Written by 7:41 pm Featured, Mortgages

Guide to mortgage affordability

When granting you a mortgage, lenders want to be sure that you’ll be able to comfortably afford your monthly repayments. 

When granting you a mortgage, lenders want to be sure that you’ll be able to comfortably afford your monthly repayments. 

The primary way they do this is by carrying out an affordability test or ‘stress test’; looking at how much you’re earning and how much you’re spending to determine how much you’ll be able to borrow. 

Mortgage affordability testing was introduced in 2014 to protect people from defaulting on their payments. 

So, if affordability is the only thing getting in between you and that mortgage, it’s time to swot up on some of our expert advice.

Income multiples

Your salary is a key factor when it comes to how much you can afford to borrow. Unfortunately, it’s the one thing that you may have little control over – maybe pay rises are unlikely or your salary is limited by your industry or field of work. 

As a general rule of thumb, lenders will allow you to borrow up to 4.5x your income, provided that you meet the rest of their criteria. So, if you earn £25,000 per year, you should be able to borrow £112,500. 

If you’re buying with a partner the amount you can borrow tends to be reduced slightly to around 4x your income. If your partner also earns £25,000 per year (giving you a combined annual income of £50,000), you should be able to secure a loan of £200,000. 

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Last modified: 11/08/2021

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