More importantly, how much can you afford to borrow? Before setting your hopes on the property of your dreams, it’s key to think about the levels of monthly mortgage repayments you’d be comfortable with and how they fit within your budget. A mortgage lender will have their own method to assess what you can afford now and if your circumstances were to change or if mortgage rates were to increase.
These calculations will be made by taking into account any income that you have and any personal and living expenses, this will enable them to do an affordability assessment. The lender will also look at possible effects on your ability to pay the mortgage e.g. any interest rate rises, redundancy, having a baby, taking unpaid leave for an extended holiday, illness etc. The lender needs to be sure that you will still be able to pay your mortgage in changing circumstances. The key to this is to make sure that you are happy with the monthly payments, at the end of the day, you are the one borrowing the money.
What will the lender want to know?
The lender will require details about your income, this can include your basic income, income from pensions or investments, child maintenance payments received, any overtime, commissions and bonuses, additional income from second jobs, state benefits etc. You will have to provide proof of all of these incomes for them to be taken into account. This evidence can be in the form of pay slips or bank statements. If you are self employed you’ll need to provide a bit more detail, along with bank statements, you’ll need to provide your confirmation of your income and details of your income tax payments.
Lenders will also require details of any outgoings and this will include any loans, credit cards and other credit agreements you might have, utility bills, living costs including childcare, gym memberships, food and clothing costs and also maintenance payments. The lender may ask to see recent bank statements as back up. It is also useful if you can provide details of any savings, this proves that you are thinking ahead and have the ability to make payments should an unexpected change happen in your life. The mortgage lender will also want to know details of your home addresses for a minimum of 3 years and also employment records for the last 12 months.
Please note the content of this blog is for guidance purposes only and does not constitute for professional advice. Contact us today at firstname.lastname@example.org or by calling 01473 216950.