Mortgage Affordability Calculator

Ask a lender how much it will lend you and it does not run one sum. It runs four, and it lends you the smallest of the four answers. This article explains what those four tests are, why the one that binds is the only one worth arguing about, and why the price you can reach is smaller than the loan plus the deposit once the tax and the solicitor have been paid. It also covers every box in the panel, works through the example the tool opens with, and is honest about what a calculator on a web page cannot know.

Four tests, one answer, and only one of them matters

Most borrowing calculators multiply your salary by four and a half and stop there. That is one of the tests a lender runs. It is rarely the one that decides anything.

The first test is the income multiple. The lender takes the income it is willing to count, multiplies it by a figure somewhere between four and five, and that is a hard ceiling. It has nothing to do with your spending. Two people on identical salaries get the same number even if one has three children and a car loan and the other has neither.

The second is a debt-to-income ceiling. Everything you pay each month towards debt, the new mortgage included, has to sit under a set share of your gross monthly pay. Around forty-five per cent is common. This one does notice the car loan.

The third is the affordability stress test. The lender works out what is genuinely left over each month after tax, existing debts and the cost of the people who depend on you, then asks whether the mortgage payment would still fit if the interest rate were several points higher than the one you are being offered. If it would not fit, the loan shrinks until it does.

The fourth is not a rule about you at all. It is about the deposit. If a lender will go to ninety per cent of the purchase price, your ten per cent deposit sets the size of everything else. No amount of income moves that line.

The tool shows all four side by side as bars, marks the shortest one, and names it in the text underneath. That is the useful part. If the income multiple is what binds, clearing a credit card does nothing at all. If the stress test binds, clearing the same card can be worth more than a pay rise. Knowing which lever works saves you pulling the wrong one for a year.

The income a lender counts is not the income you receive

There are two income figures in this calculation and keeping them apart is the whole trick. One is what the lender counts. The other is what lands in your bank account.

Basic salary is counted in full. Bonus, commission, overtime, a second job and rent from a lodger are not. Lenders discount variable pay because it is not guaranteed, and they vary enormously in how harshly. Fifty per cent is a fair middle assumption. Some take the average of the last two or three years. A few will not count commission at all, and a handful count it in full if you can show three years of payslips.

That is why the panel has a separate box for bonus and other income, and a haircut box next to it. Put the year's variable pay in the first and the percentage counted in the second. Set the haircut to nought and you will see the pessimistic answer, which is worth looking at before you make an offer on a house.

The take-home figure is different again, and the tool needs it for the budget rather than the borrowing. That is what the tax and national insurance box is for. It is a blunt instrument, a single percentage of gross, but it does not need to be precise: it drives what the monthly table shows you have left, not the maximum loan.

If you are buying with someone else, switch the applicants dropdown to two and fill in the second salary. Be aware that lenders do not all treat joint applications the same way. Some apply the multiple to the combined total. Others trim the multiple when there are two names on the form. Running the sum at four and a half and then again at four tells you how exposed you are to that difference.

Why a small monthly repayment costs you so much borrowing

People are usually shocked by how much a modest debt costs them in mortgage terms. A car payment of two hundred and fifty pounds a month feels manageable. In borrowing terms it is enormous.

The reason is arithmetic. When the stress test is what limits you, the lender is working out the largest loan whose payment fits in your spare monthly income at a rate several points above the market. Every pound of that spare income you have already promised to somebody else is a pound that cannot service the mortgage. Run the sum backwards and one pound a month of freed-up income is worth about a hundred and forty pounds of borrowing over a thirty-year term at a stressed rate of seven point six per cent. The lender only commits part of your surplus, though. After the default sixty-five per cent share that pound is worth about ninety-two pounds, and that is the figure the tool prints in the note whenever the stress test is the rule that binds.

So a two hundred and fifty pound car payment is worth something in the order of twenty-three thousand pounds of house. That is a bigger swing than most pay rises produce, and it happens the month the finance agreement ends.

The panel separates two kinds of outgoing for this reason. Monthly debt repayments are cards, loans, car finance and buy-now-pay-later. Other committed monthly costs are things you cannot simply stop paying: childcare, maintenance to a former partner, a season ticket that is the only way you get to work. Both reduce the spare income the stress test works from, but only the first counts towards the debt-to-income ceiling, which is how a real lender treats them.

Dependants get their own two boxes: how many, and an allowance for each. Lenders assume a monthly cost per child whether or not you actually spend it, and the assumed figure is often higher than what a frugal household really spends. You cannot argue it down, so it is better to model it.

The stress rate, and why lenders test a rate you will not pay

The stress rate looks unfair the first time you meet it. You have found a mortgage at four and a half per cent, and the lender insists on testing whether you could pay at seven and a half. You are not going to pay seven and a half. Why does it matter?

It matters because your fixed rate ends. Most residential deals are fixed for two or five years and then revert to something considerably higher. The stress test asks whether the household survives that reversion without handing the keys back. After a period in which rates moved from under one per cent to over five in less than two years, regulators are not inclined to relax about it.

The tool has a box for how many percentage points above your real rate the stress should sit. Three is a common test. Set it to nought and you will see what a lender would allow with no margin at all, which is a useful reference point but not a number anybody will actually offer you.

There is a second, quieter safety margin in the panel: the share of spare income a lender will commit. Nobody lends against the last penny of your surplus. Sixty-five per cent is a reasonable default. Move it and watch the stress-rate bar move with it.

The result shows two monthly payments, one at your real rate and one at the stressed rate, and the monthly table shows what is left in each case. The gap between those two lines is the honest measure of how much room you have. If the stressed line is negative, you are borrowing a sum that only works while rates stay where they are.

Why the price has to be searched for rather than calculated

Once you know the loan, the price ought to be simple: add the deposit. It is not, and the reason is worth understanding because it explains some of the surprises the tool throws up.

Stamp duty depends on the price. If the fees come out of the same savings as the deposit, the amount actually going into the property depends on the stamp duty, which depends on the price. And the loan-to-value limit depends on both the loan and the price at once. It is circular.

Rather than fudge it, the tool guesses a price, checks whether every one of the four rules still holds at that price, and then halves the interval. Seventy rounds of that lands on the answer to the nearest penny, and it is then rounded down to the nearest hundred so the figure it prints is definitely inside every rule rather than a rounding error outside one.

This is why changing the fees, or moving where the fees come from, can move the maximum price by more than the fees themselves. Taking two thousand pounds of solicitor and survey out of the deposit does not just cost two thousand pounds of house. It raises the loan-to-value ratio, and if that ratio was already at the limit, the price has to fall by ten or twenty times the amount to bring it back under.

The dropdown that controls this sits under the deposit and is worth being honest with. For a first purchase the fees almost always come out of the same pot as the deposit, because there is only one pot.

The tax table is editable because tax tables change

Transfer tax on a house purchase goes by a different name almost everywhere. Stamp duty land tax in England and Northern Ireland, land and buildings transaction tax in Scotland, land transaction tax in Wales, registration duty, conveyance duty, transfer tax elsewhere. The mechanism is usually the same: a set of thresholds, and a rate on each slice of the price between them.

The important word is slice. These are marginal bands, not a single rate applied to the whole price. Paying one pound more for a house never costs you thousands in extra tax, because only that extra pound is taxed at the higher rate. The band-by-band table in the result shows exactly how much of the price fell into each band and what each band cost, which makes the point better than any explanation.

The presets in the dropdown are a starting point, not gospel. Thresholds get moved in budgets, reliefs get introduced and withdrawn, and a page that makes no network calls has no way of knowing when that happened. So the table is fully editable. Change a threshold, change a rate, add a band, delete one. The moment you touch a box the preset switches to Custom and your table is remembered for next time.

There is also a surcharge box. It applies a flat percentage to the entire price rather than to a slice, which is how additional-property and non-resident surcharges usually work. Leave it at nought for an ordinary purchase of a home to live in.

One preset deserves a warning. First-time buyer relief in England and Northern Ireland disappears completely above a price threshold rather than tapering, so if you use that preset and the answer comes out above the cut-off, the relief does not apply at all. The tool says so in the note when that happens.

Completion day costs more than the deposit

The single most common shock in a first purchase is discovering that the deposit is not the money you need. It is part of the money you need.

On completion day you have to hand over the deposit, the transfer tax, the conveyancing bill with its searches and registration fees, the survey you paid for weeks earlier, and whatever the removal firm charges. Add a mortgage broker's fee, a lender's product fee if it is not being added to the loan, and buildings insurance that has to be live from exchange.

The Cash needed on completion table adds all of it up in one place. On the default example the deposit is forty-five thousand and the cash needed is nearly fifty-seven thousand. That twelve thousand gap is the number that catches people out, and it is why the tool asks where the fees are coming from before it works anything else out.

The three cost boxes in the panel are deliberately plain: legal fees, survey and valuation, and moving and everything else. Put realistic numbers in. A basic conveyancing quote that excludes searches is not the figure you will pay. A mortgage valuation is not a survey, and on an older house the survey worth buying is not the cheap one.

The question after the question: what does it leave you?

A maximum is a ceiling. It is not a target, and the tool is careful not to present it as one.

The monthly table takes your net income, subtracts the mortgage payment, the existing debts, the other committed costs and the dependant allowance, and shows what is actually left. Then it shows the same figure again at the stressed rate. Those two numbers are the ones to look at hardest, because they are the ones you will live with.

What is left has to cover council tax, utilities, insurance, food, transport, phones, anything you do for fun, and the boiler that will fail in February. It also has to absorb a car that needs replacing and a month of statutory sick pay. If the figure looks thin at your real rate, it is not thin, it is dangerous, because the stressed figure is the realistic one for the years after the fix ends.

When the payment at the real rate already leaves you short, the note above the tables says so plainly rather than letting a large headline figure speak for itself. A rule allowing you to borrow something is not the same as it being sensible to borrow it.

Working through the example the page opens with

The page starts with a joint purchase: salaries of forty-two and twenty-eight thousand, six thousand of bonus counted at half, one child, three hundred and twenty a month of debt repayments, a hundred and fifty of other commitments, and forty-five thousand saved.

The income the lender counts comes to seventy-three thousand, not the seventy-six thousand received, because half the bonus is discarded. At four and a half times that, the income multiple allows three hundred and twenty-eight and a half thousand. The debt-to-income ceiling would stretch to over four hundred and seventy thousand, and the stress test to about three hundred and fifty. The deposit at ninety per cent loan to value would allow around three hundred and thirty-six thousand.

The smallest of those is the income multiple, so that is the loan. The tool marks that bar and says so. With the forty-five thousand deposit on top, and the fees paid from separate savings, the maximum price is three hundred and seventy-three and a half thousand, at eighty-eight per cent loan to value.

The payment is about sixteen hundred and eighty a month at four point six per cent, and two thousand three hundred and twenty if the rate reached seven point six. Stamp duty on that price under the standard England and Northern Ireland bands is around eight and a half thousand, taking the total cash needed on completion to nearly fifty-seven thousand.

Now change one thing. Set the fees to come out of the deposit rather than sitting on top of it, and the maximum price falls by more than the fees, because less deposit goes into the property. Switch to a single applicant and everything collapses, and the binding rule changes from the income multiple to the stress test, which tells you that for a single buyer with a child the budget bites before the multiple does.

What this cannot tell you

No credit search has been run. Your credit file is a large part of a real lending decision and none of it is visible here. A missed payment two years ago, a recently opened account, or simply not being on the electoral roll can move a real answer in ways no calculator will predict.

Nor does it know your employment status. Self-employed applicants are assessed on two or three years of accounts, often on the lower of the last two years, and the figure a lender uses can be very different from what you consider your income. Contractors, people inside a probation period and anyone with a recent gap in employment are all treated differently again.

It also assumes a straightforward repayment mortgage. There is no interest-only option, no offset, no shared ownership calculation, no help-to-buy equity loan, and no guarantor. Those all change the arithmetic in ways that need their own tools.

What it does do is show you the shape of the problem, which of the four constraints is holding you back, and what the payment leaves you to live on. Take the printed sheet to a broker and it will make the conversation faster, because you will already know which lever you are trying to move.

Everything happens in your browser. The salaries, the debts and the savings you type in never leave the device, because the page makes no network calls at all. The figures and the tax table you edited are kept in your own browser's local storage so the page still has them tomorrow, and Start over clears both.