Buying a home – what mortgage can I afford?

You'll only know what you can borrow when you apply for a mortgage, but you can speak to a lender or mortgage broker who can give you an estimate of what you might be offered.  

This offer often lasts between 60-90 days, and can be called either: 

• Mortgage in Principle (MIP)  
  
• Decision in Principle (DIP), or 
  
• Agreement in Principle (AIP). 
  

There are two main types of mortgage advisers:  

1. An adviser who works for a lender, such as a bank or building society and only discusses their own mortgage products with you. They might have exclusive deals if you go to them directly. 
   
2. An independent broker, who can discuss and offer mortgages from lots of providers.
   

Comparison websites are also a good place to start to see what products and features are available, like: 

• MoneySavingExpertOpens in a new window
  
• MoneySuperMarketOpens in a new window 
  
• MoneyfactsOpens in a new window

These websites might not show you the same results and products, so it’s best to use more than one before deciding.

Mortgage lenders decide how much you can borrow by looking at your income, outgoings and the security of your employment. For example, if you’re employed on a permanent or fixed-term contract.   

They calculate what is known as a ‘loan-to-income ratio’ by dividing the amount you want to borrow by your annual income (and the income of anyone you’re buying with).  

Typically, lenders cap the maximum amount you can borrow at four and a half times your annual income. But most people are offered less, so keep this in mind when planning your budget.

Lenders want to make sure you can afford and manage your mortgage long-term. They assess the monthly payment you can afford by reviewing both your income and outgoings.

This includes:

• your basic income
• income from your pension or investments
• income in the form of child maintenance and financial support from an ex-partner
• any other earnings you have – for example, from overtime, commission or bonus payments or a second job or freelance work.

You will need to provide pay slips and bank statements as evidence of your income.

If you’re self-employed you’ll need to provide:

• bank statements
• business accounts
• details of the Income Tax you’ve paid.

Typically, you’re asked to provide two or three-years’ worth of tax returns and business accounts.

This includes: 

• credit cards 
  
• child maintenance payments 
  
• buildings insurance  
  
• loans or credit agreements (like a car lease) 
  
• bills (water, gas, electricity, phone, broadband) 
  
• Council Tax and other property charges (service charges, ground rent, and estate charges).
  

They might also ask for estimates of your regular spending: 

• travel costs 
  
• clothes 
  
• gym membership 
  
• entertainment and eating out costs  
  
• weekly food shopping 
  
• childcare, nursery or school fees 
  
• subscriptions (such as streaming services). 
  

They might also ask to see some recent bank statements to back up the figures you supply.

Formal mortgage affordability assessments were scrapped in 2022. But your lender will still have their own rules to review your application.

Ultimately, you will need to decide if the mortgage is affordable for you, now and in the future. 

Think about whether you could still pay your mortgage if:

• interest rates increase
  
• you or your partner becomes unemployed
  
• you're unable to work because of illness
  
• your circumstances change, like having a baby or taking a career break.
  

Use our mortgage calculator and check if you could afford the repayments if interest rates rise. 

Build up savings when you can to protect against unexpected drops in income. Try to aim to have enough to cover three months of expenses, including your mortgage payments. 

Also, consider taking out insurance. Life insurance, critical illness insurance, or income protection could help with your mortgage repayments if the unexpected happens. 

To find out about the different policies available, visit our Insurance section.

Check your credit report before applying for a mortgage. 

This allows you to correct any mistakes and show any missed payments that could affect your application, which might mean the mortgage lender turns you down. 

Read our tips on how to improve your credit score.

Most mortgages ask for a deposit of at least 5% to 10% of the price of the home you’d like to buy.  

The size of your deposit can improve the mortgage deal you’re offered and reduce the cost of your monthly repayments. 

Find out more about saving money for a mortgage deposit.