How much can you afford?
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 
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 about 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 get 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 our Are you covered? guide and Protecting income or borrowing in our Insurance section.
If you do get into difficulties
You might lose your job through redundancy or find yourself unable to work due to long–term sickness. By law, an employer must pay most employees statutory sick pay for up to 28 weeks but this will probably be a lot less than full earnings. After that, you would probably have to fall back on State benefits. If you are self-employed, you have no employer to help so you would have to turn to the State straight away unless you have some savings. This is when insurance to protect you or your family's income or borrowing can be useful.
Check whether you have insurance to cover you in these circumstances. You may have taken it out when you got your mortgage. It’s usually called Mortgage Payment Protection Insurance (MPPI) or Accident, Sickness and Unemployment insurance (ASU) – see Protecting income or borrowing.
It's crucial to talk to your lender as soon as possible otherwise you could risk losing your home. You may be able to come to an agreement with them, such as a payment plan, and avoid more serious problems. You can also download or order online a free copy of our What to do when you can’t pay your mortgage printed guide – see Publications.
Sale-and-rent-back schemes
Some companies may offer to help you with financial difficulties by buying your home and then renting it back to you for a fixed period of time (six months or more). These are sometimes called flash sales because they can buy your home quickly — sometimes within a week, but more often three to four. You may also hear them called mortgage rescue, rent–back or sell–to–let schemes.
We do not regulate these schemes so you may not have access to the complaints and compensation procedures if things go wrong. They are not the same as a Home reversion, which is for people who have paid off their mortgage and want to sell part or all of their home for cash and retain the right to live in it for a nominal rent.
Selling your home in this way may allow you to clear your mortgage debts and stay in your home. But if you opt for such a scheme you will no longer own your own home and could still be evicted if you fall behind with your new rental payments. And most of these companies will pay you less than the market value of your property — so think carefully before entering into such a scheme and make sure you understand the consequences.
Get specialist debt help
It may be a good idea to get some free and independent advice before making any major decisions. Various agencies specialise in dealing with financial difficulties and can help you plan how to solve your problems – see Get more help.
Top tips
- Don't borrow the maximum on offer unless you’re sure you can afford it.
- Plan your budget for now and the future.
- If you're getting into difficulties speak to your lender or a specialist debt agency as soon as possible.