Summary
This calculator answers “How much can I borrow?” (or “How much can we borrow?” for joint applicants) using a practical UK affordability model:
- Combine applicant income.
- Add a conservative share of bonus income.
- Subtract annualised monthly commitments.
- Apply lending multiples (3.0x, 4.0x, 4.5x).
How it works
1. Income base
Start with gross annual income from applicant 1 and applicant 2.
2. Bonus treatment (variable pay)
Bonus treatment is lender-specific. Intermediary criteria show that lenders distinguish between regular vs discretionary bonus and often require history (typically 2 years of evidence for annual variable pay).
This calculator uses a conservative default:
- Include 50% of declared annual bonus in qualifying income.
- Treat this as an estimate, not a lender decision.
Why 50%? It is a defensible baseline for discretionary bonus scenarios and avoids overstating borrowing capacity when bonus is variable year to year.
3. Commitment deduction
Monthly commitments (credit cards, loans, childcare, other committed outgoings) are annualised and deducted from qualifying income.
4. Lending multiple range
Three reference multiples are shown:
- 3.0x conservative
- 4.0x standard
- 4.5x upper mainstream
5. Responsible lending context
Under FCA MCOB 11.6, lenders must assess affordability and repayment sustainability, not just income multiples. MCOB 11.6.18R also requires assessment against likely future interest-rate movements for relevant cases.
Formula
Where
Then:
Where
Worked example
Joint application with bonus
Base income
= £75,000
Bonus counted
= £6,000
Annual commitments
= £7,200
Effective income
= £73,800
Standard estimate
= £295,200
Maximum estimate
= £332,100
Result
Estimated borrowing range: £221,400 to £332,100
Inputs explained
- Annual income (applicant 1/2): gross salary income.
- Annual bonus (applicant 1/2): variable pay; calculator includes 50%.
- Credit cards / loans / childcare / other: monthly commitments deducted before applying multiples.
Outputs explained
- Conservative / standard / maximum: borrowing range at 3.0x / 4.0x / 4.5x.
- Effective income: income actually used after bonus policy and commitments.
- Bonus income counted: annual bonus contribution included in affordability.
- Indicative monthly payment: repayment illustration (standard estimate, 4.5%, 25 years).
Assumptions and limitations
- This is a planning estimate, not a Decision in Principle.
- Bonus policy is simplified to a 50% inclusion default.
- Real lenders may use different treatment (including 0%, 50%, or 100%), with stronger evidence requirements where bonus is high or irregular.
- Credit profile, deposit size, property type, and lender policy can materially change outcomes.
Verification
The calculator implementation is verified against deterministic test cases in src/lib/__tests__/borrowing.test.ts, including identity checks:
conservativeEstimate = effectiveIncome x 3.0standardEstimate = effectiveIncome x 4.0maximumEstimate = effectiveIncome x 4.5
Representative cases:
| Case | Inputs | Expected standard (4.0x) | Verification |
|---|---|---|---|
| Single applicant, no commitments | £35,000 salary | £140,000 | Unit test |
| Joint applicant, no commitments | £45,000 + £35,000 | £320,000 | Unit test |
| Bonus included | £40,000 salary + £10,000 bonus | £180,000 | Unit test (50% bonus inclusion) |
| Commitments reduce borrowing | £50,000 salary, £500/month commitments | £176,000 | Unit test |
| Commitments exceed income | £20,000 salary, £2,000/month childcare | £0 | Unit test (floor at 0) |