So you're thinking about buying a house. The first question everyone asks is "how much can I borrow?" - and honestly, it's not as straightforward as you might think.
I've been using mortgage calculators for years, and the basic rule most people know is that you can borrow 4.5 times your income. But that's just the starting point. There's a whole load of other stuff lenders look at these days.
The 4.5x Income Rule (And Why It's Not Everything)
Let's start with the basics. If you earn £40,000 a year, you'd think you can borrow £180,000, right? Well, maybe. But here's the thing - that's just the headline figure.
Lenders actually look at your gross income (before tax), and they'll consider:
- Your basic salary
- Regular overtime (usually if you've been doing it for 2+ years)
- Bonuses (they might average them over a few years)
- Commission (if it's predictable)
- Benefits in kind (company car, private healthcare, etc.)
But here's where it gets interesting. Some lenders will go up to 5x or even 5.5x your income, especially if you're a professional or have a really stable job. I've seen doctors and lawyers get 6x their income with specialist lenders.
The Stress Test (This Is The Big One)
Now, this is where most people get caught out. Even if you pass the income multiple test, you still need to pass the affordability stress test.
Lenders have to stress test your mortgage at a rate that's usually 1-3% higher than the actual rate you'll pay. So if you're getting a 5% mortgage, they'll test whether you can afford payments at 7% or 8%.
Quick Example:
£300,000 mortgage at 5% = £1,754 per month
Same mortgage stressed at 8% = £2,201 per month
That's an extra £447 per month you need to prove you can afford, even though you'll never actually pay it (unless rates go mental).
What Counts As Outgoings?
Lenders are pretty thorough when they look at your spending. They'll want to know about:
- Credit commitments: Car finance, credit cards, personal loans, student loans
- Regular expenses: Childcare, school fees, maintenance payments
- Insurance: Life insurance, income protection
- Living costs: They'll either use your actual spending or their own minimum figures
Here's a tip: clear any credit card debt before applying. A £3,000 credit card balance might only cost you £100 a month, but lenders often assume you'll pay the minimum (around £75) when calculating affordability. It's mental, but that's how they work.
First-Time Buyer Perks
If you're a first-time buyer, you've got some advantages:
- No stamp duty up to £425,000 (massive saving)
- Help to Buy ISA bonus (if you've got one)
- First-time buyer mortgages with better rates
- Shared ownership schemes if you can't afford the full amount
The Deposit Situation
You'll need at least 5% deposit for most mortgages, but honestly, 10% is better. The more you put down, the better rates you'll get.
Here's the thing though - don't blow all your savings on the deposit. You'll need money for:
- Solicitor fees (£1,000-£2,000)
- Survey (£300-£1,500)
- Mortgage arrangement fee (£0-£2,000)
- Moving costs
- Immediate repairs/furniture
Use Our Calculator (Obviously)
Look, I'm not going to pretend our mortgage calculator is magic, but it's pretty decent. It'll give you a realistic idea of what you can borrow based on current rates and lending criteria.
The key is to be honest about your income and outgoings. There's no point getting a figure that looks good if you can't actually afford the payments.
When To Speak To A Broker
If your situation is straightforward - employed, good credit, standard income - you can probably go direct to a lender. But if you're self-employed, have bad credit, or your income is complicated, a mortgage broker is worth their weight in gold.
Good brokers know which lenders are flexible on what. They'll also handle all the paperwork, which is honestly worth the fee on its own.
Final Thoughts
Don't get too hung up on borrowing the maximum amount. Just because you can borrow £400,000 doesn't mean you should. Think about your lifestyle, potential rate rises, and whether you want to be house-poor.
The best mortgage is one you can comfortably afford, not the biggest one you can get.
Remember: lenders want to lend you money, but they also don't want you to default. Their affordability calculations are pretty conservative, so if you pass their tests, you're probably fine.