How much mortgage can I afford?

"How much mortgage can I afford?" has no single answer and no figure fixed by law. The maximum loan is the lower of two limits: your repayment capacity and the limit the bank applies to the value of the property. The prior savings neither raise nor lower that loan: they are the condition that makes the purchase viable, because they have to cover what the loan does not pay plus the taxes and costs. This guide explains each piece with real formulas — without percentages presented as rules — and ends with a worked example step by step.

Not a fixed figure: the loan is the lower of two limits

The amount the bank can lend you is the lower of two quantities: the one your repayment capacity allows (the payment you can take on) and the one the bank's limit on the value of the property allows. Work out both and keep the lower one: that is your maximum loan.

The prior savings play a separate role. They do not determine the size of the loan, but they do decide whether you can close the purchase: once the loan is set, you need to have saved the rest of the price plus the taxes and costs. As a formula:

Maximum loan = lower (repayment capacity, bank limit)
Savings needed = price + taxes and costs − loan granted

Before granting the loan, moreover, the lender is required by law to assess your creditworthiness (Article 11 of Spain's Law 5/2019): it analyses your income, your expenses, your debts and your job stability, and it cannot grant you the loan based on the value of the property alone. That assessment is what, in practice, sets your real limit.

The two loan limits and the savings condition

The price the bank finances (LTV and valuation)

The lender does not finance on the price you pay, but on the lower of the purchase price and the valuation of the property. The ratio between the loan and that value is called LTV (loan to value). If the valuation comes in below the price, you have to put up the difference yourself: that is why the valuation conditions how much capital you reach.

There is no legal LTV cap for the buyer: each bank sets it according to its risk policy and your profile. This guide does not publish a market percentage, because it changes and depends on the lender; in the example below we use a value purely to illustrate. The valuation, remember, is paid by the client and must be carried out by a firm approved by the Bank of Spain (we cover this in the guide on mortgage costs).

The effort ratio: what share of your income you commit

The second limit is your repayment capacity, measured by the effort ratio: the proportion of your net monthly income that goes on paying debt. The formula, with no recommended percentage, is:

Effort = (mortgage payment + other debt payments) ÷ net monthly income

All your debts with a monthly payment count (consumer loans, car, financing, deferred cards), not just the mortgage. The lower the ratio, the more room you have for the unexpected, for rate rises on a variable mortgage, or for changes in income. The Bank of Spain, in its guidance for bank customers, suggests keeping total debt payments at a contained proportion of income; this is a prudence recommendation, not a legal limit. For a variable mortgage, run the number with a higher payment than the initial one too, in case the reference index rises.

Prior savings: deposit plus taxes and costs

Once the loan is set, the prior savings decide whether you can close the purchase. With own funds you have to cover two things: the deposit (the part of the price the bank does not lend) and the purchase taxes and costs (separate from the mortgage costs). The formula is:

Own funds needed = (price − capital the bank finances) + purchase taxes and costs

The purchase taxes are paid by the buyer and depend on the type of home: on a new build, VAT plus AJD (the stamp duty on the purchase, separate from the mortgage's); on resale, Transfer Tax (ITP). Rates vary by autonomous region. To the taxes, add the notary and registry of the purchase: unless otherwise agreed, Article 1455 of the Spanish Civil Code assigns the granting of the deed to the seller and the first copy to the buyer, so not everything falls automatically on the buyer. Note: these are the costs of buying the home; the costs of setting up the mortgage (the loan notary, the mortgage registry, the agency and the loan's AJD) are borne by the bank since Law 5/2019. Review that split in the guide on mortgage costs so you do not count them twice.

Worked example step by step

Hypothetical figures, only to show the method. They are not real rates or prices:

Here the loan (€160,000) fits within your repayment capacity (an effort ratio of 28%), so the loan is viable; what decides the operation is savings: you can only close it if you have the €60,000 of own funds. If you only had €45,000 saved, you would not reach the price plus the costs even if your effort ratio were comfortable. Swap the numbers for yours and check whether the payment, the bank's limit or the savings stops you.

How to estimate it with the calculator

The quick way is to work backwards: start from the payment that feels comfortable and see what capital comes out. In the mortgage calculator enter a capital, the term and a hypothetical rate, and adjust until the payment fits your effort ratio; that capital is the maximum your repayment capacity supports. Then check that this capital does not exceed what the bank would finance (percentage × value): your loan is the lower of the two. Finally, check that your savings cover the price plus the costs minus that loan. To fine-tune the real cost when comparing offers, the figure that matters is the APR: we explain it in the guide on the difference between the nominal rate and the APR.

Work out your payment and the capital you can take on

Summary

• Maximum loan = lower (repayment capacity, bank limit). There is no legal figure.
• Repayment capacity: effort = (payment + other debts) ÷ net income; the lower, the more room.
• Bank limit (LTV): percentage × the lower of price and valuation; set by the bank, not the law.
• Savings = viability condition, not a loan limit: savings needed = price + costs − loan.
• The percentages in the example (80%, 30–35%) are hypothetical, not entitlements; the lender assesses your creditworthiness (art. 11 LCCI).

Official sources

• Law 5/2019 (LCCI) — art. 11 (assessment of the borrower's creditworthiness) and art. 4 (total cost of the credit) (BOE, consolidated text).
• Spanish Civil Code, art. 1455 — purchase costs: deed to the seller, first copy to the buyer, unless otherwise agreed (BOE).
• Consolidated ITPAJD Act, art. 31 — stamp duty (AJD) on the purchase of a new build (BOE).
• Bank of Spain — Bank Customer Portal: guidance on mortgage lending and the effort ratio (prudence recommendations, not rules).

Notice: this guide and the calculator are for information and educational purposes. They are not financial, tax or legal advice, nor a loan offer. The amounts, rates and percentages in the examples are hypothetical and illustrative; the financing, effort and savings percentages are commercial conventions that each lender sets freely. Always check your terms with the bank (the FEIN sets out the binding offer), the taxes with the regional tax authority and, if in doubt, with an adviser.