How much mortgage can I afford?

Most lenders apply two tests: an income multiple (typically 4–5× your annual income) and an affordability stress test at a higher interest rate. As a rule of thumb, your monthly mortgage payment should not exceed 28–35% of your gross monthly income.

What is LTV and why does it matter?

Loan-to-Value (LTV) is your mortgage amount as a percentage of the property value. Below 80% LTV typically unlocks significantly lower interest rates. Above 90% LTV usually requires mortgage insurance (PMI in the US, LMI in Australia) which adds to your monthly cost.

What is a mortgage stress test?

Lenders test whether you could still afford repayments if interest rates rose by 3 percentage points. This is mandatory in the UK and Canada. A larger deposit or lower loan amount helps you pass the stress test and borrow more.

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How lenders decide what you can borrow

Most lenders use two tests: an income multiple (typically 4–5× salary) and an affordability stress test at a higher rate (usually current rate + 3%). The lower of the two limits what you can borrow.

A larger deposit doesn't increase your borrowing limit — but it does reduce your LTV ratio, which typically unlocks lower interest rates and avoids mortgage insurance requirements.

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