If you’re asking yourself, “What house can I afford?”, you’re not alone. Understanding your budget is one of the most important steps when buying a property. Before you start booking viewings or making offers, you need a clear picture of how much you can realistically borrow and afford to repay each month.
Mortgage lenders use a range of factors to determine affordability, including your income, deposit, credit history, monthly spending and financial commitments. While online mortgage calculators can provide a useful estimate, lenders will carry out their own checks before approving your application.
Whether you’re a first-time buyer, moving home, or planning to sell your house and buy another, this guide explains everything you need to know about mortgage affordability in 2026.
Why Is It Important to Know What House You Can Afford?
Knowing what house you can afford helps you focus your property search on homes within your budget. This saves time, reduces disappointment, and puts you in a stronger position when you find a property you want to buy.
Understanding your affordability can also help you:
- Set realistic expectations
- Calculate how much deposit you’ll need
- Understand your likely monthly repayments
- Avoid overstretching your finances
- Improve your chances of mortgage approval
With UK property prices and mortgage rates continuing to fluctuate, affordability has become more important than ever.
How Do Mortgage Lenders Decide What House You Can Afford?
Mortgage lenders are required to ensure that borrowers can comfortably afford their mortgage repayments, both now and in the future.
According to the Financial Conduct Authority (FCA), lenders must carry out affordability assessments before approving a mortgage application.
When assessing affordability, lenders typically consider:
Your Income
Your income is one of the biggest factors affecting how much you can borrow.
Your gross annual income (your salary before any taxes are deducted) is the primary factor lenders use to determine how much you can borrow. They will verify this by looking at your payslips and tax documents. Lenders will consider all of your consistent income sources, including:
Lenders will usually look at:
- Basic salary
- Overtime payments
- Bonuses and commission
- Self-employed earnings
- Pension income
- Benefits and maintenance payments
Many lenders offer between four and five times your annual income, although some may lend more depending on your circumstances.
For example:
| Annual Income | Potential Mortgage |
|---|---|
| £30,000 | £120,000 to £150,000 |
| £40,000 | £160,000 to £200,000 |
| £50,000 | £200,000 to £250,000 |
| £60,000 | £240,000 to £300,000 |
These figures are illustrative only and do not guarantee mortgage approval.
These figures are a simple starting point. While the income multiplier gives you a rough idea, a lender’s final offer will be based on a detailed affordability assessment that considers your deposit size, credit history, and, most importantly, your debt-to-income ratio.
Your Monthly Outgoings
Mortgage lenders will examine your spending habits to understand how much disposable income you have available each month.
This may include:
- Credit card repayments
- Personal loans
- Car finance agreements
- Childcare costs
- Utility bills
- Insurance premiums
- Mobile phone contracts
- General living expenses
The lower your monthly commitments, the more favourable your affordability assessment may be.
Your Credit History
Your credit report helps lenders assess how you have managed borrowing in the past.
A good credit score can help you:
- Access more mortgage products
- Secure lower interest rates
- Increase your chances of approval
Before applying for a mortgage, it is worth checking your credit report through agencies such as Experian, Equifax or TransUnion.
How Much Deposit Do You Need?
Your deposit plays a major role in determining what house you can afford.
Most mortgage lenders require a minimum deposit of 5% to 10%, although a larger deposit can provide access to better mortgage deals and lower interest rates.
For example:
| Property Price | 5% Deposit | 10% Deposit | 20% Deposit |
|---|---|---|---|
| £200,000 | £10,000 | £20,000 | £40,000 |
| £300,000 | £15,000 | £30,000 | £60,000 |
| £400,000 | £20,000 | £40,000 | £80,000 |
A larger deposit reduces the lender’s risk and lowers your loan-to-value ratio, often resulting in more competitive mortgage products.
Furthermore, if your deposit is less than 20% of the property’s value, most lenders will require you to pay for Lenders Mortgage Insurance (LMI). This insurance protects the lender, not you, in case you default on the loan. While it allows you to buy a home with a smaller deposit, the cost is added to your loan or paid upfront, increasing your overall expense. This is why saving a 20% deposit is a major goal for many homebuyers, as it eliminates the need for LMI.
Look into Low-Deposit Schemes
Saving a large deposit can be challenging. Fortunately, there are several government-backed schemes and specific mortgage products designed to help first-time buyers and others purchase a home with a deposit as low as 5%. It’s worth researching options like the Mortgage Guarantee Scheme or Shared Ownership to see if you qualify, as these can provide a vital stepping stone onto the property ladder.
Don’t Forget About Closing Costs
Your deposit is not the only upfront expense you need to budget for. Closing costs are fees associated with finalising the property purchase and can amount to 2-5% of the home’s price. These often include:
- Solicitor or Conveyancer Fees: For the legal work involved in transferring ownership.
- Valuation Fees: The lender’s fee for assessing the property’s value.
- Surveyor’s Fees: For a detailed inspection of the property’s condition.
- Stamp Duty Land Tax (in England & Northern Ireland): A tax paid on properties over a certain value.
Be sure to factor these costs into your savings plan.
Use a Mortgage Affordability Calculator
One of the quickest ways to estimate what house you can afford is by using a mortgage affordability calculator.
Most calculators will ask for information including:
- Annual income before tax
- Monthly take-home pay
- Additional income sources
- Existing debts
- Household expenditure
- Childcare costs
- Travel expenses
- Monthly financial commitments
The calculator will then provide an estimate of:
- How much you may be able to borrow
- Potential monthly repayments
- Mortgage term options
- Indicative interest rates
Useful affordability calculators can be found at:
Remember that these calculators provide estimates only. Your actual mortgage offer may differ.
What Other Factors Affect Mortgage Affordability?
Employment Status
Lenders prefer borrowers with stable employment histories. However, many lenders now offer mortgages for:
- Self-employed individuals
- Contractors
- Freelancers
- Company directors
You may need additional evidence of income if you are not employed on a standard salary.
Interest Rate Stress Testing
Mortgage lenders must ensure that you could continue making repayments if interest rates rise.
This means they will assess your affordability based on higher repayment scenarios, not just today’s mortgage rates.
Future Financial Commitments
Lenders may also consider potential future expenses such as:
- Starting a family
- Retirement plans
- Existing financial dependants
- Upcoming changes in employment
What If You’re Selling a Property Before Buying?
Many homeowners need to sell their house before purchasing another property.
If this applies to you, the equity released from your current home can significantly affect what house you can afford.
For example:
- Current property value: £350,000
- Outstanding mortgage: £150,000
- Available equity: £200,000
This equity can be used as a deposit on your next property, reducing the amount you need to borrow and potentially improving your mortgage options.
How to Improve What House You Can Afford
If you’d like to maximise your borrowing potential, consider the following:
Save a Larger Deposit
The more you can contribute upfront, the more attractive you’ll appear to lenders.
Reduce Existing Debt
Paying off loans and credit card balances can improve affordability calculations.
Improve Your Credit Score
A strong credit history is crucial. Ensure you are on the electoral roll, always make payments on time, try to keep your credit card balances below 30% of the limit, and check your credit report with all three major agencies (Experian, Equifax, TransUnion) for any errors that could be dragging your score down.
Increase Household Income
Joint mortgage applications can increase borrowing potential if both applicants have stable incomes.
Speak to a Mortgage Broker
An experienced mortgage broker can help identify lenders that suit your specific circumstances and affordability profile.
Frequently Asked Questions
What house can I afford on a £40,000 salary?
Many lenders may offer between £160,000 and £200,000, depending on your deposit, credit history and financial commitments.
What house can I afford with a £20,000 deposit?
This depends on your income and existing financial commitments. A larger deposit can improve your mortgage options and reduce monthly repayments.
Can I get a mortgage with bad credit?
Yes. Some lenders specialise in helping borrowers with adverse credit histories, although rates may be higher than standard mortgage products.
Does selling my house affect what I can afford?
Yes. The equity you receive when you sell your house can significantly increase your deposit and reduce the amount you need to borrow.
Final Thoughts
Understanding what house you can afford is an essential part of the home-buying process. By assessing your income, deposit, monthly spending and credit history, you can gain a realistic understanding of your budget before you start viewing properties.
If you’re planning to move and need to sell your house first, ensuring you have access to your property’s equity can help strengthen your position when applying for a new mortgage.
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