How are mortgages calculated?

1st July 2022

How do lenders work out how much I can afford?

If you’re looking to buy a new home, you may wonder how much you would be able to borrow to mortgage a property. The mortgage amount, added to your deposit, will determine the maximum property price you can afford.

Lenders will use your income and usually offer you 5 to 6 times salary per person. For example, if you earn £30,000 a year, you may be able to borrow anywhere between £150,000 and £180,000.

However, lenders can sometimes offer more or less depending on your circumstances.

When you apply, your chosen lender will conduct an affordability check to calculate how much they can lend you.

What is affordability?

As part of their affordability assessment, lenders will consider criteria such as your:

  • Employment status
  • Total income
  • Regular outgoings (such as household bills and credit card payments)
  • Student loan repayments
  • Childcare costs
  • Credit history

Does the size of my deposit make any difference?


This is because as well as a smaller mortgage, you will have access to the best interest rates on the market, as lenders would view you as less risky if you are putting a significant sum of money into the property yourself.

The more deposit you put down, the less your mortgage will be, meaning the less you will have to repay.

Can I borrow more on a joint mortgage?

A joint mortgage is when you apply for a mortgage with another person – perhaps a partner, family member or friend. You may have the benefit of two salaries when you apply, meaning you can borrow more.

For example, if one person earns £30,000 and the other £25,000, this would give a joint income of £55,000, meaning you would typically be able to borrow between £275,000 and £330,00 (5 to 6 times total annual income).

Most lenders only accept joint applications from two borrowers, but some may accept a joint application from up to four people.

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