Confused about mortgage affordability? Here’s what you really need to know

Thinking about buying a home? Let’s talk about what you can actually afford.

The idea of owning your own home is exciting – it’s a big step and major milestone! But the minute you start hearing about deposits, interest rates and affordability checks, it can all start to feel a bit overwhelming.

The chances are, you’ve already heard a few things that don’t quite tell the full story. And those half-truths? They can end up holding you back.

Don’t worry – we’re here to clear things up. This guide is all about cutting through the noise and helping you to understand what mortgage affordability really means for you. Let’s bust some myths and help you move forward with confidence.

Heard these before? Let’s set the record straight.

Some of these might sound familiar – they’re the kind of things you’ll hear from friends, social media, or even well-meaning family. But just because they’re common, doesn’t mean they’re accurate.

Let’s take a closer look at the myths that crop up again and again – and what’s actually true when it comes to getting a mortgage:

Affordability Myth #1: “Renting is cheaper than owning”

It’s easy to look at the monthly numbers and think renting must be the more affordable option. But that’s not always the full story. When you factor in long-term costs, equity, and flexibility, the comparison gets more complicated.

Affordability Myth #2: “If I earn enough, I’ll be fine”

A strong income definitely helps, but it’s not the only thing lenders look at. From your existing debts to how stable your income is, there’s more to the affordability picture than just your salary.

Affordability Myth #3: “You can always borrow 4.5x your income”

That 4.5x figure shows up everywhere, especially online. But it’s a guideline, not a guarantee. What you can actually borrow depends on a lot more than just one number.

Affordability Myth #4: “Once I’ve locked in a mortgage, my interest rate won’t change”

Fixed rates don’t last forever, and if you’re on a variable or tracker rate, things can shift much sooner. It’s important to understand what kind of deal you’re on, and how it might evolve over time.

Affordability Myth #5: “Go for the longest mortgage term – it keeps payments low!”

Stretching your mortgage term can reduce your monthly payments, but it also means paying more overall. It’s not always the win it appears to be, especially if you don’t plan to stay in that home long-term.

Affordability Myth #6: “A mortgage is a mortgage – they’re all the same, right?”

Not even close. The type of mortgage you choose affects your payments, flexibility, and risk. Understanding the differences can make a big impact on your affordability and financial comfort.

Affordability Myth #7: “If your credit score isn’t perfect, you won’t get a mortgage”

A less-than-perfect credit score can be frustrating, but it’s not the end of the road. There are options out there – and ways to improve your chances.

Affordability Myth #8: “If my family can be guarantors, I don’t need a job to get a mortgage”

Having support from family can help, but it doesn’t replace the need for a stable, reliable income. Lenders still want to see that you can afford the repayments.

Affordability Myth #9: “Brokers recommend the products where they’d get most commission”

Some people worry brokers are just in it for the payday – but regulated advisors have a duty to recommend what’s right for you. A good broker helps you understand your options, not just sell you a deal.

Beyond the Myths: Understanding Your True Affordability

Now that we’ve busted some common mortgage affordability myths, let’s focus on what really determines how much you can comfortably borrow. It’s less about strict rules and more about your unique financial situation. Here are the key factors lenders will look at, and what you should be thinking about:

Key Factors Explained

Income: More than just the number

Lenders look at your gross income (before deductions) for an overview but also your net income (take-home pay) to see your available cash. Stable income, whether from employment or self-employment, is crucial. Think about: Is my income consistent? Do I have other income sources?

Debt-to-income ratio (DTI): Your monthly obligations

This is how much of your monthly gross income goes to debt payments (including a potential mortgage). Lenders prefer a lower DTI, showing you have more room for a mortgage payment. Think about: What are my current monthly debts? How would a mortgage fit in?

Credit score: Your financial track record

This three-digit number reflects how you’ve managed credit in the past. It significantly impacts the interest rates you’ll be offered and your eligibility for a loan. A higher score usually means better rates. Think about: What’s my credit score? Can I improve it?

Savings and assets: Your financial cushion

While your deposit is vital, lenders also want to see you have funds for closing costs (fees, etc.) and an emergency fund for unexpected homeowner expenses. Think about: What savings do I have beyond my deposit? Do I have an emergency fund?

Monthly expenses: The reality of your spending

It’s crucial to have a realistic budget of your regular expenses (from bills to leisure). This helps you determine a comfortable mortgage payment. Think about: What are my essential and non-essential expenses? Where can I adjust?

Moving beyond generic rules: Your personal affordability picture

Ultimately, true mortgage affordability is personal. While general guidelines exist, they don’t account for your specific circumstances, lifestyle, and comfort with debt. Considering these factors will give you a much clearer understanding of what you can realistically afford.

Taking Control: Practical steps for understanding your affordability

Feeling more informed about what goes into mortgage affordability? Great! Now, let’s look at some concrete steps you can take to get a clearer picture of what’s realistically within your reach:

1. Create a realistic budget: Know where your money goes

Track your income (after tax) and all your expenses for a month using apps, spreadsheets, or even a notebook. Categorise your spending to see where your money goes and identify areas where you might be able to save more for your deposit and future mortgage payments.

2. Check your credit report: Understand your borrowing power

Get your free credit report from Experian, Equifax, or TransUnion and review it carefully for any errors. Understanding your credit history is crucial as it impacts your interest rates and loan eligibility.

3. Explore different mortgage options: Get a feel for what’s out there

Familiarise yourself with the main types of mortgages: fixed-rate (stable payments), variable-rate (payments can change), and tracker (follows a base rate). Also, consider how the mortgage term (length) affects your monthly payments and total interest. Remember, personalised advice is key.

4. Talk to a mortgage professional: Your guide through the process

A mortgage advisor can assess your situation, explain your options clearly, and often access a wider range of deals.

Ask them questions like:

• What mortgages might I qualify for?
• What are the estimated monthly payments? What are the upfront costs?
• What are the risks and benefits of different interest rates?
• What are the lender’s criteria?

5. Get pre-approved (Mortgage in Principle): Know your borrowing limit

Getting a mortgage in principle gives you a realistic idea of how much you could borrow, helps you focus your property search, and can make your offer stronger. It doesn’t commit you to anything.

By taking these steps, you’ll be well on your way to understanding your true mortgage affordability and making informed decisions.

Taking the first step towards your homeownership goals

We’ve uncovered the truth behind common mortgage myths, revealing the realities of affordability in the UK. The key message? Don’t let outdated ideas hold you back from exploring your options.

The mortgage world can feel complex, but by understanding your individual circumstances and taking proactive steps to assess what you can truly afford, you can navigate the process with confidence.

So, what’s next? Start by creating a budget to understand your finances, check your credit report, and when you’re ready, talk to a qualified mortgage advisor for personalised guidance.

Your dream of owning a home could be closer than you think. Arm yourself with the right information and take control of your journey!

Try our free mortgage affordability calculator