You are in section Home Mortgages Mortgage guides First time buyers What can I afford?
How much?!
Working out what you can afford each month
There’s no point in getting the keys to your own place if you can’t afford to actually live in it. There’s a lot of pressure on people to get on the property ladder – but it only makes sense if you can feed yourself and enjoy some sort of social life at the same time.
What bills will I pay each month?
When working out what you can afford you should take into consideration that you might have to pay for some (if not all) of these…
- Mortgage – likely to be the single biggest expense of them all
- Food
- Transport – be it your Oyster Card or your car’s running costs (finance, fuel, maintenance…)
- Utility bills – typically electricity, gas and water
- Council tax – charges are banded A to H, A being the cheapest. You can apply to your local authority for a reduction if you’re living on your own
- Broadband and digital TV – and don’t forget the TV licence!
- Insurances – buildings, contents and life insurance all need factoring in, plus car insurance if you have one
- Service charges and ground rent – if you’re buying a flat
- Parking – in some areas you’ll need to purchase an on-street parking permit
You also need to expect the unexpected – be it the leaky gutter, faulty boiler or washing machine that pours forth its bounty all over the kitchen floor… it never ends – and you need to factor it in.
There’s more to life than paying bills…
It’s unrealistic to expect to move into your first home without tightening your belt and making some sacrifices. Equally, there’s no point in doing it if your whole life ends up being sacrificed on the altar of the bills. You need to leave room to live a little… have a think about how much you currently spend a month on things like:
- Going out
- Gym membership
- Clothes
- Holidays
- Books, magazines and newspapers/subscriptions
- Mobile phone contract
- TV, film and music subscriptions
And we wouldn't be doing our job without mentioning...
Pensions and savings. We know. WE KNOW. You’ve got enough to think about. We’ll just leave it here: having rainy day savings and keeping a pension well fed will serve you well…
How do you work out how much you can lend me?
In the olden days(!), mortgage lenders used to base the amount of money you could borrow on a multiple of your income. So, if you earned £30,000 a year, you might have been able to borrow three to five times that amount, giving you a maximum mortgage of £150,000.
This led to some people borrowing more than they could actually afford when things like the cost of living, Bank of England base rate or their personal circumstances changed. Not good. So now mortgage lenders are prohibited from lending anyone more than four and a half times their income, and we’re also required to look ahead and stress test the amount we’re willing to lend you, to make sure you can stay afloat during things like redundancy, having a baby or an interest rate hike.
Think carefully before securing other debts against your home. Your home may be repossessed if you don't keep up repayments on your mortgage.
The material contained in this document is for information purposes only and does not constitute advice.
You should obtain relevant legal or other advice if you are unsure about the effect on you of any matter in this document.
You may also like
Our mortgages explained
We have lots of different mortgage options, from Repayment and Offset, to Fixed, Tracker and Standard Variable Rate. If you’re not sure what any of this means, we can help.
How much can you borrow?
We have a handy calculator to give you a rough idea of what you may be able to borrow – simply add a few details and get an indication in seconds.