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How much can you afford?

How much you can afford may change over time. Find out how to protect yourself against changes in circumstances.

Four main things affect what your monthly mortgage repayment will be. These are:

  • how much you borrow;
  • how long you borrow it for;
  • the type of mortgage you have (e.g. interest-only or repayment); and
  • the interest-rate deal you choose.

All these factors can vary, so use our Mortgage calculator to work out what your repayments might be. Simply enter the information it asks, and see what a particular mortgage will cost you each month.

Always check the Annual Percentage Rate (APR) and use it to compare mortgages. You pay back more than just the interest on the amount you borrow – other things may also affect the overall cost of the mortgage, such as administration fees, survey fees and insurance charges. The time at which the credit and other charges have to be paid back affects the rate of the charges and the overall cost to you. See What is APR? in our Loans section. You’ll see the APR quoted in Section 5 of the Keyfacts logo about this mortgage document.

Budget for increased costs in future

If you choose a variable rate mortgage (including a discounted or tracker rate), be prepared for your monthly payments to go up when interest rates rise.

If you choose a low, initial fixed rate or a discounted rate mortgage, allow for the increased cost when your interest-rate deal comes to an end.

Use the Keyfacts logoabout this mortgage document which your lender or mortgage broker will give you to see whether you can afford your mortgage in the future and if rates rise.

You can afford it now, but what if...?

You may be able to afford the repayments now, but think about what could happen if, for example, your income falls or you or your partner lose your jobs. What if interest rates rise and your monthly repayments go up?

Using the Mortgage calculator and, looking ahead, enter interest rates that are 1% or 2% higher than they are now. Would you still be able to afford your mortgage and live life the way you want to?

There are things you can do now to help protect yourself against the risks of changes to your circumstances and interest-rate rises, such as:

  • build interest-rate increases into your budget;
  • avoid taking the maximum mortgage on offer;
  • consider a fixed rate mortgage — but don’t forget that if rates fall your repayments won’t;
  • build up your emergency fund;
  • work out how much you’d need if you lost your job; and
  • find out what your employer provides if you become ill.

There are insurance products available to help protect your income or mortgage repayments if something goes wrong and you may be offered these when you take out a mortgage. You should consider them but be aware that there are restrictions on when and how much they’ll pay out – see Payment protection insurance.

Top tips

  1. Don't borrow the maximum on offer unless you’re sure you can afford it.
  2. Plan your budget for now and the future.