Mortgage affordability is determined by assessing how much you can comfortably borrow based on your income, expenses, and financial commitments. Here’s how the calculation typically works:

• Determine your gross annual income – This includes earnings from employment, self-employment, and any additional income sources.
• Calculate your monthly debts – Factor in repayments for credit cards, car loans, personal loans, student loans, or any other outstanding debts.
• Assess your monthly living expenses – Include essential costs such as utilities, food, transportation, and other regular outgoings.
• Work out your debt-to-income (DTI) ratio – Divide your total monthly debt payments by your gross monthly income. A lower DTI ratio generally improves mortgage affordability.
• Consider your deposit – Most lenders require a deposit of at least 5% of the property price, though a larger deposit can improve your borrowing potential and mortgage terms.
• Estimate your monthly mortgage payment – Use a mortgage affordability calculator to estimate repayments based on the interest rate, mortgage term, and loan amount.
• Determine the maximum mortgage amount you can afford – Based on your income, debts, expenses, and deposit, you can estimate the maximum mortgage size lenders may offer you.

Other factors such as credit score, employment status, and lender-specific criteria can also influence affordability. Speaking to a mortgage specialist can provide a more accurate picture of what you can borrow.

Lenders use a variety of factors to determine how much you can afford to borrow for a mortgage. These typically include:

• Income – Lenders assess your earnings to ensure you can afford monthly mortgage payments. You may need to provide payslips, tax returns, or bank statements as proof of income.
• Debt-to-Income (DTI) Ratio – This ratio is calculated by dividing your total monthly debt payments by your gross monthly income. A lower DTI suggests better affordability and increases your chances of approval.
• Monthly Outgoings – Lenders evaluate your regular expenses, including energy bills, groceries, commuting costs, childcare, and other financial commitments, to determine how much disposable income you have after essential spending.
• Credit Score – Your credit score helps lenders assess your financial reliability. A higher score can improve your chances of securing a mortgage with better rates, while a low score or adverse credit may require a specialist lender.
• Employment History – Lenders look for job stability, typically preferring applicants with consistent income and long-term employment. Self-employed applicants may need to provide additional proof of income, such as tax returns or business accounts.
• Deposit & Loan-to-Value (LTV) Ratio – A larger deposit reduces the loan-to-value ratio, meaning you borrow less in proportion to the property’s value. This can improve your affordability and potentially secure you better mortgage deals.

Lenders use these factors to determine how much they are willing to lend, the loan terms, and the interest rate they will offer. Since each lender has different affordability criteria, comparing multiple lenders or working with a mortgage specialist can help find the best mortgage deal for your situation.