Home Affordability Calculator

What Can You Actually Afford?

Home affordability isn't just about what a lender will approve – it's about what you can comfortably afford without becoming "house poor". Just because you're approved for a £400k mortgage doesn't mean you should take it. You want to buy a home, not have the home own you through crippling monthly payments.

The classic rules (like 28% of income for housing) were created decades ago when life was simpler and cheaper. Today, with student loans, childcare costs, and higher living expenses, many experts suggest being more conservative – especially if you want to maintain your lifestyle and save for other goals.

The Real Debt-to-Income Rules

• Front-End Ratio: Housing costs ÷ gross monthly income (aim for 25% max, lenders allow 28%)
• Back-End Ratio: All debts ÷ gross monthly income (aim for 30% max, lenders allow 36-43%)
• Conservative approach: 20% housing, 25% total debts (sleep better at night)
• Reality check: Can you afford this payment AND still enjoy life?
• Stress test: What if interest rates rise 2% at renewal?

All Housing Costs (Not Just Mortgage)

Your mortgage payment is just the beginning. The real monthly cost includes everything needed to live in your home. Many first-time buyers get shocked by how much more expensive homeownership is compared to renting.

Here's what people often forget: when you rent, your landlord handles repairs, maintenance, and property taxes. When you own, every broken appliance, every leaky pipe, every roof repair comes out of your pocket. Budget accordingly.

• Mortgage payment: Principal and interest (the obvious one)
• Property taxes: 0.5-2% of home value annually (varies dramatically by area)
• Home insurance: £40-100+ monthly depending on coverage and location
• Maintenance fund: Budget 1-3% of home value annually (older homes need more)
• Utilities: Often 50%+ higher than renting (heating whole house vs flat)
• HOA fees: If applicable, can add £50-500+ monthly

Down Payment Strategy

The 20% down payment isn't just an arbitrary number – it's designed to show lenders you're serious and reduce their risk. With less than 20% down, you'll pay mortgage insurance, which protects the lender (not you) if you default.

But here's the thing: waiting to save 20% might cost you more than paying mortgage insurance if house prices are rising faster than you can save. Sometimes it's better to buy now with 10% down than wait two years to save 20%.

• 20%+ down: No mortgage insurance, better rates, stronger offers in bidding wars
• 10-19% down: Mortgage insurance required but often manageable (£100-200/month)
• 5-9% down: Higher insurance costs, but gets you in the market sooner
• Less than 5%: Possible with some programs but expensive – calculate total cost carefully
• Government schemes: Help to Buy ISA, Lifetime ISA, Shared Ownership options

Hidden Costs That Destroy Budgets

Everyone focuses on the big numbers – purchase price, down payment, monthly payment. But it's often the smaller, unexpected costs that push people over their budget limit and create financial stress.

• Moving costs: £2,000-5,000+ (professional movers, time off work, cleaning deposits)
• Immediate purchases: Lawnmower, tools, furniture for bigger space, window treatments
• Emergency repairs: Boiler dies week one (£3,000), roof leak during first storm
• Higher monthly bills: Council tax, gas/electric, water rates, broadband setup
• Opportunity cost: Down payment money not earning 5-8% in investments
• Lifestyle inflation: Bigger garden = more landscaping, bigger house = more furniture

Smart Affordability Strategies

The best affordability test isn't what the bank approves – it's whether you can sleep soundly at night knowing you can handle the payments even when life throws curveballs.

Ask yourself: Can you afford this payment if one of you loses your job for 3 months? If interest rates rise 2% at renewal? If you have a baby? If you need a new roof? If the answer is "barely" or "no", consider waiting or buying less house.

• Keep emergency fund intact: 3-6 months expenses AFTER buying, not before
• Factor in life changes: Kids cost £200k each, job changes happen, health issues arise
• Don't max out approval: Lenders qualify you at today's rates with today's income
• Consider total lifestyle cost: Longer commute = £200+ monthly in transport
• Buy less house initially: You can always upgrade later when income grows