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Mortgage Borrowing Formula:
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The Money Saving Expert Mortgage Calculator helps you estimate how much you can borrow for a mortgage based on your income, the lender's income multiplier, and your existing debts. This provides a realistic assessment of your borrowing capacity.
The calculator uses the borrowing formula:
Where:
Explanation: The formula calculates your maximum borrowing capacity by multiplying your income by the lender's multiplier, then subtracting any existing debts to determine the net amount you can borrow.
Details: Accurate mortgage affordability calculation is crucial for understanding your borrowing limits, planning your property purchase, and ensuring you don't overextend yourself financially.
Tips: Enter your annual income in GBP, the lender's income multiplier (typically between 4-5), and your total existing debts in GBP. All values must be valid non-negative numbers.
Q1: What is a typical income multiplier used by lenders?
A: Most lenders use a multiplier between 4-5 times your annual income, though this can vary based on the lender and your financial circumstances.
Q2: What debts should I include in the calculation?
A: Include all regular debt payments such as credit cards, loans, car finance, and any other ongoing financial commitments.
Q3: Does this calculation include deposit amount?
A: No, this calculation shows the borrowing amount only. You'll need to add your deposit to determine the total property price you can afford.
Q4: Are there other factors that affect how much I can borrow?
A: Yes, lenders also consider your credit score, employment status, monthly expenses, and the property value when determining your borrowing capacity.
Q5: Should I borrow the maximum amount available?
A: Not necessarily. Consider your lifestyle, future plans, and potential interest rate changes. It's often wise to borrow less than the maximum to maintain financial flexibility.