Calculating a mortgage means working out four key figures: your monthly payment, the total interest paid, your loan-to-value ratio (LTV), and whether the repayments are affordable given your income.
Mortgage affordability: the income multiple rule
Most UK lenders offer mortgages of 4 to 4.5 times your annual gross income (or joint income for couples).
Max mortgage ≈ Annual gross income × 4.5
Example: £60,000 income → maximum mortgage ≈ £270,000
Monthly payment formula
M = P × r × (1+r)^n / ((1+r)^n - 1)
Example: £250,000 over 25 years at 4.5%
- Monthly rate r = 4.5% ÷ 12 = 0.00375
- n = 300 payments
- M ≈ £1,389/month
- Total repaid: £416,700 | Total interest: £166,700
Loan-to-Value (LTV) and rates
| LTV | Typical rate range | Deposit required |
|---|---|---|
| 60% LTV | Lowest rates | 40% deposit |
| 75% LTV | Good rates | 25% deposit |
| 85% LTV | Standard rates | 15% deposit |
| 90% LTV | Higher rates | 10% deposit |
| 95% LTV | Highest rates | 5% deposit |
Stamp Duty Land Tax (England, 2025)
| Property value | Standard rate | First-time buyer rate |
|---|---|---|
| Up to £250,000 | 0% | 0% (up to £425,000) |
| £250,001 – £925,000 | 5% | 5% (above £425,000) |
| £925,001 – £1,500,000 | 10% | 10% |
| Over £1,500,000 | 12% | 12% |