment clears exactly one balance over a given term at a given rate, so the answer is a single number rather than a range. At 4.5%, an illustrative rate rather than any lender's:

Two things in those rows are worth more than the figures. The borrowing scales exactly with the payment, so doubling what you pay doubles what you can borrow and there is no threshold to cross. And the extra five years buys about a tenth more house while charging you five more years of interest for it, which is the trade most people are actually making when they stretch the term. Put your own payment, rate and term into the calculator above and it redraws the whole row.

The obvious one is that it cuts the amount you borrow, pound for pound. The second is that it decides the rate you are offered. Lenders price in loan-to-value bands rather than on a sliding scale, commonly at 95%, 90%, 85%, 80% and 75% of the price, so the last few hundred pounds of saving are worth a great deal or nothing at all depending on which side of a band they land on. Which band you are near is usually a better thing to work out than another evening of property listings, and a savings goal calculator will tell you how many months the next band is away.

The deposit is also not the whole of what you need on the day. There is the tax on the purchase, a valuation, legal fees and the cost of moving. The stamp duty calculator covers the largest of those for England, Scotland and Wales, including the higher rates on an additional property and first-time-buyer relief where the nation you are buying in has one.

A repayment mortgage is an amortising loan: a fixed monthly payment, part interest and part capital, sized so that the balance reaches exactly zero at the end of the term. The payment depends on three things: the amount, the interest rate, and how long you take to repay it.

“What can I borrow?” is simply the same formula turned inside out. Given a payment you can sustain, a rate and a term, there is exactly one balance it clears in time. That is the number this calculator gives you.

What it deliberately does not do is guess your affordability from a salary multiple. Two households on the same income can afford wildly different mortgages depending on childcare, debts, and what they spend. That is a question about your whole financial picture, not about one formula.

A lender will give you a maximum. This calculator gives you what a payment can service. Neither is the amount to borrow, and the distance between them is where the decision actually sits. A lender's maximum is sized on an income multiple and a stress test. The figure worth acting on is sized on the months you already know are coming.

So run it the second way round. Rather than starting from an asking price, start from the payment you could still make in a month that goes wrong: the car needs work, the childcare bill rises, one of you drops a day. That payment produces a borrowing figure of its own. If it lands below the lender's maximum, the gap is not money left on the table. It is the margin that decides whether the next five years are comfortable or tight.

From there you have three levers and they trade against each other. Lowering the price cuts the payment and usually the choice of house. A bigger deposit cuts the payment and delays the purchase while you save it. A longer term cuts the payment and raises the total interest, sometimes by tens of thousands of pounds, so the monthly figure and the total repaid are worth reading as a pair rather than one at a time. Which lever is cheapest to move is a question about your circumstances, not about the formula.

One more question the figure cannot settle on its own: what the payment becomes when the deal ends. Most UK mortgages revert to a different rate after the fixed or tracker period, so put the same borrowing amount back in at a rate two or three percentage points higher and read the monthly payment again. If that version of the number would not have been affordable, it is worth knowing before you offer rather than in year three.

None of this shows the rest of the month. A mortgage payment never arrives on its own. It lands alongside the nursery fees, the car finance, the loan that has two years to run, and whatever the next few years add. The exercise worth doing before you commit is to lay every payment you are already tied to against the same months, including the ones that start and stop, and look at what is left in each individual month rather than on average. CrestCast forecasts a whole household that way, so a mortgage payment can be checked against the years around it instead of against a single month.