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Summary
This calculator answers “What property can we afford?” using household take-home pay (net income) rather than gross salary. It offers two views:
- Forward: given a spending percentage, compute the maximum property price.
- Reverse: given a target property price, compute the monthly payment and its share of income.
Both views include stress tests showing the impact of rate rises.
Why net income?
Most online affordability tools use gross income and lending multiples (4x, 4.5x). This gives a quick answer but ignores tax, student loans, and pension contributions — all of which vary widely between households.
A couple earning £80,000 combined gross might take home anywhere from £4,200/mo to £5,000/mo depending on pension contributions, student loan plans, and Scottish tax rates. The mortgage payment comes from what lands in your bank account, not what your contract says.
Affordability markers
The calculator uses four reference points for what percentage of net income to spend on a mortgage:
| Marker | % of net income | Source |
|---|---|---|
| Conservative | 25% | Bankrate, Chase guidance |
| Recommended | 28% | HomeOwners Alliance, MortgagesRM |
| Stretched | 35% | Boon Brokers, Ascot Mortgages |
| Maximum | 45% | Upper limit observed in practice |
For context, the average UK mortgage payment in 2024 was approximately 49% of gross income (Moneyfacts), which translates to roughly 35-40% of net income depending on tax position.
How the forward calculation works
Where
The maximum mortgage is derived by reversing the standard amortization formula:
Where
The property price is then:
Where
Forward: £5,000/mo household at 28%
Monthly budget
= £1,400
Monthly rate r
= 0.00375
Total months n
= 300
Compound factor
= 3.0668
Max mortgage
= £251,454
Property price
= £279,394
Deposit needed
= £27,939
Result
Max property: £279,394 with £27,939 deposit
How the reverse calculation works
Given a target property price, the calculator computes the mortgage amount and monthly payment using the standard amortization formula:
Where
The payment is then expressed as a percentage of household take-home to show where it falls against the affordability markers.
Stress testing
The calculator shows what happens if interest rates rise by +1%, +2%, and +3% above the current rate. This aligns with the FCA’s MCOB stress test framework, which requires lenders to assess borrowers’ ability to pay at elevated rates.
For example, at a base rate of 4.5%, the stress tests show payments at 5.5%, 6.5%, and 7.5%.
Gross income estimate
The informational note at the bottom estimates what gross salary might correspond to the entered take-home pay. This uses a binary search over the take-home pay calculation assuming a standard 1257L tax code, no pension, and no student loan. The estimate is for reference only — lenders use their own affordability models based on gross income, committed expenditure, and living costs.
Limitations
- This calculator uses net income rules of thumb, not lender-specific affordability models
- Actual lending decisions consider credit history, existing debts, employment type, and other factors
- The gross income estimate assumes a standard tax code and no deductions
- Stamp duty and other purchase costs are not included in the property price