What are mortgage affordability checks?

In a nutshell, the affordability checks are designed to ensure that you can afford the mortgage repayments – both now and when interest rates rise. You'll be expected to provide evidence of your income and everything you spend, including essential payments and non-essential outgoings, covering everything from utilities, council tax and rent/mortgage payments to leisure costs, entertainment and holidays.

Providing a simple layout of money coming in versus money going out won't be enough, and nor will it be sufficient to try and convince the lender that you can afford the payments based on your salary – it's all about evidence, not income multiples, with the whole point being that you need to prove you're not overreaching yourself financially.

1. Know your budget. If you can't prove to yourself that you can afford the repayments how will you prove it to a lender? So, if you take a blasé attitude and have no idea about proper money management it's time to make a change. Take a close look at your bank statement so you know exactly how much money you've got coming in (as well as how much goes on the likes of pension contributions or student loans), and make a list of every regular, essential payment that will leave your account without you thinking about it.
2. Keep a detailed record of everything you spend. And this means absolutely everything. Essential payments are a given, but you'll need to include the likes of holidays, meals out, money spent on housekeeping (including food bills and any cleaning services), TV subscriptions, credit cards and travel costs, and any regular savings or private pension contributions you make will need to be recorded too. It might be a good idea to keep a list of every single outlay for a month or two, to get a better idea of your outgoings and a more accurate estimation of monthly costs. You'll be able to see how much you've got left over at the end of the month and will truly see where all your money goes. That way you can see if you can make any cutbacks and crucially whether you'll have enough to cope with any rise in mortgage repayments.
3. Adjust where necessary. If you live from paycheque to paycheque without much leeway, you'll need to start making some changes. When mortgage rates rise your monthly outgoings could significantly increase, so if you wouldn't be able to cover that comfortably, you won't get that mortgage. You'll want to look at ways you could rein in non-essential spending – such as cutting back on meals out, foregoing that Netflix subscription, paying off those credit cards or having fewer holidays – and you'll need to start doing that before you make the application, as lenders could well use bank statements as evidence of your spending.

Being unable to prove that you can afford the repayments will mean you'll be eligible for a smaller mortgage than you'd like. However, being rejected outright will have bigger consequences and could make it more difficult to be accepted with a different lender in the future.

So, if you're already struggling to make ends meet, you'll want to focus on making the necessary improvements. Don’t forget to consider your credit rating too. At the very least you'll need to start scrutinising your budget and keeping records. While it may take longer to prepare sufficiently it’ll be well worth it in the long run.

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.

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