The mortgage process involves an essential part of determining the amount you can borrow. An affordability assessment is one of the crucial steps required to secure yourself a mortgage. It is designed to ensure that mortgage repayments can be made now and, in the future, if the interest rates rise. Affordability assessments are done to protect both yourself and the lender since you are engaging in a long-term commitment. An affordability check is a review of how much you earn and how much you spend as well as other regular payments. This can be daunting and thus you should consider getting the services of a professional such as a mortgage adviser.
What are your incomings?
This is the first step of the affordability assessment and it involves the lender checking how much you earn annually. For those who are employed, it means your last three payslips, your recent P60 and your last recent three bank statements. If you have any other source of income you are required to provide copies of proof. For those who are self-employed, they are required to facilitate three years of audited accounts from a chartered accountant, the last three months’ bank statements for your business and personal accountants. Also, tax computation from a chartered accountant is required, this scrutiny is to ensure you have a solid track record hence you will make your monthly repayments.
What are your outgoings?
The lender will assess your regular and anticipated outgoings annually to see how much you can provide for mortgage payments. Your outgoings include bills, debts, travel costs, insurances, leisure, groceries, council tax and childcare or maintenance costs. Car finance agreements and personal loans are also reviewed and the outstanding balances you may have. The aim of determining your expenses by the lender is to allow them to find out if your monthly mortgage repayment will result in financial hardship.
Stress-testing your finances
This is finding out if you will still be able to finance your mortgage in the case of any circumstances or an increase in interest rates. Losing a job, life-changing events or prevention of working because of an illness are included in stress testing. This can deem time-consuming and tasking but they have been designed to ensure you can make your payments.
What to do to improve the outcome of your affordability check
To improve your chances of securing a mortgage and convince a mortgage adviser are few adjustments. They include:
Knowing your budget
Thoroughly know your budget so that you can convince the lender you can make the mortgage repayments. Review your bank statements and make a list of outgoings.
Documenting everything you spend on
Keep a detailed record of everything you spend on and this will give you an accurate estimate of your costs. The detailed record can make a lender consider your application.
Adjusting where necessary
Reduce non-essential spending before your make your application so that your bank statements will not be evidence of your spending.
The benefits of using a mortgage broker
They do the heavy lifting for you
A mortgage broker will do the hard work for you such as they will explore the market searching for lenders and will look into key factors that can affect the entire cost of your mortgage.
They are on your side
An independent broker will have your best interest at heart. Since they work for you and not the lender, they will make more products accessible to you. They will give you various lenders to choose from and unbiased advice which results in a better mortgage for you.
A mortgage broker protects you
Your broker must protect you at all costs. When dealing with a broker you are insulated against harm and in case of any complaints you may seek compensation.
A mortgage broker is qualified and knowledgeable
A mortgage broker must be qualified to provide you with their services. Experienced brokers have contacts who will help make your mortgage application smooth and efficient. Brokers know what exactly the application process entails and will deliver your application without any delays.
Get in contact with an independent mortgage adviser to start an efficient, smooth and fast mortgage application.