What mortgage can I afford?

The MMR has given banks and building societies increased responsibility for ensuring their customers can genuinely afford to repay the mortgages they are lent. Therefore, it has made it more difficult for some people to borrow.

Whether or not you can afford a mortgage will depend on your financial circumstances. This includes how much you earn and spend each month, as well as the level of deposit you have to put down on your chosen property. The purchase price of the property will have an impact on your mortgage affordability too.

Most mortgage lenders provide online affordability calculators that offer a general guide to how much you could borrow. MoneySuperMarket’s mortgage channel offers its own affordability and repayments calculator too, which can be a helpful starting point for estimating your borrowing capacity.

It's important to remember that the results of any online calculator are only a general guide to the amount a bank or building society might be prepared to lend, and that only the chosen lender can make a final decision on the mortgage offer once an application is made.

What will my lender look at when they assess whether I can afford a mortgage?

When you're ready to take the plunge into homeownership, understanding what lenders are looking for can be crucial. They will meticulously review your pre-tax income, which includes the combined income if you're applying with someone else. But it's not just about what you earn; it's also about what you spend. Monthly outgoings are scrutinised, covering everything from:

• Credit card and loan repayments

• Child/spousal maintenance

• Childcare costs

• School fees

• Travel

• Insurance

• Other household bills

• Existing rent or mortgage payments

Beyond these essentials, lenders may also take a magnifying glass to your discretionary spending, such as entertainment, leisure, holiday, and food expenses. They'll weigh this information against the property details and deposit size to decide on mortgage affordability.

Is there anything I can do to help demonstrate that I can afford a mortgage?

If you're looking to tip the scales in your favour when applying for a mortgage, consider the following steps:

• Pay down debts, such as loans and credit card balances, to reduce your monthly outgoings

• Curtail your spending where possible, as lenders may review up to six months of bank statements

• Ensure your credit file is in good shape

You can use MoneySuperMarket's Credit Monitor tool to check the information that the three main credit referencing agencies (Experian, Equifax, and TransUnion) hold on you to make sure it is correct. What’s more, you can figure out if there’s anything you need to do to improve your file. A simple step, such as ensuring you are on the electoral roll, could make a big difference to how favourably a mortgage lender may see you.

Your home may be repossessed if you do not keep up repayments on your mortgage.

How do I know if I can keep up with my repayments?

Before you commit to a mortgage, it's vital to consider all the associated costs of homeownership. This includes:

• General living expenses

• Property upkeep and maintenance

• Renovations

• Utility bills

Choosing a mortgage that fits comfortably within your budget, including all property-related expenses, is essential to ensure you can keep up with repayments without overstretching yourself financially.

What type of mortgage should I opt for?

Selecting the right mortgage type is a personal decision, and each option comes with its own set of pros and cons. Here are some of the choices you might consider:

• Fixed-rate mortgage – fixed-rate mortgages have an interest rate that remains the same for a set period. Generally, it is anything between two to five years, but you can also find fixed-term options of up to ten years or more. With fixed-rate mortgages, you’ll know how much you need to pay each month (as your repayments are fixed), regardless of any rise in interest rates.

• Variable-rate mortgage – with variable-rate mortgages, your monthly costs could change throughout your loan term. This is because the interest rate changes in line with the Bank of England’s base rate. For standard variable-rate (SVR) mortgages, each lender has an SVR that they can move when they like. SVRs can be anything from two to five percentage points above the base rate (or higher).

• Discounted variable rate mortgage – rather than being linked to the Bank of England’s base rate, discount mortgages are linked to the lender's standard variable rate (SVR). For example, if the SVR is 4.50% with a discount of 1%, the payable mortgage rate is 3.50%. If the SVR rose to 5.50%, the pay rate would rise to 4.50%. Bear in mind that SVR changes are always at the lender’s discretion.

• Interest-only mortgage – with an interest-only mortgage, you only pay the interest charges on your loan. This means that your monthly instalments will be cheaper than on a repayment mortgage. However, at the end of your mortgage term, you will still owe the lender the amount you borrowed at the start. You can usually pay off your debt with savings or by selling your house.

Our other useful guides

Joint Mortgage paid by one person | MoneySuperMarket

Can I change my mortgage to interest-only? | MoneySuperMarket

Should I fix my mortgage or go variable? | MoneySuperMarket

Compare affordable mortgage deals with MoneySuperMarket

Using a mortgage comparison tool can help you get a good idea of the kind of mortgage deals available. When you enter your information into MoneySuperMarket’s mortgage comparison tool, you’ll be able to compare example mortgage quotes from different providers.

Just tell us a bit about yourself, your financial situation, and your plans. We’ll help you scour the market in search of the mortgage deal that is right for your pockets and requirements. Then, feel free to use our mortgage calculators to find out how much each deal would cost you overall.

Your home may be repossessed if you do not keep up repayments on your mortgage.