1. What is the Mortgage Affordability Calculation?

The mortgage affordability calculation estimates the maximum mortgage amount you can likely afford based on your income, existing debts, and a lender-specific multiplier. It helps determine your borrowing capacity before applying for a mortgage.

2. How Does the Calculator Work?

The calculator uses the affordability formula:

Where:

• \( Income \) — Your annual income before tax (GBP)
• \( Debts \) — Your annual debt repayments (GBP)
• \( Multiplier \) — Lender's affordability multiplier (typically 4-5x)

Explanation: The calculation determines how much you can borrow by first accounting for your existing financial commitments, then applying a multiplier that lenders use to assess repayment capacity.

3. Importance of Affordability Calculation

Details: Understanding your borrowing capacity helps set realistic property price expectations, improves mortgage approval chances, and ensures you don't overextend financially.

4. Using the Calculator

Tips: Enter your gross annual income, total annual debt repayments, and the lender's multiplier (typically 4.5). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What counts as income for mortgage applications?
A: Lenders typically consider base salary, regular bonuses, commissions, and sometimes investment income or rental income.

Q2: What debts are included in the calculation?
A: Include all recurring debt payments like credit cards, loans, car finance, and existing mortgages or rent payments.

Q3: How do lenders determine the multiplier?
A: Multipliers vary by lender and are based on interest rates, affordability tests, and regulatory requirements.

Q4: Does this include the deposit?
A: No, this calculates the mortgage amount only. You'll need to add your deposit to determine the total property price you can afford.

Q5: How accurate is this estimate?
A: This provides a general guideline, but actual mortgage offers may differ based on credit history, expenses, and lender-specific criteria.