Check you can afford a mortgage
To work out how much you can afford to spend on a home, you need to work out:
Your total income
Subtract your outgoings from your income to see how much you can pay on a mortgage each month. You can then avoid getting one with repayments you cannot afford.
You can work out how much you can spend on a home by using a mortgage cost calculator to enter a property value and interest rate and check how much repayments will cost.
There are many other costs when you buy a property on top of the mortgage. Here is how much buying a home can cost in total.
Will lenders accept your mortgage application?
Lenders have to carefully check your financial circumstances before they can offer you a mortgage. The Financial Conduct Authority's (FCA) rules means they have to make sure you can keep up with the repayments.
To work out how much you can afford to repay, they will look at:
How much you earn
If you are in permanent full time employment
Your outgoings and what you spend your money on
Your existing debts
If you have anyone financially dependent on you, like children
Lenders will also base their decision on:
Your credit history: This tells lenders how much you owe and how well you have managed debt in the past. Here is why your credit record matters and what it shows.
The deposit you have: The more you can put down as a deposit, the lower the risk for the lender. Putting down a large deposit will make it more likely you will be accepted and you should be able to get a lower interest rate too.
How old you are: If you are close to retirement you may only be offered shorter term mortgages and you usually need a larger deposit. Here is how to get a mortgage when you are older.
The property's value: The size of the mortgage you need affects whether lenders think you can afford to keep up with repayments.
The mortgage term: A shorter mortgage term means higher monthly payments, so you may only be accepted for a larger mortgage if you pay it off over a longer period.
If you apply on your own or jointly: If you apply for a joint mortgage you may be able to borrow more because the other person's income will be taken into account as well.
They also run stress tests to check you could still afford your mortgage if interest rates went up or your circumstances changed, like if you lost your job.
Use a mortgage affordability calculator to check how much lenders are likely to offer.
Work out your income
Add up the following to work out your monthly income:
Your salary, including regular bonuses and overtime
Benefits and tax credits
Any income from your pension
Money you get for child maintenance
Income from investments, including savings, shares and property
Work out your outgoings
Use a calculator like Nationwide's budget planner to add up how much money you spend each month.
Alternatively, work out your essential living costs and other spending yourself:
Calculate your living costs
Mortgage payments or rent
Credit card balances
Outstanding loans or overdrafts
Insurance you pay for
Money you save
Student loan payments
Petrol and car maintenance
Electricity, gas and water
Internet and phone
TV licence and subscriptions
Food and drink
Clothes and accessories
Toiletries and cleaning products
Child maintenance payments
School fees or costs
What else do you spend?
Add up how much you spend in an average month on:
Holidays and travel
Your social life, including restaurants and seeing friends
Entertainment like the cinema, music or sporting events
Gym memberships or other exercise costs
Buying cigarettes and alcohol
Luxury purchases or gifts for other people
How to afford a mortgage
If your income is currently too low to get a mortgage on the property you want, you could wait until your income is higher or try the following:
Get a cheaper property, as a lower purchase price means your mortgage payments will be lower.
Get a longer mortgage term, which reduces the amount you repay each month, but you will pay a higher amount overall. Here is how to choose your mortgage's term.
Cut your spending and unnecessary costs. Here is how to write a budget and spend less.
Find a cheaper mortgage because a lower interest rate can make the repayments more affordable.
Increase your deposit, which should help you get a cheaper mortgage. Here is how to save up a deposit.
Get the right mortgage
Avoid applying for too many mortgages if you get rejected because this can harm your credit record and make it harder for you to get accepted.
Getting the right mortgage for your circumstances can help you get accepted and come with lower costs than an unsuitable deal. Here is how to work out what type of mortgage is right for you.
You can get mortgages designed for:
Save on bills
Here is how to cut the cost of your: