What percentage of your income should your mortgage be? 

If you’re considering buying your own home, it’s important to think about long-term affordability, not just the initial deposit you need.   

Mortgages have become a lot more expensive over the last few years, prompting many potential homeowners to question whether they can afford to buy. 

This article explores how much of your income should be used on your mortgage payments and what can impact how much you pay.

How much is recommended you spend on mortgage payments?

It’s generally recommended that you follow the 28/36 rule.  

So, you shouldn’t spend more than 28% of your monthly income on housing costs, including mortgage payments and insurance.  

Overall, your total debt shouldn’t exceed 36% of your monthly income, including your household bills, debt and mortgage payments. 

If your spending is likely to exceed the above percentages, a mortgage lender may reject your application due to affordability concerns. 

How do mortgage payments work? 

When you apply for a mortgage, you agree to repay the loan via monthly instalments at a set interest rate over a defined period. 

You can choose a fixed-rate mortgage, so you know how much you’ll pay back each month, or you can opt for a variable rate mortgage, where your monthly payments will change when interest rates rise or fall. 

If you opt for a fixed or special rate, once it expires, you can remortgage on to a new deal to avoid moving onto your lender’s standard variable rate, which is likely to be much higher.

With a mortgage, the principal (or capital) is the amount you borrow and have to pay back, while the interest is the charge you pay for the loan.

There are a few repayment methods for a UK mortgage:

• Repayment mortgage: If you get a repayment mortgage, you’ll repay the capital and the interest over a fixed period, clearing your mortgage by the end of the term. This is the most popular option as it means you will eventually own the property outright.

• Interest-only mortgage: Here you only pay the interest during the mortgage term and repay the capital after the term ends.  However, to do this, you may need to sell your property.

There are also part-and-part mortgages, where you pay off some of your mortgage but not the whole amount, combining repayment and interest-only.     

What other mortgage costs should you consider? 

While mortgage payments represent the biggest cost, it’s not the only one associated with buying a home. 

You also have to consider the cost of life insurance, buildings insurance, typically requested by mortgage lenders, and potentially contents insurance. 

You may also need to pay stamp duty when you buy your home and pay legal fees.

What do lenders consider when you apply for a mortgage? 

Before they approve your mortgage application, lenders will take a close look at your income and spending, to ensure you can afford repayments. 

They’ll look at: 

• Your household income, including salaries or earnings from self-employment, as well as commission and bonuses.

• Your regular spending, including household bills, childcare, eating out, travel costs and subscriptions. 

• Your debts, such as loans or credit cards. 

• Your credit score and history.  

• Whether you’ll still be able to afford your monthly mortgage payments if interest rates rise or your circumstances change. 

The amount mortgage lenders are willing to lend has increased in recent years and many lenders will consider a mortgage of up to five to 5.5 times your annual income.

So, if you earn £35,000 a year, you may be able to borrow between £175,000 and £192,500.

What should you consider when deciding on mortgage payments 

You could look at your debt-to-income (DTI) ratio, which is the amount of your monthly gross income that you use to pay off your debt. 

You simply add up your monthly debt costs and divide this number by your monthly gross income. Then, multiply this figure by 100 to get a percentage figure, which is your DTI ratio.  

For example, if your gross monthly income is £3,000 and your monthly debt is £1,500, your DTI ratio would be 50%. 

A lower DTI ratio is better, so in this scenario, it would be high, and you would want to reduce it.  

You should include: 

• Mortgage costs or rent

• Student loans  

• Your overdraft 

• Any council tax arrears

• Any other debt, such as credit cards, loans and finance 

A DTI ratio between 0% and 39% is acceptable — if it’s between 40% and 49%, you’ll need a good credit history. 

If your DTI ratio is over 50%, you’re seen as a higher risk, so the interest rates you’ll be offered will be less competitive. Over 75% means your application is most likely to be rejected.  

It’s also worth factoring in the impact of your deposit. The more money you can put down up front, the less you’ll need to borrow and the lower your repayments will be.

You should also take into account any general property maintenance costs, although any savings could cover this. 

Before you apply for a mortgage, it's a good idea to have emergency savings worth at least three months of your monthly expenses to help cushion any unexpected costs.  

Need expert mortgage guidance? 

Determining how much of your income should go toward mortgage payments is crucial for long-term financial stability.

Lenders assess affordability based on income, debt-to-income ratio, and credit history, and the stability of your income.

Beyond mortgage payments, other costs such as insurance, property maintenance, and emergency savings should also be considered.

Seeking expert mortgage advice can help you understand your borrowing capacity, secure the best deal, and ensure your mortgage remains manageable in the future.

Unbiased can connect you with a qualified mortgage broker who can help you with your application, determine how much you can afford to borrow and find the most suitable deal.