It is one of the first questions people ask when they start thinking about moving.
But there is a big difference between what a lender might agree to lend you and what you can actually afford to spend.
Just because a bank says you can borrow a certain amount does not necessarily mean you will feel comfortable making that mortgage payment every month.
Your income, deposit, existing commitments, mortgage term and interest rate all make a difference. So does what you actually want your life to look like once you have bought the house.
Start with your deposit
Your deposit is an important part of the equation.
The larger your deposit, the less you need to borrow, which can make a significant difference to your monthly mortgage payments. It can also affect the mortgage products available to you.
For example, someone with a £100,000 deposit looking at a £500,000 property needs to borrow £400,000.
Someone with the same income but a £200,000 deposit would only need to borrow £300,000 for the same property.
That is a very different monthly commitment.
Then look at the mortgage, not just the house price
This is where it is easy to get carried away.
A property might be within your overall budget, but you need to be comfortable with the mortgage payment that comes with it.
Interest rates matter. So does the length of the mortgage. A longer mortgage term can reduce the monthly payment, but you will generally pay more interest over the life of the mortgage.
It is worth looking at different combinations rather than simply asking, “How much will the bank lend me?”
The better question is:
“What monthly payment am I genuinely comfortable with?”
And don’t forget everything else
Your mortgage is only one part of owning a home.
There are council tax, utilities, insurance, maintenance and potentially service charges or ground rent. If you are buying a leasehold property, these costs can vary considerably.
Then there is everything else that comes with everyday life.
You do not want to buy your dream home and discover that you cannot afford to enjoy living in it.
So, how much property can you afford?
There is no single figure that works for everyone.
Lenders look at your income and financial commitments when assessing how much they are prepared to lend. Your own calculation should go further and consider what you are comfortable spending each month.
It is also worth remembering that mortgage rates can change, depending on the product you choose and when you take it out.
If you are considering buying, getting an Agreement in Principle can give you a much clearer idea of your borrowing position before you start seriously viewing properties.
But even then, treat the figure as a guide rather than a target.
You do not have to spend everything you can borrow.
The property market matters too
Once you know your budget, the next question is what that budget actually buys you.
This is where local property knowledge becomes important.
£750,000 can buy you something very different in central London compared with Surrey, Essex or other parts of the country. Even within the same town, two streets can produce very different prices depending on the property, condition, outside space, transport and demand.
That is why looking at a property’s asking price on its own does not tell you whether it represents good value.
If you are buying, you need to understand what similar properties have actually achieved and what else is available within your budget.
And if you are selling at the same time, understanding the value of your existing property is just as important.
You can read our recent article, Buyers Have Choice. Sellers Have Competition, for a look at what is happening in the current property market.
You might also want to read Are Mortgage Rates Going Down? and what changing rates could mean if you are thinking about moving.
Before you start looking
Work out your deposit.
Understand what you could potentially borrow.
Look at the monthly repayment rather than just the headline property price.
Allow for the other costs of owning a home.
And, most importantly, leave yourself some breathing room.
The right property is not necessarily the most expensive property you can technically afford. It is the one that works for your finances and your life.
If you are thinking about moving and want to understand what your current home could be worth, you can book a valuation with one of our property experts.
We can help you understand where you stand in the market before you decide what comes next.