Mortgage Calculator

Mortgage Calculator

Using our Mortgage Calculator to find out how much you can borrow in the UK as a first-time buyer, house mover or remortgage with no deposit or poor credit.

Take a look at our quick guide to learn how much you can pay based on your financial condition. Plus, consider how lenders determine your viability and evaluate how much you should borrow in the United Kingdom.

How Much Can I Lend?

How much you can lend for a mortgage in the UK is usually up to five times your salary. Or five times your combined salary, if you’re applying for a mortgage with someone else.

Using how much I can borrow the mortgage calculator above to estimate how large a mortgage you can get in the UK.

Mortgage lenders also carry out affordability tests before you borrow any money to ensure that you can make monthly repayments. After the financial crisis of 2008, mortgage lenders have been much stricter on who they lend money to. They judge your affordability on the basis of an in-depth exploration of your profits, all your revenues, and your total debt. They’re even checking your credit account.

Lenders also want to learn that if the interest rate increases by 4 per cent above the base rate of the Bank of England, you can afford the repayments. This is known as the stress check.

You may only be eligible to get the full sum if you already have a current account with the lender, or if you have a very big deposit.

In order to obtain a more reliable maximum mortgage number, apply for an agreement in principle (AIP). AIP is not the same as a structured mortgage deal. It is a theoretical calculation of what the lender would be able to lend to you.

The majority of estate agents would not take the bid seriously without an AIP. You can obtain one easily online or via a mortgage broker.

How Big Of A Mortgage Can I Afford To Borrow?

How big a mortgage you can borrow and how much of a mortgage you can pay is slightly different. Before you borrow the full amount, you should determine that you can afford a large mortgage payment on a monthly basis.

Generally, you wouldn’t want to spend more than 30% of your take-home salary on mortgage payments. Paying more than that, and you will risk becoming “home poor “- where you own a home, but you do not have the resources to do other important things (like building up your savings, going on holiday, etc.)

For London, where house prices are very high, it may be difficult to keep your expenses below 30% of your income.

Before you get a mortgage, you just need to do the math on the overall cost of homeownership. When your mortgage payments and household bills look like they\’re going to make up 40 to 50 percent of your income, consider having a smaller mortgage.

How Big Of A Mortgage Can I Get With A Bad Credit Score?

If you have a bad credit score, you might still be able to get a mortgage, but it’ll be harder to find a lender willing to give you a loan.

You’ll also need a bigger deposit if you have a poor credit background, so the best mortgage rates won’t be open to you.

Generally speaking, the only way to locate a poor credit mortgage is to talk to a mortgage broker.

How Much Deposit Do I Need To Get A Mortgage?

In most situations, you’ll need a minimum deposit of 5% to obtain a mortgage, which means you’ll need a 95 per cent mortgage loan. The amount of the loan vs the value of the property is referred to as the loan-to-value ratio or LTV.

If you can save more, such as a 10, 15 or 20 per cent deposit, you can increase the chances of being approved for cheaper mortgage options. Lower interest rates (and limited set-up fees) are equivalent to cheaper mortgages.

In general, the cheapest mortgages are only available if you have a big deposit or – if you are remortgaging or selling a house – a significant amount of equity in your home.

How Much Can I Borrow With No Deposit?

If you don’t have a deposit-otherwise known as a 100 percent LTV-you can still get a mortgage, but your options would be much more limited than if you had a 5, 10 or 15 per cent deposit.

Non-deposit mortgages usually have a much higher interest rate, which means that you can pay a lot more in interest in the long term.

Although 100% of LTV mortgages are open to first-time borrowers, you can find better and cheaper options if you can save at least 10% of your deposit.

How Do Lenders Assess My Affordability?

Some AIPs only need a soft check on your credit sheet, which ensures that other lenders do not see it. A true mortgage application will leave a mark on your file that all other lenders will be able to see. Generally, getting more marks will count against you, as it could mean you’re desperate for credit. Being Rejected for a loan product would have a detrimental effect on your credit records.

Mortgage lenders will review your credit file in detail to make sure that you can handle the monthly mortgage repayments you have applied for. Every lender has its own score system – it doesn’t see the score you do, it’s only for you – and will review one or all of your credit files (from Experian, Equifax or TransUnion) so it’s important you test all three of them before you apply for a mortgage.

Lenders want to know how to secure an investment you are by looking at how long you’ve been in a career, staying at your current home, and getting a bank account.

Income vs outgoings

Upon request, mortgage lenders must look at your wages, fixed incentives, insurance, savings and any other income you have. You’re going to need to show your profits with payslips and bank statements. If you are self-employed, there are a few additional hoops to jump through (see below for more details).

Lenders will also analyse the outputs closely. Other than just your rent (or existing mortgage repayments if you’re remortgaging), which is likely to be the highest monthly cost, you’ll look at other daily bills (credit cards, cell phone, cable, utilities) as well as the living expenses.

If you\’re down to £0 a day until you pay, or worse yet, you\’re in your overdraft, and your bank statements show you\’re dining at restaurants four days a week, you may find it really hard to get a mortgage because it looks like you can\’t handle your finances.

That’s why it’s worth trying to keep your finances in order at least six months before you apply for a mortgage.

“Stress testing.”

You would be able to afford monthly payments if you received a low-interest rate mortgage, but what would happen if the rate rose to 3% above the standard variable rate (SVR) of the lender? The average SVR today is 5.11 per cent – so you’d be stress-tested – measured at an interest rate of around 8%. This is referred to as “stress testing.”

Can you afford payments if your personal circumstances change? That’s not only what the investor thinks, but something you’re going to need to ask yourself.

Keeping back enough money to cover up to three months of mortgage payments might be worthwhile, especially if your circumstances change in the future – for example, if you lose your current employment.

Lenders can restrict the amount that can be lent on the basis of their findings.

Should I Borrow The Maximum Amount?

It may be tempting to lend the maximum mortgage amount to purchase the most expensive property you can afford – but it may not be the best thing to do, because it gives you no space to wiggle if the rate goes up or the income goes down or both!

First of all, one of the best ways to lower your monthly repayments is to borrow less capital, giving you a lower LTV. If you have £20,000 as a deposit, that’s just 5 percent of a £400,000 home, but 10 percent of a cheaper £200,000 house.

The other factor to remember is that mortgage products are typically structured in a tiered manner, with a lower interest rate provided every time your LTV decreases by 5%. So, 95 percent of LTV mortgages typically have higher interest rates than 90 percent of LTV mortgages, which have higher rates than 85 percent of LTV mortgages, and so on.

If you were trying to buy a property and your LTV would be 87 per cent, you might consider raising a slightly larger deposit to move over the 85 percent LTV mark; otherwise, you would be stuck at 90 per cent. It could also be worth looking at a slightly cheaper house, where the same size deposit will provide a better LTV and allow you to put some money aside.

Borrowing the maximum amount possible could leave you “home poor” – where you own a property, but you don’t have any money left to pay for daily things without going into debt.

How Can I Drop My LTV Band If I’m Remortgaging?

When you sell your home, the very same rule of thumb applies – you want to reach for the lowest possible LTV – so instead of creating a big deposit, you can use the equity in your house.

For instance, you collected a deposit of £40,000 and borrowed £360,000 to purchase a home priced at £400,000 (90 percent of LTV). Now that the five-year fixed-rate contract has finished, you want to repay a new fixed-rate mortgage. By then, you have paid £400,000 from the principal debt – and you owe the lender £320,000 – and your house has risen to £420,000.

When you choose to get a new mortgage for the same price – £320,000, with £100,000 in equity – you’d have an LTV of just 76%.

Furthermore, an LTV mortgage of 76% is most likely to have the same rate as an LTV mortgage of 80%. To drop to an LTV of 75% (and thus lower interest rates), you will need to add £5,000. Alternatively, you might try to get a slightly higher home value, which would help you drop to 75% LTV.

If you remortgage to unlock money for home renovation or other expenditures, try to keep your LTV degree in mind. If you can remain at a lower LTV level, maybe by borrowing slightly less, you’ll save a lot more on long-term interest payments.

How Much Mortgage Can I Get If I’m Self-Employed?

First things first, you can still get a mortgage if you’re self-employed, you’re only going to have a few more hoops to go through than if you were a full-time employee.

Lenders will find you more of a risk, so you will need to collect at least two full fiscal years of business reports and tax returns. Some borrowers demand that the paperwork has been signed by a chartered accountant to show that the information you have produced is accurate.

Your overall mortgage will then be based on your net income, not your total turnover. The exact amount will vary from lender to lender, as will the legal status – self-employed individuals, for example, differ from the sole director of a limited company.

Many lenders may base the maximum mortgage on your past trading background, while others will want estimates of potential customers and profits. Organise all of them, just in case.

If you’re self-employed, talking to a mortgage broker is pretty much a must. They’ll know which lenders are most likely to consider you, and they’ll reduce the risk of a credit score — damaging rejection.

We hope you have found our information about getting a mortgage and our mortgage calculator useful. If you need help finding a mortgage, get in touch to find out more on how we can help find you a mortgage that fits your criteria.