How much can I afford to borrow?

Mortgage lenders used to just multiply your income by a certain number to work out how much you could borrow. These days it's a lot more complicated as the lender has to check the affordability of the mortgage – in other words, whether you can afford to repay it.

But, again, it's still not quite that simple. Lenders mustn't just check if you can afford the mortgage repayments at today's interest rates, but if rates were higher.

Passing both the affordability and 'stress' tests can be tough. And it's not been made any easier with the cost-of-living increasingly eating into people's budgets.

Be prepared for the mortgage application form

Passing a lender's affordability test is tough. Most lenders carry out assessments behind the scenes based on information you provide in the application form. Be prepared for the lender to do a thorough assessment – including possibly submitting bank statements as evidence.

These days lenders tend to use statistical modelling to work out how much someone in your position typically spends on essentials, such as food, housing and energy bills. But on the application form you'll likely have to state how much you spend on the following:

💳 Loan or credit card debt.
📑 Insurance.
🚗 Vehicle costs.
🤩 Entertainment.
🍽️ Eating out.
👨‍👩‍👦‍👦 Childcare.
🎓 School fees.
🏋🏽 Gym membership.
📺 Subscriptions (such as Netflix, Spotify, Disney+).

This isn't a call to stop doing what you enjoy. Lenders judge affordability, so if the cost of something pushes you over the edge it can be a problem – if you can easily afford it, it's not.

Even so, it's best to make it as easy for your lender as you can...

Most lenders look at your spending in the three months before you apply for a mortgage, so if you know you're about to apply, try to live within your means for several months before. Put up as much as you can for the deposit if it's your first mortgage, as borrowing less means less risk for the lender, and hopefully less close scrutiny for your finances.

If you get bonuses or irregular income, unless the amount is guaranteed, lenders may only count half of this towards your annual salary when determining how much you can borrow. This varies between lenders though, so it's best to check with the lender or a broker.

Cutting back on spending in the run up to a mortgage application can help with affordability, though it'll depend on what. Lenders usually use statistical modelling to estimate what you spend on essentials (food, housing, energy bills), so cutting back on these may not help.

Rather, cutting back on (or avoiding new lines of credit to pay for) discretionary spending is more likely to help – think a new car (unless it's essential), plasma TV, foreign holiday, etc.

See our Boost your mortgage chances guide for more on what lenders look out for.

Quick question:

If you're self-employed or would struggle to prove your long-term income – perhaps you've worked abroad, are on a fixed-term or zero hours contract, or are a freelancer, etc – then getting a mortgage can be tough.

You'll need cast-iron proof of your income. Be prepared to provide up-to-date evidence to show how your business is faring. You'll also need to show:

• Business accounts. Preferably three years of accounts – though two can suffice depending on the lender – usually signed off by a chartered accountant.

• Tax returns. If you can't show business accounts, then two or three years' tax returns.

You'll be assessed on net profits, not turnover. If this is likely to be complex, using a mortgage broker could help as they'll know which lenders require what evidence.

While this can work for those in established businesses, it could mean those who have recently become self-employed may not be able to get a mortgage. And where you're self-employed and your partner isn't, your mortgage may be calculated using their income only.

For the self-employed, our Self-employed mortgages guide provides detailed information.

You won't get a definitive figure until you apply, but a lender or mortgage broker should be able to give you an estimate if you ask.

In the meantime:

• Use our affordability calculator. Our mortgage affordability calculator can give a rough estimate based on your situation.

• Sign up to MSE Credit Club. This can give you a more specific estimate based on how 'affordable' MSE Credit Club rates you. Plus get free access to your TransUnion credit report and, uniquely, an estimate of what we call your 'Credit Eligibility Rating'.

• Search our Mortgage Best Buys tool. Use it to see today's top mortgage deals (based on your deposit and deal preference), to estimate how much a mortgage will cost you.

It's also worth applying for an 'agreement-in-principle' (AIP). This is a mini-application to a mortgage lender where it'll carry out some basic checks to see if it would be willing to lend to you. You'll get a yes (and an indication of how much you could borrow) or a no.

If you're approved for an AIP, the battle's half over. It means the lender's looked at you, credit checked you, and – on the surface – you're someone it would lend to. But this is only half the battle, because an AIP's not binding on the lender, or on you.

Watch out: too many AIP applications can harm your credit rating if lenders carry out checks that mark your credit file, potentially denting your mortgage chances in the process.

Quick question:

The minimum deposit (or equity if you're remortgaging) you'll usually need to get a mortgage is 5%, though if you're struggling to save there are low deposit options.

Yet the number of mortgage deals available tends to increase substantially if you've got a 10% deposit or more, so where you can try saving to get as big a deposit together as possible.

What's more, the bigger your deposit/equity, the better the mortgage rates you'll have access to. Plus, the more likely you'll be accepted by a lender, as you'll be seen as less of a risk (if you're on the borderline of affordability, a slightly bigger deposit can really help).

In terms of mortgage interest rates:

• 10% deposit gets you a good range of deals and OK rate.

• 20% to 25% deposit gets you a decent rate.

• 40% deposit gets you the top rates.

So as a rule of thumb, the more you can save up, the better...

If you're a first-time buyer but struggling to save for a deposit, then getting a mortgage can be tough. But even if you've only got a small deposit – or possibly no deposit – there are options. 

The options if you've got a small budget include:

95% mortgages

If you've only got a 5% deposit then you could look at a 95% mortgage. However the number of lenders offering them is limited and the interest rate won't be cheap.

Use our Mortgage best buys tool to see which lenders offer 95% mortgages.

Boost your deposit with a Lifetime ISA

Anybody aged between 18 and 39 can open a Lifetime ISA, where you can save up to £4,000 a year, with the state adding a bonus of up to £1,000 a year too.

Yet there are some drawbacks to consider. We explain all in our Lifetime ISA guide.

Shared ownership

Here you buy a share of a property – typically between 10% and 75% – and pay rent on the share you don't own. You can buy additional shares later on.

Read how the scheme works in our Shared ownership guide.

Do you qualify for a discount off a new-build home?

Some first-time buyers qualify for a discount worth between 30% and 50% off the price of a new-build home as part of the First Homes scheme. See our First Homes scheme guide.

Even if you're not a first-time buyer, you may still qualify for a discount off a new-build home. You'll normally need to have a connection to the local area and not be earning over a certain income, though eligibility varies by council. Search for 'discounted market sale' homes.

'Track record' mortgage (aimed at renters)

Skipton Building Society has a 100% mortgage for renters in England, Wales and Scotland who have no, or a small, deposit. It doesn't require the backing of a guarantor.

To qualify you'll need to have paid your rent on time for 12 months in a row within the last 18 months. Bear in mind how much you can borrow is determined by the amount you pay in rent, the rate you'll pay won't be cheap, and you'll need to fix the mortgage for five years.

It's possible to use this mortgage in conjunction with the shared ownership scheme.

Read more about how it woks in our Track record mortgage analysis.

Can a loved one join your mortgage application?

Here we're talking about 'joint borrower, sole proprietor' (JBSP) and 'guarantor' mortgages. While guarantor mortgages are less common than JBSP these days, both work similarly.

A family member or loved one joins your mortgage application – either as a borrower or promising to repay the mortgage in the event you can't – but only you own the property. This can increase the chances of mortgage acceptance and how much you're able to borrow.

Read more about how these mortgages work in our What mortgage to choose? guide.

Use a loved one's savings/property as security

A few lenders like Barclays, Lloyds and Halifax might lend to you even if you've a small, or no, deposit if there's someone else willing to either put their money into a savings account offered by the lender or use their own property as security.

Typically they'll want savings or equity equivalent to 10% of the value of the property you're buying, and for the security to last the length of the mortgage deal (such as a five-year fix).

For more information about family mortgages, speak to a mortgage broker.

'Concessionary purchase' mortgage

If someone like a family member or landlord is willing to sell you a property at a price below its genuine market value, there are some lenders like TSB, Halifax, Nationwide that may offer you a mortgage. The discount off the property price effectively acts as your deposit.

Known as a 'concessionary purchase' mortgage, the discount offered must be a gift, not a loan. These mortgages are quite niche, so it's best to speak to a mortgage broker.

Teacher or working in education?

Specialist lender Teachers Building Society offers mortgages to teachers and education professionals in England and Wales, including those with small deposits.

It lets you borrow up to seven times your income, higher than many other lenders.