We do a little pay per click advertising on the various search engines, this is no secret. But it surprised me to see so many hits coming through the somewhat spurious term “mortgage calculator” and it occurred to me that rather than this being people searching to find out what their monthly payment would be (as pretty much everyone has one of these calculators) it is probably people looking to see how much they can borrow.

If this is the case and you are reading this article because you were looking to find that out let me explain something, calculators that purport to tell you what the maximum you can borrow is are a waste of your time. Plain and simple.

The reason is this, every lender will take a multiple of your income and your partners if applicable or a percentage of your gross or net income and the sum will be different with ever lender. They may then deduct your loans and other credit commitments (but the way they do this will also be different with every lender). They may deduct a figure for each dependent child you have, and they may use their standard variable as a basis for affordability or the product rate you will be borrowing if they use a rate to calculate it at all.

Clearly a calculator cannot be set up to work out the maximum based on all the different methods of assessment used, so they use a “best case” method to give you a rough idea. This might seem useful but if the best case happens to be a bit optimistic it could cause you some big headaches and if it is woefully underestimated then you might miss your dream home based on poor information. The only calculators that are reliable are those on lenders websites, but they only work for that lender and will often be based around your credit score anyway which you cannot predict.

Affordability assessment is very complex and is an ever changing landscape, so if you want to know what the maximum you can borrow is speak to a mortgage advisor as that’s what we’re here for.
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However there is a general feeling among the industry now that the bottom is out, and while prices are likely to remain fairly stable for at least the next year due to lack of mortgage products there is some good news out there for people looking to borrow.

Recent research from Unbiased.co.uk suggests that many people now believe that they can only get between 0.5 and 2.5 times their income when looking to mortgage and that only 24% of the UK believes they could arrange a mortgage for more than 4 times their main income.

The truth is that most lenders will accept four times main income as a guide or perhaps 3.5 times joint income however the difficulty is really for those with dependent children which has started to play a more significant role in lenders assessment of affordability and those people who have existing credit commitments which will continue to run after the mortgage completes.

If you are holding significant savings and have existing loans which have a short term to run it may be worth considering paying off loans before applying for a mortgage in order to assist your maximum loan and affordability calculation particularly if you also have children.

If you are unsure how much a mortgage lender will consider lending you many now have useful calculators which will give you an indicator of their maximum loan available on their websites.