Mortgage guides

How lenders decide what you can borrow

Lenders assess income, spending, debts, credit history and the property. Our model illustrates 4 to 4.75 times adjusted income, with a separate payment ceiling. Those are modelling choices, not a universal lender rule. Income accepted by one lender may not be accepted by another.

An income multiple is only a starting comparison. A lender's decision depends on its current eligibility and affordability assessment, not the label attached to a range in a calculator.

Loan-to-value, and why it changes the price

Loan-to-value is the mortgage divided by the property value. A larger deposit lowers the lender’s risk, so rates tend to improve in steps at 90%, 85%, 80%, 75% and 60%. Being a few hundred pounds short of a band boundary can cost far more over a fixed period than the shortfall itself. The LTV calculator shows how much more deposit would take you into the next band.

What a monthly payment is made of

On a repayment mortgage, each payment covers the interest accrued that month, and whatever is left reduces the balance. Early on, most of the payment is interest; later, most of it is capital. That is why the balance falls slowly at first, and why overpayments made early save the most. See the year-by-year breakdown in the repayment calculator.

Overpaying

Overpaying reduces the balance interest is charged on, so it can cut both the total interest and the term. Most lenders allow penalty-free overpayments up to a limit — often 10% of the balance a year — and charge an early repayment charge above it. Check your offer before committing. The overpayment calculator illustrates the difference.

Remortgaging

When a fixed or discounted period ends, most borrowers move to the lender’s standard variable rate. Remortgaging means moving to a new deal, either with the same lender or a different one. A new deal with the same lender is usually called a product transfer; moving to another lender is a remortgage. Fees matter: a lower rate with a large product fee is not automatically cheaper. The remortgage calculator shows the monthly difference and how long a fee takes to pay for itself.

A like-for-like mortgage comparison

Start with the same balance, remaining term and repayment type. Then compare the payment, product fee, other switching costs and the balance remaining at the end of the deal. Do not compare a two-year fixed product with a five-year fixed product only by the starting rate: the length of payment certainty and any early repayment charges differ. If a fee is financed, include the extra borrowing and interest rather than treating it as free.

Three checks when a deal is ending

1. Confirm the dates. Note the end of the fixed or discounted period, when any early repayment charge ends and the expiry date of a new offer.
2. Price staying as well as moving. Ask your current lender about product-transfer options, then compare a new-lender quote with all fees included.
3. Test a less favourable outcome. Try a lower property valuation and a higher rate. Keep enough cash for fees and do not assume a new application will succeed.

If payments are becoming difficult, contact your lender rather than relying on an overpayment or remortgage illustration. A calculator cannot negotiate support or assess arrears. Free guidance is available from MoneyHelper; personalised recommendations belong with an FCA-regulated adviser.

Sources and further reading

See MoneyHelper's rate-type guide, its remortgaging guide and FCA mortgage consumer information. They explain consumer choices; they do not endorse our assumptions or any product promoted on this site.

Mortgage questions