How Much Can I Borrow? Mortgage Affordability Calculator

Use our how much can I borrow calculator to work out how much you can borrow in the UK as a first time buyer, moving home or remortgager, even with no deposit or bad credit. Explore our guide to learn how much you can afford based on your financial situation. Plus, understand how lenders assess your affordability and decide how much you can borrow in the UK.

How much mortgage can I get?

How much you can borrow for a mortgage in the UK is generally a maximum of 5 times your income - or 5 times your joint income, if you're applying for a mortgage with someone else.

Use the how much can I borrow mortgage affordability calculator above for an estimation on how big a mortgage you can get in the UK.

Mortgage lenders always conduct affordability checks before loaning you any money to ensure you can meet the monthly repayments. Since the 2008 financial crash, mortgage lenders are far more strict about who they lend to. They judge your affordability based on an in depth discovery of your income, all your outgoings and your total debt. They also scrutinise your credit file.

Lenders also want to know you could afford the repayments should the interest rates increase by 4% above the Bank of England base rate. This is known as stress testing.

You may only be able to get the maximum amount if you already have a current account with the lender, or you have a very large deposit.

To get a more accurate maximum mortgage figure, apply for an agreement in principle (AIP). An AIP is not the same as a formal mortgage offer. It is a theoretical figure of what a lender may be willing to lend you.

Most estate agents will not take an offer seriously without an AIP. You can secure one quickly online or via a mortgage broker.

How much mortgage can I afford?

How much mortgage you can borrow and how much mortgage you can afford are slightly different. Before you borrow the maximum amount, you should think about whether you can afford the monthly repayments on a large mortgage.

A general rule of thumb is that you don't want to spend more than 30% of your take home salary on mortgage repayments. Any more than that and you risk being "house poor" - where you own a house, but lack the money to do other important things (like build up your savings, go on holiday, etc.)

In London, where house prices are very high, it can be hard to keep your repayments under 30% of your income.

Before getting a mortgage, you really should do the maths on what the total cost of home ownership. If your mortgage payments and household bills look like they will take up 40 or 50% of your income, you should consider getting a smaller mortgage.

How much mortgage can I get with bad credit?

If you have bad credit you may still be able to get a mortgage, but it will be harder to find a lender willing to give you a loan.

You will likely need a larger deposit if you have a history of bad credit, and the best mortgage rates won't be available to you.

Generally the best way to find a bad credit mortgage is to talk to a mortgage broker.

How much deposit do I need to get a mortgage?

In most cases, you will need a minimum of a 5% deposit to secure a mortgage, meaning you’ll need a 95% mortgage loan. The size of the loan versus the property value is referred to as loan-to-value ratio, or LTV.

If you are able to save more, for instance a 10, 15 or 20% deposit, you’ll increase your chances of being accepted for cheaper mortgage products. Lower interest rates (and small set-up fees) equal cheaper mortgages.

The cheapest mortgages are generally only available if you have a big deposit, or – if you’re remortgaging or moving house – a large amount of equity in your property.

How much can I borrow with no deposit?

If you have no deposit - otherwise known as 100% LTV - you can still get a mortgage, but your options will be much more limited than if you had a deposit of 5, 10 or 15%.

No-deposit mortgages generally have a much higher interest rate, which means you'll pay a lot more in interest over the long term.

While 100% LTV mortgages are available for first-time buyers, you can find better and cheaper products if you can save up a deposit of at least 10%.

How do lenders assess my affordability?

Most AIPs only require a soft search on your credit file, which means other lenders will not see it. A real mortgage application will leave a mark on your file that all other lenders will be able to see. Generally, having more marks can count against you because it could suggest you are desperate for credit. Being turned down for a loan product will have a negative impact on your credit file.

Mortgage lenders will review your credit file in depth to make absolutely sure you could afford the monthly repayments of the mortgage you’ve applied for. Each lender has their own scoring system – it does not see the score you do, that’s just for you – and may check one or more of your credit files (from Experian, Equifax or TransUnion), so it is vital you check all three before you apply for a mortgage.

Lenders want to know how stable an investment you are by looking at how long you’ve been in a job, lived at your current address and had a bank account.

Income vs. outgoings

On application, mortgage lenders will look at your salary, guaranteed bonuses, pension, investments and any other income you have. You’ll need to prove your income with payslips and bank statements. If you are self-employed, there are some additional hoops to jump through (see below for more details).

Lenders will also closely examine your outgoings. More than just your rent (or current mortgage repayments if you’re remortgaging), which is likely your biggest monthly expense, they’ll look at other regular bills (credit cards, mobile phone, broadband, utilities) as well as your living expenses.

If you are down to £0 the day before pay day, or worse still, you’re in your overdraft, and your bank statements show you eat at restaurants four times a week, you could find it very hard to get a mortgage as it will look like you cannot manage your money.

For that reason, it’s worth trying to get your finances in order at least six months before you apply for a mortgage.

“Stress testing”

You might be able to afford the monthly payments if you secure a mortgage with a low interest rate, but what would happen if rates increased to 3% above the lender’s standard variable rate (SVR)? The average SVR today is 5.11% – so you would be stress-tested on an interest rate of around 8%. This is known as “stress testing”.

Could you afford the repayments should your personal circumstances change? That is not just what a lender considers, but something you will need to ask yourself too.

Having enough savings to cover three months of mortgage payments could really be worth your while in case your circumstances change – for instance, if you lose your current job.

Lenders may limit the amount you can borrow based on their findings.

Should I borrow the maximum amount?

It can be tempting to borrow your maximum mortgage amount and buy the most expensive property you can afford – but that may not be the right thing to do as it leaves you little wiggle room if rates go up or your income goes down…or both!

To begin with, one of the easiest ways to lower your monthly repayments is to borrow less money, giving you a lower LTV. If you have £20,000 as a deposit, that’s only 5% of a £400,000 property, but 10% of a cheaper £200,000 property.

The other thing to consider is that mortgage products are usually arranged in a tiered fashion, with a lower interest rate offered every time your LTV goes down by 5%. So, 95% LTV mortgages generally have higher interest rates than 90% LTV mortgages, which have higher rates than 85% LTV mortgages and so on.

If you’re looking at buying a property and your LTV would be 87%, you might consider raising a slightly larger deposit to push yourself over the 85% LTV threshold, otherwise you’d be stuck at 90%. Likewise, it might be worth looking at a slightly cheaper property, where the same size deposit would provide a better LTV and allow you to keep some money aside.

Borrowing the maximum amount possible could leave you “house poor” – where you own a house, but you have no funds left to pay for everyday stuff without going into debt.

How can I drop my LTV band if I’m remortgaging?

If you’re remortgaging your home, the exact same rule of thumb applies – you want to aim for the lowest LTV possible – but instead of raising a big deposit you get to use the equity in your home.

For example: you raised a deposit of £40,000 and borrowed £360,000 to buy a home valued at £400,000 (an LTV of 90%). Now the five-year fixed-rate deal deal has ended, you want to remortgage to a new fixed-rate mortgage. You’ve since paid off £40,000 from the principal debt – so you owe the lender £320,000 – and your home has gone up in value to £420,000.

Assuming you want to get a new mortgage for the same amount – £320,000, with £100,000 in equity – you would have an LTV of just 76%.

However, a 76% LTV mortgage will most likely have the same rates as an 80% LTV mortgage. To drop to a 75% LTV (and therefore lower the interest rates) you would need to add £5,000. Alternatively, you could try and get a slightly higher valuation for your home, which would help you drop to a 75% LTV.

If you’re remortgaging to unlock money for home improvements or other expenses, try to keep your LTV tier in mind. If you can stay within a lower LTV tier, perhaps by borrowing slightly less, you’ll save a lot more in interest repayments in the long-term.

How much mortgage can I get if I’m self-employed?

First things first, you can still get a mortgage if you are self-employed, you’ll just have a few more hoops to jump through than if you were a full-time employee.

Lenders will consider you more of a risk, so you will need to gather together at least two complete tax-years of business accounts and tax returns. Some lenders require that the documentation has been signed by a chartered accountant to prove that the information you’ve provided is reliable.

Your maximum mortgage will then be based on your net profit, not total turnover. The exact calculation will vary from lender to lender, and also on your legal status – self-employed is different from the sole director of a limited company, for example.

Some lenders may base your maximum mortgage on your past trading history, while others might want projections of future customers and income. Organise both, just in case.

If you’re self-employed, speaking to a mortgage broker is pretty much a must. They will know which lenders will most likely accept you, therefore cut the chance of a credit score-damaging rejection.

Edited by: Sarah Guershon. Mortgage calculator updated to version 1.11 on July 25, 2019.

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Last updated: 2 August, 2019

Which Type Of CD Is Best For You?

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The traditional certificate of deposit account remains the most popular type of CD. However, it’s far from the only option. Financial institutions offer a variety of non-traditional CD products. These specialized CDs can: give savers more flexibility to benefit from rising rates, provide early access to their funds or offer better-than-average rates of return. If you’re willing to sacrifice some yield or tolerate some additional risk, you might find a CD better suited to meet your financial needs.

But first, what is a CD account?

A certificate of deposit is a time deposit account. A bank agrees to pay interest at a certain rate if savers deposit their cash for a set term, or period of time.

11 types of CD accounts

1. Traditional CD

With a traditional CD, you deposit a fixed amount of money for a specific term and receive a fixed interest rate. You have the option of cashing out at the end of the term or rolling over the CD for another term. Most institutions don’t allow you to add additional funds before your traditional CD matures.

Penalties for early withdrawal can be quite stiff and will cause you to lose interest, and possibly principal. Federal regulation — Regulation D, specifically — sets only the minimum early withdrawal penalty for traditional CDs. There is no law preventing an institution from enacting tougher penalties, but the institution must disclose those fees when the account is opened.

Before you pick a CD, it’s important to calculate how much interest you could earn by the end of your term.

2. Bump-up CD

A bump-up CD helps you benefit from a rising-rate environment. Suppose you buy a two-year CD at a given rate, and six months into the term the bank offers an additional quarter-point on the same investment.

A bump-up CD gives you the option of telling the bank you want to get the higher rate for the remainder of the term. Institutions that offer this CD option usually allow only one bump-up per term.

The drawback is you may get a lower initial rate on a bump-up CD than on a traditional CD. The longer it takes interest rates to rise, the longer it will take to make up for the earlier, lower-rate portion of the term.

Be sure you have realistic expectations about the interest-rate environment before buying a bump-up CD. See how bump-up CD deals stack up against traditional CD rates.

3. Step-up CDs

In a rising-rate environment, you might also want to consider a financial institution that offers a step-up CD.

It’s not uncommon to see a step-up CD and a bump-up CD lumped together. Both of them will help you move up into a higher yield. However, they are different products. Rather than requiring you to ask the bank for a higher rate as bump-up CDs do, step-up CDs will automatically increase their rates throughout their terms at certain intervals.

They are not too common, however. Moreover, there is a big caveat: There is no guarantee that you would end up better off than you would have if you had parked your money in a traditional CD. The blended APY could be less than you would make with a traditional CD. As such, you’ll want to evaluate the starting APY as well as how much the rate is increasing before making a decision.

4. Liquid CD

Liquid CDs, or no-penalty CDs, offer investors the opportunity to withdraw their money without incurring a penalty. However, these types of CDs may come with strict withdrawal limits and large minimum investment requirements.

You can generally expect the interest rate on a liquid CD to be higher than that of a savings or money market deposit. But it’s usually lower than the rate on a traditional CD of the same term. You’ll have to weigh the convenience of liquidity against whatever return you’re sacrificing.

A key consideration when purchasing a liquid CD is how soon you can make a withdrawal after opening the account. Most banks require that the money stay in the account for at least seven days before it can be withdrawn without penalty, but banks can set the first penalty-free withdrawal for any time period. It’s important to read the fine print before picking up a liquid CD.

5. Zero-coupon CD

These CDs are similar to zero-coupon bonds. As with the bond, you buy the CD at a deep discount to its par value (or the amount you’ll receive when the CD matures).

“Coupon” refers to a periodic interest payment. “Zero-coupon” means there are no interest payments.

So, you might buy a 12-year, $100,000 CD for $50,000, and you wouldn’t receive any interest payments over the course of the term. You’d receive the $100,000 face value when the CD matures.

One drawback is that zero-coupon CDs are usually long-term investments, and you take on considerable interest-rate risk. If interest rates rise during the 10-year term in question, you’ll be on the losing end of that deal.

Another potential problem is that you’re credited with phantom income each year. No money is being put in your pocket, but you’ll have to pay Uncle Sam on the earnings being accrued.

In our example, you’d earn $3,000 during the first year and would owe tax on the money, though you haven’t actually received it. Each year, you’ll have a higher base than the year before — and a bigger tax bill. Make sure you have room in your budget to cover the taxes.

6. Callable CD

With a callable CD, you could get a higher yield than with traditional CDs but with a risk: the bank that issues the CD can “call” it away from you after your call-protection period expires, and before the CD matures. For instance, if you buy a five-year CD with a six-month call-protection period, the institution could call it back after the first six months.

Just as with the zero-coupon CD, the bank is shifting interest-rate risk on to your shoulders. If it issues a five-year CD at 3 percent and six months later rates drop by a full percent, the bank will drop its rate as well. It’ll now be paying 2 percent on the five-year CD you originally got at 3 percent.

The bank can call, or take back, your CD and reissue it at the lower 2 percent. You’ll receive your full principal and interest earned. But you’re stuck reinvesting your money at lower rates.

Usually, banks pay a premium for you taking on the risk that the CD may be called. They may pay investors a quarter- or half-percent more on a callable CD than they would on a CD without the call feature.

7. Brokered CD

A brokered CD is simply a certificate of deposit sold through a brokerage firm. To qualify for one, you’ll need a brokerage account. Some banks use brokers as sales representatives to find investors willing to purchase the banks’ CDs.

Buying CDs through a brokerage can be convenient. There’s no need to open accounts at a variety of banks just to get the best CD yields. Brokered CDs may pay higher rates than CDs from your local bank because banks using brokered CDs compete in a national marketplace. But that’s not always the case.

Brokered CDs are more liquid than bank CDs because they can be traded like bonds on the secondary market. But there is no guarantee you won’t take a loss. The only way to guarantee getting your full principal and interest is to hold the CD until maturity.

Don’t assume all brokered CDs are backed by the Federal Deposit Insurance Corp. It’s up to you to do your due diligence and look for that FDIC seal on the broker’s website. You should also watch out for brokered CDs that have call options. And before you invest, check on fees and early withdrawal policies.

8. High-yield CD

Banks compete for deposits by offering better-than-average rates. High-yield CD accounts may offer two or three times the national average on a given term. These are generally traditional CD accounts that pay very generous returns. Bankrate offers the best route for finding the highest rates in the nation.

Bankrate surveys local and national institutions to find banks offering the highest yields on CDs. All accounts are directly offered to the consumer by the institution.

Take time to compare the best CD rates. Then calculate your potential earnings.

9. Jumbo CD

Just as its name implies, a jumbo CD requires a larger deposit than a traditional CD. To get one, you would typically need to make a minimum deposit of $100,000. In some instances, that deposit threshold will be somewhat lower.

While jumbo CDs could pay more than a traditional CD, they might not. A five-year jumbo CD on average pays 1.55 percent APY, while a 5-year CD rate pays 1.49 percent as of late January, according to Bankrate’s national survey of banks and thrifts.

In putting tens of thousands of dollars into a jumbo CD, there’s a risk of whether the account will keep up with the inflation rate. Also don’t forget to consider your tax bite: The interest you earn will be taxed as ordinary income.

10. IRA CD

Individual retirement accounts hold investments. IRA CDs are IRAs where you invest in CDs.

IRA CDs may appeal to the risk-averse who are preparing to pad their retirement savings with guaranteed returns – you’ll know how much you’ll make over the product’s term so long as you keep the CD until its maturity. You will also have protection of up to $250,000 from the government if you purchase IRA CDs from an FDIC-insured institution. Translation: If the bank goes bust, your money won’t.

The trade-off is that you won’t make high returns on these investments. While they can help you diversify your portfolio, IRA CDs are not generally viewed as smart retirement strategies for younger investors, who can take on more risk.

Just like with the other CD types, make sure you shop around for the best yields. To effectively use an IRA CD, fund one with money you won’t need until age 59 1/2, so you don’t have to pay a tax on early distributions.

11. Add-on CD

Most CDs let you make only an initial deposit. But add-on CDs let you make multiple deposits into the account during the CD’s term. However, how many deposits you can make into an add-on CDs varies. So, make sure you read the fine print.

These accounts are worth considering if you are saving for a goal.

Make sure you look around to find the best rates. And reminder, try not to lock up your money for too long at times when interest rates are expected to increase.

What is a money market account?

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You are looking for a low-risk way to earn a competitive rate. Then, you stumble upon something promising: a money market account that pays a high yield. You have just one question: what in the world is a money market account?

A money market account is a financial tool for storing your savings safely, and it is quite similar to a traditional savings account. A money market account is great for when you want a low-risk way to earn a competitive rate on your cash.

Generally, a money market account pays a higher interest rate than a savings account; however, the account tends to include more restrictions, such as requiring a higher minimum balance. It wouldn’t be surprising for the financial institution to require $5,000 or more to open a money market account, for example.

You will, however, often have the ability to write checks from the account and/or a debit card to access your money. But a money market account is not a checking account, and there are limits on your ability to use these tools to move money in and out of the account. A money market account will allow up to six withdrawals or transfers a month because of a federal mandate.

Brick-and-mortar banks, online banks and credit unions offer the deposit account.

Are money market accounts FDIC-insured?

Your money is safe in a money market account if it’s offered by a bank or credit union.

At banks, the Federal Deposit Insurance Corp. insures up to $250,000. At credit unions, the National Credit Union Association insures up to $250,000.

Should the bank or credit union fail, the FDIC or NCUA guarantees your money will remain safe.

For money market accounts, banks and credit unions can use your deposits for low-risk investments, like certificates of deposit. But again, your money is still safe in these accounts.

How do I choose the best money market account?

First and foremost, shop around.

As you do your research, one of the most important factors to consider is the product’s annual percentage yield. The annual percentage yield, or APY, alerts you to how much you will earn with compound interest over the year. In other words, it’s the interest earned on your first deposit as well as the interest earned on top of other interest earnings — the higher the number is, the more your money will grow.

Next, look out for account restrictions. You’ll want to check to see whether or not the account requirements are too onerous to earn the yield or to sidestep a fee. It’s not uncommon to see hefty balance requirements. For example, BMO Harris Bank currently requires a $5,000 minimum opening deposit to earn 2.45 percent APY on its money market account.

Also, make sure you look for fees, including whether the account charges you a penalty if you close it within three months of opening it. Look out for monthly fees, transfer fees, shipping fees, inactive account fees and other penalties.

You can use Bankrate to compare money market accounts.

Should I open a money market account?

If you’re looking to earn a higher rate without taking on risk for your shorter-term goals, you should consider opening a money market account. For example, you may want to open a money market account if:

• You want relatively easy access to your savings.
• Need a place to park your emergency savings or another shorter-term financial goal.
• Want the ability to write a limited amount of checks.
• Desire a predictable APY and a federally insured account.

Can you lose money in a money market account?

A money market account is a safe place to park your money, so long as you aren’t depositing more than $250,000 — the amount FDIC-insured banks and NCUA-insured credit unions insure against losses — in a single account.

Importantly, a money market account is separate from a money market fund. The money market account is FDIC-insured; the money market fund is not.

What is a money market account good for?

If you want to park your savings somewhere but still have relatively easy access to it, a money market account is a good option to consider.

A money market account is a solid option to keep funds for your shorter-term savings goals, like a wedding or home repair. It’s also a good place to keep your emergency fund.

Are you taxed on money market accounts?

You must report all taxable and tax-exempt interest on your federal income tax return, even if it’s just a couple of dollars.

If you earn $10 on interest on an account, your bank will send you a 1099-INT for interest earned during that year. Even if you earn less than $10, you still need to report it on your tax return to the IRS. You will want to report the interest the year that you earn it.

Contact your accountant to answer your specific tax questions.

What is the difference between a money market account and a savings account?

Savings accounts and money market accounts have more in common than not: They pay interest, and they are designed to keep you saving. But there are a few distinctions that should help you choose the product that suits your needs best, including:

• Generally, you will have to park more money in a money market account than you will in a savings account.
• The money market account, on average, pays twice the savings account APY, according to Bankrate data (0.25 percent APY vs. 0.1 percent APY).
• With a money market account, you can get checks — don’t expect this tool in your savings account.

If you are deciding between a money market account and a certificate of deposit, evaluate your goals. A CD could pay you a more competitive rate than a money market account, but your money is more liquid in a money market account than a CD.

Remember, there are always exceptions. Some savings accounts pay higher yields than money market accounts, and not all money market accounts offer ATM access or check-writing privileges. Bottom line: Do your research and shop around to find the account that works best for you.

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