How much house can you realistically afford?
Affordability is one of the most misunderstood numbers in housing. The figure a lender is willing to advance and the figure that leaves your life comfortable are rarely the same, and the gap between them is where a lot of financial stress lives. This guide breaks affordability into the pieces you can actually measure, so you can arrive at a number that belongs to you rather than to a calculator.
Start with take-home pay, not gross income
Most affordability rules of thumb are written against gross income because that is the number institutions can verify quickly. It is a poor planning tool. Tax, pension contributions, health cover, and any salary sacrifice arrangements all come out before a single housing bill is paid.
Write down what actually lands in your account each month, averaged across the last six to twelve months if your income varies. If a meaningful share of your pay is bonus or commission, treat the reliable base as your planning figure and think of the variable part as something that accelerates savings rather than something that supports a larger monthly commitment.
Subtract the commitments that will not disappear
Affordability is what remains after everything else you have already promised to pay. Student loans, car finance, credit card minimums, childcare, insurance, and any regular support you give family are all part of the picture.
This is also how lenders think. They compare your total monthly debt commitments to your income and expect the combined figure to sit inside a range. You can run the same comparison yourself long before anyone else looks at it, and you will usually be stricter than they are — which is the point.
Housing costs are more than the loan payment
The monthly cost of owning a home is the loan payment plus property taxes or rates, buildings insurance, any service charge or association fee, utilities, and maintenance. Maintenance is the line people leave out, because it is irregular rather than monthly. Setting aside a small percentage of the property's value each year for upkeep turns an unpredictable expense into a predictable one.
When you compare a potential purchase with your current rent, compare the whole figure, not the loan payment alone. A payment that looks similar to your rent can turn out to be meaningfully higher once the surrounding costs are included.
The deposit changes more than the price you can reach
A larger deposit reduces the amount borrowed, which lowers the payment, and in many markets it also improves the rate offered and removes the need for mortgage insurance. Those three effects compound.
It works the other way too. Emptying every account to reach a larger deposit can leave you owning a home with no cash behind you, which is precisely the moment a boiler fails. A deposit that leaves your emergency fund intact is usually worth more than a slightly bigger one that does not.
Stress-test the number before you commit to it
Ask what happens to your budget if the rate on your loan were two percentage points higher at renewal, if one income paused for three months, or if a major repair arrived in the first year. If the answer to all three is uncomfortable but survivable, the number is probably about right. If any of them is genuinely unmanageable, the number is too high.
Doing this on paper costs nothing. Discovering it after moving in is expensive.
Build your own affordability figure
Work through it in order and write each line down. The exercise takes half an hour and gives you a figure you can defend to yourself when a property slightly outside it appears.
- Average monthly take-home pay across the last year
- Minus every existing monthly commitment
- Minus the savings rate you want to protect
- Minus running costs: taxes, insurance, utilities, upkeep, service charges
- What remains is what a loan payment can occupy — and leaving a margin inside it is the whole point
Go750 publishes educational information about money and housing. This article is not financial advice and Go750 does not offer or arrange financing.
