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What mortgage can I get for £500 a month?

By Kev TilleyCeMAP

Last Reviewed: 1st April 2021

Are you wondering what mortgage you can get for £500 a month? Mortgage advisors are often asked how much can be borrowed while keeping monthly mortgage repayments on target, however, this question isn’t as simple as it seems!

There are many variables that impact the total amount that can be borrowed from mortgage lenders depending on:

  • An applicant’s personal circumstances.
  • The mortgage product chosen including the term of the mortgage.
  • The interest rate set.
  • Property value.
  • Value of the deposit.

In addition, it is also worth bearing in mind that the overall cost of a mortgage should not only be assessed by the cost of the monthly repayments.

There are also other considerations including the value of other fees such as application fees, arrangement fees, valuation fees, broker fees and transaction fees.

In this guide, we will explore further the variations that impact the total amount that can be borrowed on a mortgage as well as other considerations.

How Much can be Borrowed for £500 Monthly Mortgage Repayments?

As mentioned, there is not a simple answer to how much can be borrowed keeping mortgage payments at £500 per month, due to the varying factors involved.

As a very rough guide, a standard repayment mortgage value of £112,000 taken over a term of 25 years, with an interest rate of 2.5% would set monthly repayments at around £502.45. The monthly repayments could be approximately half the cost of an interest-only mortgage is chosen.

However, such examples must be taken as illustrations only as so many elements would depend on a potential mortgage applicant’s personal circumstances, including employment status and income levels, as well as the property itself and the proposed loan to value rate.

In addition, there will be differences between lenders on how much they are prepared to lend depending on their borrowing criteria.

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Property prices range vastly up and down the country and therefore depending on the desired location, a mortgage value of £112,000 as seen in the above example, may not stretch very far!

In locations with higher value properties, larger deposits would be needed or other methods to keep the costs affordable such as government schemes, should the mortgage applicant be eligible, such as Help to Buy or Share Ownership schemes.

There are various websites that provide mortgage calculators that estimate the value of a mortgage that could be offered without impacting a credit score by applying for a mortgage. While undertaking research into the mortgage market, such calculators may be a useful tool.

Once initial research has been completed, it is strongly advised that the assistance of an Independent mortgage advisor is sought to advise on the most suitable type of mortgage for the applicant’s personal circumstances, and to find the best deals available on the market.

What Factors will Impact the Total Mortgage Offer?

In addition to a mortgage applicant’s employment status and income, mortgage lenders often have further borrowing criteria that assess mortgage applicants on other elements such as their credit scores and age.

Each mortgage lender will have slightly different lending criteria and therefore to obtain an insight into which lenders would be the most appropriate, it is strongly advised to seek advice from an independent mortgage advisor.

What Type of Mortgage Would Keep my Monthly Mortgage Repayments low?

There are a number of ways to keep the monthly mortgage repayments low as follows:

  • Extending the mortgage term – Opting to take a mortgage over a longer-term can reduce the monthly repayments amounts, however, the overall cost of the mortgage will increase due to paying interest for a longer-term.
  • Increasing the level of deposit – By putting down a larger deposit, the loan to value changes and therefore the risks decrease to the lender. It is common for lenders to provide mortgage terms, including interest rate depending on loan to value rate, and therefore should it be possible for an applicant to increase their deposit, they are likely to receive more favourable mortgage terms.
  • Choosing a Variable Interest Mortgage – A standard variable rate mortgage is a type of mortgage product where the interest rate can fluctuate, and therefore the level of repayments can also change. The interest rate is set by the mortgage lender however it is also linked to the Bank of England base rate, which as we have already discussed, is very low at present.

Often mortgage holders are moved onto a standard variable rate product following the end of an introductory offer on a mortgage such as a fixed-rate period.

Fixed-rate mortgages provide consistency to the mortgage holder as the payments remain the same each month, however, overall fixing the mortgage interest rate can be more expensive over the longer term.

  • Opting for an interest-only mortgage – With this option the capital borrowed is not repaid during the mortgage term and therefore an exit strategy is required to repay the capital, however in some circumstances interest only mortgages may be suitable and can keep the monthly costs down significantly.

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What Interest Rates Would Be Applicable for a Mortgage with £500 Monthly Repayments?

The interest rate attributed to a mortgage is not set depending on the value of the monthly repayments. The interest rate on mortgages is often calculated by the criteria set by the lender as well as the Bank of England base interest rate.

Currently, the Bank of England base rate is set at a very low rate of 0.1%, to assist with controlling the economic shock of the coronavirus pandemic. Such low-interest rates are very attractive for mortgage applicants, should they be in a position to proceed with an application.

Summary – What mortgage can I get for £500 a month?

The total value that a mortgage lender will be prepared to lend varies greatly depending on a wide range of factors as discussed within this article, however typically the loan to value rate and personal circumstances are the biggest factor.

Should you wish to discuss the mortgage options that may be available to you, as well as discuss edibility, contact us today to arrange an initial consultation with our independent mortgage advisors.

Call us today on 01925 906 210 or feel free to contact us. One of our advisors will be happy to talk through all of your options with you.

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