About the Mortgage Affordability Calculator
"How much house can I afford" has two answers, and they are not the same number.
There is what a lender will approve, which is decided by two arithmetic ratios applied to your gross income. And there is what you can comfortably live with, which depends on childcare, pensions, commuting, how much you want to save and how much slack you want in a month.
This calculator gives you the first one, accurately, and is explicit that it is not the second. It also tells you which of the two lender limits is actually holding you back — because if it is your existing debts rather than your income, that is a problem with a solution.
How to Use the Mortgage Affordability Calculator
Enter your gross annual income — before tax, combined if you are buying with someone.
Then other monthly debt payments: car loans, student loans, credit card minimums. Not rent, utilities or groceries — underwriters count debt service, not living costs.
Add your deposit, the rate you expect to be offered and the term.
Finally the running costs: property tax, insurance and any service charge. These matter more than people expect, for the reason in the next section.
The Two Limits
Lenders apply two debt-to-income caps, and the binding one is whichever allows less.
The front-end ratio caps all housing costs at 28% of gross income.
The back-end ratio caps housing costs plus every other debt payment at 36%.
On £85,000 of income — £7,083.33 a month:
Front-end: 28% of 7,083.33 = 1,983.33
Back-end: 36% of 7,083.33 = 2,550.00
less 750.00 of existing debt payments = 1,800.00£1,800 is lower, so the back-end ratio binds. Your housing budget is £1,800 a month, not £1,983.33.
Why Running Costs Cut the Price
Here is the detail most affordability calculators leave out, and it is not small.
That £1,800 is an allowance for housing, not for the mortgage. Property tax, insurance and any service charge come out of it first:
Housing budget: 1,800.00
Tax (3,600 ÷ 12): −300.00
Insurance (1,400 ÷ 12): −116.67
─────────
Left to service a mortgage: 1,383.33Every pound of running cost is a pound not available for the loan. Raising the property tax from £3,600 to £7,200 a year does not just cost you £300 a month — it removes roughly £47,000 of borrowing.
Turning a Payment Into a Price
The last step runs the payment formula backwards. Instead of "what does this loan cost", it asks "what loan does this payment buy":
P × (1 − (1+r)⁻ⁿ)
A = ────────────────────
r£1,383.33 a month at 6.5% over 360 months supports a £218,857.77 mortgage. Add the £40,000 deposit and the ceiling is £258,857.77.
What Your Existing Debts Are Really Costing
This is the most useful thing on the page, and it is not what people expect.
Clearing that £750 a month of debt payments would lift the ceiling from £258,857.77 to £287,862.56 — about £29,000 more house.
But only £183.33 of the £750 is actually binding. The other £566.67 fits under the 28% housing limit anyway and costs you nothing. The threshold is the gap between the two ratios:
(36% − 28%) × 7,083.33 = 566.67 a monthBelow that, your debts are invisible to the calculation. Above it, every pound bites directly. Someone paying £560 a month is at the ceiling their income allows; someone paying £580 has started losing house.
That changes what to do about it. Clearing one small debt entirely is usually worth more than reducing several, because what matters is getting total payments under the threshold, not reducing them in general.
How the Ceiling Moves
| Rate | Maximum price |
|---|---|
| 5% | 297,688.95 |
| 6.5% | 258,857.77 |
| 8% | 228,525.05 |
Three points of rate is nearly £70,000 of house. This is why affordability shifts so sharply when rates move, and why a rate quote is worth getting before you start viewing.
| Deposit | Maximum price | Loan-to-value |
|---|---|---|
| 20,000 | 238,857.77 | 91.63% |
| 40,000 | 258,857.77 | 84.55% |
| 70,000 | 288,857.77 | 75.77% |
The deposit adds to the price pound for pound, because the loan is capped by your income rather than by the deposit. Crossing below 80% loan-to-value also removes mortgage insurance — which, since that insurance would come out of the same housing budget, frees up more for the loan itself.
Step-by-Step Example
£85,000 income, £750 of monthly debts, £40,000 deposit, 6.5% over 30 years, £3,600 tax and £1,400 insurance a year.
Monthly income: 85,000 ÷ 12 = 7,083.33
Front-end limit: 28% × 7,083.33 = 1,983.33
Back-end limit: 36% × 7,083.33 − 750 = 1,800.00
Binding: the lower = 1,800.00
Running costs: (3,600 + 1,400) ÷ 12 = 416.67
For the mortgage: 1,800 − 416.67 = 1,383.33
Loan: 1,383.33 × (1 − 1.005417⁻³⁶⁰) ÷ 0.005417 = 218,857.77
Price: 218,857.77 + 40,000 = 258,857.77At 84.55% loan-to-value that would attract mortgage insurance, which would come out of the £1,800 and reduce the price further — worth modelling in the mortgage calculator once you have a figure.
Understanding Your Result
Price a lender would allow is the ceiling, including your deposit.
Monthly housing budget shows the split between the mortgage and everything else that comes out of the same allowance.
Which limit binds tells you whether income or existing debt is the constraint. If it is debt, that is actionable.
Loan-to-value flags whether mortgage insurance would apply on top.
Worth knowing says what the figure is and is not.
When Should You Use This Calculator?
Before you start viewing. Knowing the ceiling stops you falling for something above it.
Before applying, if you have debts. The threshold calculation tells you whether clearing one would change anything.
When rates move. The table above is why a rate change of one point matters more than most people assume.
Comparing areas. Two towns with different property tax rates support meaningfully different prices on the same income.
Deciding how long to save. Seeing what another £30,000 of deposit does is usually the argument for waiting a little longer.
Common Mistakes
Treating the ceiling as a target. It is an underwriting limit. It takes no account of your actual life, and plenty of people borrowing at it find it uncomfortable.
Ignoring property tax and insurance. They come out of the same allowance as the mortgage. A calculator that leaves them out will overstate your ceiling by tens of thousands.
Using net income. These ratios are applied to gross income, before tax.
Counting rent as a debt. It is not — it disappears when you buy. Underwriters count debt service only.
Reducing several debts a little. If the total stays above the threshold, you have gained nothing. Clear one completely instead.
Forgetting mortgage insurance. Above 80% loan-to-value it comes out of the housing budget and reduces the price you can reach.
Forgetting the costs of buying. Legal fees, survey, stamp duty or transfer tax come from the same savings as the deposit, and none of them appear here.
Reading this as a decision in principle. Lenders assess credit history, employment stability and the property itself, and apply their own overlays to these ratios. Every figure here is an estimate for planning.