Before applying for a mortgage, you need to think about more than just whether you can afford the monthly repayments. Mortgage providers will look at your income and outgoings to see if you can keep up with repayments if interest rates rise or your circumstances change. Learn more about how lenders assess how much you can borrow.
1. Your income
- your basic income
- income from your pension or investments
- income in the form of child maintenance and financial support from ex-spouses
- any other earnings you have – for example, from overtime, commission or bonus payments or a second job or freelance work.
You will need to provide pay slips and bank statements as evidence of your income.
If you’re self-employed you’ll need to provide:
- bank statements
- business accounts
- details of the income tax you’ve paid.
2. Your outgoings
- credit card repayments
- maintenance payments
- insurance – building, contents, travel, pet, life, etc
- any other loans or credit agreements you might have
- bills such as water, gas, electricity, phone, broadband.
The lender might ask for estimates of your living costs such as spending on clothes, basic recreation and childcare.
They might also ask to see some recent bank statements to back up the figures you supply.
3. Future changes that might make an impact
The lender will assess whether you’d be able to pay your mortgage if:
- interest rates increased
- you or your partner lost their job
- you couldn’t work because of illness
- your life changed, such as having a baby or a career break.
It’s important that you also think ahead and plan how you’d meet your payments.
For example, you can help to protect yourself against unexpected drops in income by building up savings when you can.
Try to make sure it contains enough for three months’ outgoings, including your mortgage payments.