Understanding How Much You Can Afford
Buying your first home is one of the most exciting milestones in life — but it can also feel overwhelming, especially when it comes to understanding how much you can realistically afford. Between deposits, mortgages, monthly payments, and additional costs, it’s easy to feel lost before you’ve even begun your search.
At Property Connections, the journey to your first home should feel empowering, not intimidating. With the right knowledge and guidance, you can step into the market with confidence and clarity. This guide breaks down the key factors that determine how much you can afford, helping you prepare financially and make well-informed decisions throughout the buying process.
1. Start with Your Personal Financial Picture
Before speaking to a mortgage adviser or browsing property listings, it’s helpful to take a clear look at your own financial situation. Lenders will assess your income, outgoings, credit history, debt, and savings and you should do the same.
Your Income
Consider all sources of income that are steady and reliable. This usually includes your salary, bonuses, overtime (if consistent), and any additional earnings. Mortgage lenders base affordability on stable income rather than irregular financial boosts.
Your Monthly Outgoings
Lenders look closely at your essential expenses:
- Loan or credit card payments
- Car finance
- Childcare or school fees
- Utility bills
- Subscriptions and insurance
The lower your regular outgoings, the more you may be able to borrow, but it’s not just about what a lender will allow, you also need to feel comfortable with your monthly budget.
Your Credit Score
A strong credit score can make a significant difference. Better scores may unlock lower interest rates and higher borrowing potential. If your score needs improvement, small changes like paying bills on time, reducing credit balances, and avoiding unnecessary applications can help boost your score
2. Understanding the Role of Your Deposit
Your deposit is one of the biggest factors in determining affordability. In most cases, you’ll need a minimum of 5% of the property price. However, the more you save, the more options you will have.
Why a Bigger Deposit Helps
- Access to better mortgage rates
- Lower monthly payments
- More choice in the properties you can afford
- Greater security if property prices fluctuate
For example, if your budget allows you to put down 10-20%, you may find that your overall mortgage cost reduces significantly over time.
3. How Lenders Calculate What You Can Borrow
Most lenders use income multiples to determine how much they might offer - typically up to 4 to 4.5 times your annual income. For some applicants with strong financial profiles, this may stretch slightly higher, but it’s not guaranteed.
Example:
If you earn £35,000 per year:
£35,000 x 4.5 = £157,500
This gives you a rough idea of your potential mortgage amount. Combined with a deposit i.e. say £20,000 - your maximum property price could be around £177,500.
But affordability goes beyond income multiples. Lenders also stress-test your finances to ensure you could still make payments if interest rates rise. This is to protect both you and them from financial strain
4. Don’t Forget the Additional Buying Costs
It’s important to factor in the upfront and ongoing costs of buying a property. These can include:
- Solicitor fees
- Valuation and survey fees
- Mortgage arrangement fees
- Insurance (buildings and contents)
- Moving expenses
- Ongoing maintenance and repair costs
While first-time buyers in Scotland may not pay Land and Buildings Transaction Tax (LBTT) on certain property values, it’s still important to check the thresholds to avoid surprises. Planning for these extras early means you’ll have a more accurate sense of your true budget.
5. Considering Your Monthly Mortgage Payment
Knowing the total amount you can borrow is one thing - but you also need to feel comfortable with the monthly repayment.
Your mortgage payment will vary depending on:
- Loan amount
- Deposit size
- Interest rate
- Mortgage type and term
For example, choosing a longer mortgage term, such as 30 or 35 years, can reduce your monthly payments, but you’ll pay more interest over the lifetime of the loan. It’s all about finding the right balance for your current financial situation and long-term goals. Using a mortgage calculator is a great way to experiment with different scenarios and understand what feels manageable.
6. Speak to a Mortgage Adviser Early
Many first-time buyers make the mistake of browsing properties before knowing what they can borrow. Speaking with a qualified mortgage adviser early in your journey gives you:
- A clear affordability assessment
- Access to a wide range of lenders and mortgage products
- Advice tailored to your financial situation
- A Mortgage in Principle (MIP), which strengthens your offer
- A mortgage adviser can also help you understand how lenders assess different types of income and what steps you can take to boost affordability.
7. Set Your Comfortable Budget (Not Just Your Maximum)
There’s a difference between what you can borrow and what you should borrow.
Ask yourself:
- Would I still be comfortable if interest rates rose?
- Do I want room in my budget for travel, hobbies, or savings?
- Would I prefer a lower monthly payment even if it means a smaller home?
Your first home is a big financial commitment, but it should also support your lifestyle. Balancing affordability with comfort is key.
8. Start Viewing Properties with Confidence
Once you understand your affordability, deposit position, and borrowing potential and ideally have your Mortgage in Principle, you’re ready to begin viewing properties.
At Property Connections, we work closely with first-time buyers to help them navigate this stage with ease. Understanding your budget allows you to focus on homes that are truly attainable, avoiding any wasted time and disappointment.
Final Thoughts: You’re Closer Than You Think
Understanding affordability is one of the most important steps for any first-time buyer and once you’ve mastered it, everything else becomes much clearer. With the right preparation, support, and guidance, buying your first home can be an exciting and empowering journey.
Property Connections is here to support you every step of the way, from understanding your budget to receiving the keys to your new home. If you’re ready to explore your options or want a personalised affordability discussion, our team is always here to help.