Home
Back
Buying Power Formula:
| From: | To: |
Buying power represents the amount of money you have available to make purchases after accounting for your income, financial multipliers (like loan approval ratios), and existing debts. In the UK context, it's particularly important for mortgage applications and large purchases.
The calculator uses the buying power formula:
Where:
Explanation: The formula calculates your maximum borrowing capacity by multiplying your income by a lender's multiplier, then subtracting any existing debts.
Details: Understanding your buying power helps with financial planning, especially when considering major purchases like property. It gives you a realistic view of what you can afford in the UK market.
Tips: Enter your annual income in GBP, the typical multiplier used by lenders (usually between 4-5 for UK mortgages), and your total existing debts. All values must be positive numbers.
Q1: What is a typical multiplier in the UK?
A: For mortgages, UK lenders typically use 4-5 times your annual income, though this can vary based on your circumstances.
Q2: Should I include all my debts?
A: Yes, include all regular debt payments like credit cards, loans, and other mortgages for an accurate calculation.
Q3: Does this include deposit amounts?
A: No, this calculation shows borrowing power only. You'll typically need a deposit (usually 5-20%) on top of this for property purchases.
Q4: How accurate is this for mortgage applications?
A: This provides a rough estimate. Actual mortgage offers will consider credit history, expenses, and lender-specific criteria.
Q5: Can I improve my buying power?
A: Yes, by increasing your income, reducing debts, or improving your credit score to qualify for better multipliers.