Understand what you could comfortably afford.
Mortgage affordability is about more than how much a lender may be prepared to offer. Understand income, outgoings, deposit, existing commitments and the factors that can influence your potential borrowing position.
Monthly budget
A simple visual example of how different financial commitments can affect available household budget.
Affordability is about your overall finances.
Lenders generally consider your income alongside regular household spending, financial commitments and other relevant information when assessing mortgage affordability.
Your mortgage budget should work for your life, not just a lender's calculation.
A lender's maximum borrowing figure is not necessarily the amount you should borrow. Your own budget should account for regular living costs, future plans, mortgage payments and unexpected expenses.
What can influence your mortgage affordability?
Every lender has its own criteria. These are some of the financial areas commonly considered when assessing an applicant's ability to afford mortgage borrowing.
Income
Salary, self-employed income and other accepted income sources can form part of an affordability assessment.
Outgoings
Regular household expenses can affect the amount of disposable income available for mortgage payments.
Existing Debt
Loans, credit cards and other financial commitments can affect affordability calculations.
Deposit
The size of your deposit affects the amount you need to borrow and your loan-to-value position.
Credit Profile
Lenders can consider credit information as part of their assessment of your application.
Mortgage Term
The mortgage term affects the size of monthly repayments and the overall cost of borrowing.
Start with the payment you can realistically manage.
Instead of starting with the largest mortgage you might qualify for, begin by looking at your household budget. This can give you a more useful personal affordability target.
Your deposit can affect how much you need to borrow.
A larger deposit generally means you need to borrow less relative to the property's value. This is reflected in the loan-to-value, or LTV, ratio.
Mortgage products and rates can vary depending on the LTV band available to you, so understanding your deposit position can be useful when comparing options.
Four practical checks before applying.
A little preparation can help you understand your own budget before approaching a lender or mortgage adviser.
Review income
Check your regular income and identify which sources are stable and likely to be accepted.
List outgoings
Review household spending and recurring financial commitments before estimating affordability.
Check your deposit
Establish how much you have available and how much borrowing would be required.
Stress-test your budget
Consider whether your budget would remain manageable if household costs or mortgage payments changed.
Avoid relying on a single affordability number.
Mortgage affordability can change depending on your circumstances, lender criteria and the property you are considering.
More mortgage guides to help you make informed decisions.
Explore practical mortgage articles covering affordability, applications, home buying and other important mortgage topics.
Mortgage Affordability FAQs
Clear answers to common questions about mortgage affordability and borrowing.
Know your numbers before you choose your mortgage.
Start with your budget, explore potential repayments and understand the factors that can affect mortgage affordability.