Mortgage affordability checks help lenders decide whether you can manage the repayments. They review your current budget and check how it might cope if your finances change.
Each lender applies its own mortgage affordability criteria. Two lenders can review the same details but still reach different decisions. Knowing what mortgage lenders check can help you prepare and avoid delays.
How to prepare for affordability checks
INCOME
Gather proof of income
Collect recent payslips, accounts or tax records so your income can be assessed clearly.
COMMITMENTS
List your regular outgoings
Include loans, credit cards, childcare and other monthly commitments that affect affordability.
FINANCIAL RECORDS
Check your details are accurate
Review your bank statements and credit history against the information in your mortgage application.
REPAYMENTS
Plan for higher repayments
Check whether your budget could still cope if your mortgage payments increased.
How much could you borrow?
Use our affordability calculator for a quick estimate.
What lenders review
A mortgage affordability assessment compares your household income with your regular costs and financial commitments.
Income
Lenders review your employed or self-employed income to understand how much you earn and how stable it is.
Regular spending
They look at monthly commitments such as loans, credit cards, childcare and household bills to assess affordability.
Credit history
Lenders check your credit record for missed payments, defaults and other signs of how you manage borrowing.
Deposit and loan-to-value
Your deposit size affects how much you need to borrow and which mortgage options may be available.
Bank statements
They may review your statements to check spending patterns, regular commitments and whether the application details are accurate.
Stress-tested affordability
Lenders may check whether your budget could still cope if mortgage repayments were higher than the initial rate.
How lenders test repayments
Some lenders use a mortgage stress test. It checks if you could manage the repayments at higher interest rates. The test rate may differ from the rate on your chosen deal.
Your mortgage term also changes the monthly cost. A longer term can lower each payment, but it will usually increase the total interest. If the term runs into retirement, the lender may ask for proof of your expected income.
Worth knowing
The rate used for an affordability stress test may be higher than the rate on your chosen mortgage deal.
When affordability checks take place
At Agreement in Principle
An Agreement in Principle gives you a clearer idea of what you could borrow, but it is not a formal mortgage offer. At this point, lender affordability checks may cover your income, spending, debts and credit history.
At full application
The full check starts when you submit your mortgage application. The lender then reviews your documents and confirms the details.
Set your property budget
Obtain an early indication of what you could borrow.
What if a lender declines you?
One decline does not mean every lender will say no. Before applying again, ask why the lender declined your application. The reason may relate to your income or monthly spending. Existing debts and the requested loan may also affect the decision.
Applying several times may lead to more credit searches, so wait until you understand the issue before trying again.
You may need to borrow less, increase your deposit or change the term. A broker can compare lender criteria and find suitable options.
Worth knowing
One lender declining your application does not mean every lender will say no.
How Muttuo Mortgages can help
Mortgage affordability depends on more than your income. We can help you understand how lenders may assess your finances.
Review your income and monthly commitments
Compare criteria from more than 100 lenders
Help prepare and manage your mortgage application
Talk through your options
Explore how your finances may affect your mortgage options and get support with your application.
Your home may be repossessed if you do not keep up repayments on your mortgage.
