What is mortgage affordability?

Stuart Bowman

5-minute read

Last updated: 18th May 2020

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Mortgage affordability basically means can you repay the money the bank lends you.

To answer that question, banks run a series of mortgage affordability checks on you and your finances when you apply for a mortgage.

Mortgage affordability works in tandem with mortgage eligibility and is supported by mortgage underwriting, when lenders look at your finances in more detail.

Mortgage affordability rule of thumb

Mortgage affordability works refers to two main tests.

1) What's the maximum a bank thinks it can afford to lend you?

Most people think this is some multiple of your annual salary, and in part they are right. It's a good rule of thumb, but it's not 100% accurate.

Some lenders will offer you a maximum loan of up to 4x your gross salary while others will go to 6x or beyond.

Mortgage affordability salary multiple example

Of course, this is as a sole applicant. If you applied for a joint mortgage, both applicants' salaries would be taken into consideration.

As mentioned, this is general guidance and in reality every application is assessed on its own merit. As well as your income, the lender would consider your age, your property, your deposit, and your finances… which brings us on to the second bit of mortgage affordability.

2) Can you afford the mortgage repayments?

At this point the bank wants to look through your finances and see for themselves that you'll have enough money every month to afford the repayment, which could be an extra £1,000+ added to your outgoings.

As you apply, your lender will ask you about what levels of unsecured debt you have, and want to know details of any regular costs such as childcare, council tax and car finance.

We take all this into consideration when you create a Mojo account and then we can show you what rates lenders will offer you right now, based on your current affordability scores.

We can even offer you a few tips to help boost that score before you're ready to apply.

Once you're ready to apply, your lender will want to see the last 3 months' worth of bank statements, so if you can, it's a good idea to cut down on any unnecessary spending and show that you have enough disposable income to afford the repayments.

But it's not quite as simple as that either.

Under changes that came into effect in 2014, lenders now have to check that you can still afford to make the repayments if interest rates shoot up 6%. When you consider that mortgage rates are currently at an historic low, that's quite a considerable buffer you need to prove you can afford.

How do I pass mortgage affordability checks and tests?

Passing mortgage affordability checks will help you go a long way to getting a mortgage offer.

If you've been saving up for a deposit for months or years while paying rent there's a good chance, you'll have enough new space in your salary to cover the repayments, but if you've been living from payday to payday, you may need to prepare your finances ahead of your application.

If you know you should be able to afford a mortgage take a long hard look at your finances. Actually see where you spend money rather than where you think you spend money. The best way to do that is to go through your past 3 months' worth of bank statements – exactly like a mortgage underwriter would.

More modern banking apps such as Monzo can also help you do this.

You even use the Mojo MortgageCoach. After seeing your MortgageScore, which shows you how likely you are to get approved for a mortgage, which can give you some tips based on your current financial situations to improve those chances or help you get the best rates.

However you decide to evaluate your spending, the next step is to see where you can reduce your outgoings slightly.

Remember not all outgoings are equal in the eyes of the lender. Any money going to an ISA should be fine, but online shopping, subscriptions or gambling transactions may come under more scrutiny – especially if you are close to the affordability threshold.

Of course, these will help improve your chances of passing affordability checks, but more importantly they'll help you develop the good spending habits you'll need to always make your repayments.

What happens if you fail mortgage affordability checks?

If a lender doesn't think you can afford a mortgage they will most likely decline your application.

A declined application will stay on your credit record and could hamper your chances of getting approved with another lender.

Don't worry, with Mojo as your broker we'll help you avoid as many affordability hurdles as we can. We'll also point out the deals and lenders with which you and your personal set of circumstances have the best chance of being accepted.

Mortgage affordability calculators

Mortgage affordability calculators are a popular tool that give you a rough figure of what you can afford and some can even tell you if you can afford to make the repayments.

However, these are all based on generic calculations and as we have seen mortgage affordability is different in every case. That's why we created the Mojo Mortgage Matcher and MortgageScore.

Just enter your details and see in real time exactly what mortgages and rates you can get. It's all free and takes a few minutes.

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