Use a mortgage calculator and find out: how much can I borrow?

If you’re considering a mortgage, you probably have lots of questions.

You may be wondering how much you can borrow, how to calculate mortgage repayments, or whether you’ll be better off making monthly mortgage repayments or renting.

A helpful first step is to take a look at the various mortgage calculators available.

Depending on your circumstances, you may need to calculate a number of different things, and you may also need a specialised calculator, such as a buy to let mortgage calculator, or a help to buy mortgage calculator. These are the types of mortgage calculators you may want to consult if you’re applying for a mortgage in the UK.

Here’s a rundown of some of the different calculators…

An affordability calculator

Most basic mortgage calculators are affordability calculators. They'll generally ask for the number of people on the mortgage, your annual income, your mortgage term, and interest rate. They'll then calculate monthly repayments based on the information you’ve given them.

A borrowing calculator

These are useful if you already have a property in mind. You can enter the property cost, your annual income and the deposit you have available, to see if you can afford that particular property.

A stamp duty calculator

Many home buyers forget about stamp duty when looking at the cost of a new home, but it can be significant. There are calculators that will work out the stamp duty due on your home. You’ll need to input the price of your home, and answer a few other questions, such as whether you’re a first time buyer, and if you’re buying a second home as a buy to let property.

An overpayment calculator

Overpayment calculators allow you to see how much money you could save when you make extra payments.

This could be:

  • A one-off (which might happen, for example, if you receive an inheritance or other windfall)
  • A regular extra monthly payment (which might be possible if you get a raise or your outgoings decrease).

Remember that not all mortgages allow for overpayments, so check in advance if this is something likely to affect you.

The above calculators will give you an idea of exactly how much you could borrow. If you already have a mortgage and want to pay it off quicker, the overpayment calculator is a useful tool. But those with an existing mortgage may also be interested in one other kind of calculator:

A remortgage calculator

This calculator will let you know if you can save money by remortgaging, either with your current lender or a new one. It’s possible that there's a better deal you could switch to, to cut your current monthly repayments.

What mortgage calculators do (and what they don’t)

While mortgage calculators are super useful tools, they are far from infallible. When using a mortgage calculator of any kind, it’s vital to be aware of what they can and can’t do. Factoring this in will help you decide not only how much you could borrow, but also how much you should borrow – they may be two very different figures.

A mortgage calculator arrives at a figure by looking at various aspects related to your ability to pay a mortgage. There are, however, some things they don’t take into account, so it’s important that you factor these in yourself when deciding exactly what you can afford.

Each mortgage calculator is different, but if you’re using a basic mortgage calculator online, here’s what you can expect.

Most mortgage calculators do:

  • Consider how many people will be repaying the mortgage
  • Look at what your annual salaries are
  • Include guaranteed ‘extras’ such as annual bonuses
  • Consider other income
  • Calculate based on your mortgage type, term and interest rate

Most mortgage calculators don’t:

  • Look at your monthly expenses/outgoings
  • Access your credit score
  • Include the costs associated with getting a mortgage
  • Anticipate changes in your circumstances
  • Calculate what happens if your interest rate increases

This is important because although mortgage calculators don’t look at every issue that could affect your repayments, most lenders do.

What lenders really want to know

Lenders carry out a credit check on mortgage applications to help them decide whether they're prepared to lend to you.

Not so long ago, it was possible to get a mortgage based primarily on income (usually you’d be offered around three to four times your annual salary), but this is no longer the case.

In 2014, the Financial Conduct Authority introduced new guidelines meaning mortgage lenders no longer rely solely on income to determine whether someone can afford to repay a mortgage. They’re now also likely to look at your current outgoings, including any other loan or credit card repayments you’re making.(1)

But don’t fret! Having some debt won’t prevent you from taking on a mortgage.

Well-managed debt might even demonstrate that you’re good at making repayments. However, if your lender determines that your current fixed outgoings will prevent you from making mortgage repayments, you may be refused.

Lenders also take into account future changes in your circumstances and how that might affect your mortgage.

They’ll be concerned about whether you’d still be able to pay your mortgage if one of you got sick, took maternity leave, or lose your job. They’ll also consider how well you’d meet your repayments if interest rates increased (in the case of a variable rate mortgage).

In short, they’re looking at not just whether you can pay your mortgage, but how comfortably you can pay it, and whether a sudden change in circumstances would leave you defaulting on your payments.

There’s no doubt that mortgage calculators are a useful tool, but it’s important to know there are lots of factors that will affect your ability to obtain, and repay a mortgage.