How the calculator works
The borrowing calculator works out two numbers and shows you the lower one, because that’s what a lender does. Here is every step, with the formula. Some inputs are our own simplifying assumptions rather than published data, and we say so where they are.
1. The income multiple
The figure most calculators stop at. Your household income before tax, multiplied by 4.5.
multiple limit = household income × 4.5
4.5 is a common lender ceiling, not a rule. Some lenders go higher for some borrowers, and many lend less.
2. Your take-home pay, estimated
Lenders assess what you actually receive. We don’t ask for your tax code or pension, so we estimate monthly take-home pay as 74% of gross.
net per month = (household income ÷ 12) × 0.74
Our assumption. Real take-home varies with tax band, pension contributions and student loan repayments.
3. Essential spending
A lender subtracts what it expects you to spend on bills, food and transport before deciding what’s left for a mortgage. We use a flat £1,050 a month for one applicant and £1,600 for two, plus the credit commitments you enter.
left after essentials = net per month − essentials − credit commitments
Our assumption. Lenders use their own models, often based on household size, location and your declared spending.
4. The payment cap
Even if you have money left over, lenders limit the share of income a mortgage payment may take. We cap it at 45% of estimated take-home pay.
payment cap = net per month × 0.45
monthly budget = the lower of (left after essentials, payment cap)
Our assumption, in line with a cautious lender.
5. The stress rate
Lenders don’t test the budget at the rate you’ll pay. FCA rules (MCOB 11.6.18) require them to consider likely rates over the first five years and to assume rates rise by at least one percentage point, unless the rate is fixed for five years or more. Many lenders meet this by testing at their revert-to rate plus a margin. We use the Bank of England’s average revert-to rate plus one.
stress rate = average revert-to rate + 1
Our simplification, not the rule itself. Each lender sets its own test, many use a wider margin, and a five-year fix may be tested differently. The revert-to average updates from the Bank of England’s quoted rates data, with the date shown on the calculator.
6. From budget to loan
The largest loan whose monthly repayment, at the stress rate, fits the budget. This is the standard repayment-mortgage formula run backwards.
r = stress rate ÷ 100 ÷ 12 n = term in years × 12 affordability limit = budget × (1 − (1 + r)^−n) ÷ r
7. The answer
you can borrow ≈ the lower of (multiple limit, affordability limit) property budget ≈ that + your deposit
The monthly payment we show uses the same formula forwards, at the average two-year fixed rate:
payment = loan × r ÷ (1 − (1 + r)^−n)
What it leaves out
Bonus, overtime and self-employed income, childcare costs, credit history, the property itself, and every lender’s own model. It’s an estimate to help you understand the numbers, not a decision in principle. This is information, not advice.