Determine how much you can afford to borrow based on your income and expenses
Lenders typically use two ratios: housing costs should not exceed 28-30% of gross monthly income, and total debt payments (including the mortgage) should not exceed 36-43% of gross income. This calculator uses the 28% rule for housing costs.
Monthly debts include credit card minimum payments, car loans, personal loans, student loans, and any other recurring debt obligations. Don't include utilities, groceries, or other living expenses - only actual debt payments.
Higher interest rates reduce the amount you can borrow because your monthly payment increases. A 1% increase in interest rate can reduce borrowing capacity by tens of thousands of pounds, depending on the loan term.
Debt-to-income (DTI) ratio is the percentage of your gross income that goes toward debt payments. Lenders prefer DTI ratios below 43%. This calculator shows your total DTI including the new mortgage payment.
This calculator provides estimates based on standard lending criteria. Actual borrowing capacity may vary by lender, credit score, employment status, and other factors. Always consult with mortgage brokers or lenders for accurate assessments.