Mortgage Calculator

This tool will estimate how much a typical mortgage provider may lend you, and the likely cost of your repayments, based on your current income and deposit size. You can also calculate the effect of different interest rates on your repayments.

The mortgage estimate generated by this tool is for your own guidance only. It is not an official mortgage quote. Your mortgage provider will take into account other factors beyond the scope of this calculator, so your actual mortgage offer and repayments may be different.

Use your estimate to get a rough idea of how much a particular size of mortgage might cost you per month, so you can judge how affordable it may be for you.

This tool lets you see how a range of different interest rates might affect your mortgage repayments. It is a good idea to experiment with a variety of interest rates, as these are likely to change over your mortgage term, and you may not always be offered the same rate.

Generally, the larger your deposit, the lower the interest rate you are likely to be offered. But never assume you’ll be offered the best rates available. Err on the side of caution and see how you might manage on higher rates.

A mortgage application will take into account many different factors, so you are not always certain to be offered a mortgage even if your income appears sufficient. You can test the strength of your mortgage application with our Mortgage Fitness Checker .

If you are ready to start making practical steps towards your mortgage application, your next step should be to contact a mortgage broker. An independent mortgage adviser can maximise your chances of finding the most favourable mortgage deal and achieving a successful application. Search for a mortgage broker .

Broadly, the calculation for how much mortgage you can borrow is between 4 times and four-and-a-half times your annual income. So for example, if you earn £25,000 a year, you could borrow between £100,000 and £112,500.

Use our mortgage calculator to get an estimate of how much you could borrow.

However, there are other factors that affect the calculation of how much a provider will lend to you. These are:

• Loan-to-value (LTV) ratio

  i.e. what percentage of the value of the property will be covered by the loan? The higher this percentage, the lower your mortgage offer might be.

  In the example above, you might be offered the full £112,500 if the home you’re buying is £200,000 and you can cover the rest in cash or equity. But if the home is only £111,000 the maximum you might be loaned is the £100,000 – as this would be a 90% mortgage.

• Credit score / history

  Your lender will need good evidence of your ability to repay loans and other credit, if they’re going to lend you the maximum.

• Source of income

  You can usually borrow more if you’re in full-time employment, and in certain industries perceived to be more reliable. Being self-employed, for example, usually makes lenders more wary.

• Age

  Lenders may get more cautious about how much they lend to you as you near retirement

• Affordability

  The size of your monthly repayments is one of the biggest issues. See ‘How much can I really afford to borrow?’ for more on this.

• Advice

  The best way to find the largest mortgage available to you is to go through an independent mortgage broker.

You need to be certain that you can keep up your mortgage repayments. If you miss a repayment, or several, your home becomes increasingly at risk of repossession by your lender.

Therefore your lender will ask you questions about your everyday spending, both essential and discretionary. For example, if it costs you a certain amount to commute to work, and you can’t reduce this figure, then your lender will take this into account when working out how much you could afford to repay. However, if you habitually eat out regularly, you could easily reduce this expenditure to show that you have more disposable income.

Therefore it’s a good idea to reduce your spending on ‘luxuries’ as much as possible in the run-up to a mortgage application. What counts as ‘luxury’ is a matter of opinion, but it’s worth a few months of living frugally in order to get a larger mortgage. Once you have your mortgage, you can gradually increase your other spending again, at your own discretion – provided you can still afford your monthly repayments.

It’s tempting to stretch yourself to the limit when buying a home, and there are good arguments for doing so. Property has historically been a good long-term investment (though values can fall in the short term) and you may not want to keep moving every few years – so it makes a lot of sense to buy a home you’ll still want in eight to 10 years’ time.

However, bear in mind that interest rates are at historical lows, and that the economy has been hit hard by Covid and other factors. Future rises in interest rates could significantly increase your monthly repayments, while a redundancy might severely impact your ability to repay your mortgage.

Therefore it’s a good idea to give yourself a safety margin, and aim for monthly repayments that are lower than the absolute maximum you could afford. How big a margin is up to you, and may depend on your own circumstances and attitude to risk. Broadly, the more vulnerable your job/income may be, the bigger margin you should allow.

Another strategy may be to look for a mortgage with a fixed interest rate that lasts as long as possible. Some 10-year fixes are now available.

Virtually all mortgages require a cash deposit too (the exceptions are some guarantor mortgages where another person, e.g. a parent, puts up financial security instead). For example, if you were buying a £200,000 home, you might be offered up to £180,000 as a mortgage only if you could provide £20,000 in cash to cover the rest of the cost. In this example, your deposit would be 10% of the total property price, and your mortgage would cover the other 90%. This is commonly referred to as a ‘90% mortgage’. If on the other hand you had £40,000 in cash, you could take out a mortgage of just £160,000. This would be an 80% mortgage.

This is known as your ‘loan-to-value (LTV) ratio’, though it’s usually expressed as a percentage rather than a ratio. The higher your deposit (relative to the total price of the property), the lower your LTV ratio is.

Some lenders will offer you a mortgage with an LTV ratio as high as 95%. However, usually the upper limit is 90%. Therefore aim for a deposit that is at least 10% of the property’s price, or preferably higher.

Broadly speaking, the lower your LTV ratio, the better mortgage deal you’ll be offered, as you’re a lower risk for the lender. For example, at a 90% mortgage you may only be offered the deals with the highest interest rates and longest lock-in periods, while an 85% or 80% mortgage will open up more options for lower monthly repayments and (perhaps) an easier way out of the deal when you want to remortgage.

Note that new mortgage deals tend to become available at every 5% ‘band’ of LTV ratio. So someone with an 86% mortgage may be offered the same deals as someone with a 90% mortgage, but someone with an 85% mortgage may be offered better deals. Therefore it makes sense to aim for the lowest band you can, in order to unlock the best possible mortgage rates.

It’s up to you whether you want to try and save a bit more in order to squeeze into the next 5% band. Doing so can save you a significant amount over the years, in the form of lower repayments.

If you can’t save enough to reach the next 5% band, you’ll still have slightly lower repayments as your mortgage itself will be slightly smaller. However, you may prefer to keep some savings for yourself rather than take this small benefit – it’s up to you. It can be good to retain some savings, just in case your circumstance change and you need emergency funds to keep up your repayments.

The main factors that can get in the way of your being offered a good mortgage deal (or any mortgage at all) include:

• Low deposit
• Insufficient income
• Unreliable or changeable sources of income
• Being self-employed (sometimes)
• Having too many other financial commitments
• A poor credit score

Your credit score, or credit rating, is a lender’s own estimate of how good a borrower you will be. Every lender has their own way of assessing this, and there are various different credit agencies that assign you a credit score based on your history of borrowing and repaying. This may sound complicated, but it boils down to this: if you make a habit of repaying credit promptly, your score will rise. If you over-used credit and/or are late paying it off, your score will fall.

One thing to note is that absence of borrowing history can also harm your credit score. So if you’ve never used a credit card or taken out a loan, it can help to use a credit card in the year before you apply for a mortgage, so you can demonstrate that you are a responsible borrower.

Various types of mortgages are available, each with their pros and cons. Here’s a summary of their key features:

• Fixed rate

  Your interest rate won’t change for an agreed period, usually two or three years but sometimes for as long as five or ten years. A favourite when interest rates are low.

• Tracker

  A tracker mortgage moves in line with an external interest rate (usually the Bank of England base rate), and may be set slightly higher or lower. Most popular when interest rates are higher and likely to fall.

• Discounted

  Discounted mortgages are similar to trackers, but track the lender’s Standard Variable Rate (SVR) instead of the base rate. Rates may start very low, but can rise unpredictably, so this type of deal is higher risk.

• Variable

  A variable mortgage is one where the interest is set to the lender’s SVR. This means it can rise without warning, by any amount. You will be moved to a variable mortgage whenever your mortgage deal expires, but you can usually get a new deal by remortgaging.

Even if you found the best deal first time, you’ll be moved onto a variable mortgage when your current preferential rate expires. This means you will probably need to remortgage every few years to keep your repayments affordable.

Other reasons to remortgage include:

• Your home has risen in value (so you may get a better deal)
• Better deals have become available
• Your circumstances (e.g. income) have improved
• You want a more flexible mortgage
• You want to borrow more money against the equity of your home

There are sometimes obstacles to remortgaging. For example, your current deal may last longer than your preferential interest rate, so you are ‘locked in’ to it for a few more years on your lender’s SVR. Leaving a mortgage deal inside the ‘lock-in period’ can mean having to pay a large early repayment fee.

There is also the risk of becoming a ‘mortgage prisoner’. This is where mortgage lenders’ criteria may become tougher over time, meaning that you cannot remortgage to a new deal with them, even if it would mean paying less than on your current deal. Absurd though this situation is, it affects thousands of people in the UK. Using a mortgage broker can minimise the risk of you becoming a mortgage prisoner.

A mortgage broker can also find you a buy-to-let mortgage if you want to buy rental property and let it out. However, the lending conditions are different from when you buy a home for yourself, and much more rigorous.

Usually you will have to be a homeowner already. Very few lenders will offer you a buy-to-let mortgage if you don’t own a home of your own.

The minimum deposit for a buy-to-let mortgage is 25%, and may be as much as 40%. Most buy-to-let mortgages are interest-only, which means the mortgage repayments only cover the interest. This keeps repayments lower, but does mean that to pay off the original loan, you’ll have to sell the property.

Buy-to-let mortgages are worked out differently from a residential mortgage because they consider your rental income. Broadly, the rent will need to cover 100 per cent of the mortgage plus an extra 25 percent.