Breaking Mortgage Calculator
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Reviewed by Calculator Editorial Team
A breaking mortgage calculator helps you determine the amount you can borrow when breaking into a new property. This tool considers your income, existing debts, and other financial factors to provide an estimate of your borrowing capacity.
What is a Breaking Mortgage?
A breaking mortgage is a type of mortgage that allows you to break into a new property while still paying off your existing mortgage. This can be useful if you need to move to a larger or more suitable home while keeping your current property.
The breaking mortgage amount is typically calculated based on your income, existing debts, and the value of your current property. Lenders will assess your ability to repay both the new mortgage and your existing mortgage payments.
Key Considerations
When considering a breaking mortgage, it's important to factor in:
- Your current mortgage balance and interest rate
- Your income and other financial commitments
- The value of your current property
- The cost of the new property
- Any additional expenses associated with moving
How to Calculate Breaking Mortgage
The calculation for a breaking mortgage involves several factors. The most common method is to use the income multiple approach, where the lender looks at your income and multiplies it by a certain factor to determine your borrowing capacity.
Breaking Mortgage Formula
Breaking Mortgage Amount = (Annual Income × Income Multiple) - Existing Debts - Current Mortgage Payment
The income multiple is typically between 3.5 and 4.5, depending on the lender's assessment of your financial situation. The exact multiple may vary based on your credit score, employment stability, and other factors.
Factors Affecting Breaking Mortgage
Several factors can influence the amount you can borrow through a breaking mortgage:
- Income: Higher income generally allows for larger borrowing amounts.
- Existing Debts: High levels of credit card debt or other loans can reduce your borrowing capacity.
- Current Mortgage Payment: The amount you currently pay on your existing mortgage will be factored into your new borrowing capacity.
- Credit Score: A higher credit score can lead to better terms and higher borrowing amounts.
- Employment Stability: Lenders prefer applicants with stable employment histories.
Important Note
This calculator provides an estimate based on general guidelines. Actual borrowing capacity may vary depending on your specific financial situation and the lender's assessment.
Example Calculation
Let's look at an example to illustrate how the breaking mortgage calculation works:
Example Scenario
Annual Income: $60,000
Income Multiple: 4.0
Existing Debts: $5,000
Current Mortgage Payment: $1,200
Breaking Mortgage Amount = ($60,000 × 4.0) - $5,000 - $1,200 = $233,000
In this example, the borrower's estimated breaking mortgage amount is $233,000. This means they could potentially borrow up to $233,000 for a new property while still paying off their existing mortgage.
Frequently Asked Questions
What is the difference between a breaking mortgage and a remortgage?
A breaking mortgage allows you to move into a new property while still paying off your existing mortgage. A remortgage, on the other hand, involves switching your existing mortgage to a new one, typically with different terms and conditions.
Can I get a breaking mortgage with bad credit?
It can be challenging to get a breaking mortgage with bad credit, as lenders will typically require a good credit score to assess your ability to repay both mortgages. However, some specialist lenders may consider applications from borrowers with less than perfect credit.
How long does it take to get approved for a breaking mortgage?
The approval process for a breaking mortgage can vary depending on the lender and your individual circumstances. It typically takes between 4 to 8 weeks, but some applications may be processed more quickly.
Are there any fees associated with a breaking mortgage?
Yes, there are usually fees associated with a breaking mortgage, including arrangement fees, valuation fees, and legal fees. These fees can vary depending on the lender and the terms of the mortgage.