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  • Writer's pictureCharlotte Oakley

Mortgage affordability rules

Updated: Dec 20, 2023

In the UK, mortgage affordability rules are designed to ensure that borrowers can afford to make their mortgage payments, both now and in the future, protecting both the borrower and the lender. The specific rules and requirements vary depending on the lender, but there are some general guidelines that most lenders use.

The primary factors that UK mortgage lenders consider when assessing affordability include:

Income: Lenders will look at your income to determine how much you can afford to borrow. They will typically require proof of your income, such as payslips or tax returns.

Expenses: Lenders will also look at your expenses, such as monthly bills and other debt payments, to ensure that you can afford to make your mortgage payments in addition to your other financial obligations.

Other mortgage affordability rules will include:

Loan-to-Value (LTV) ratio: The LTV ratio is the amount of the loan compared to the value of the property. Lenders may require a lower LTV ratio for borrowers with lower credit scores or other risk factors.

Credit score: Lenders will look at your credit score to assess your creditworthiness and ability to repay the loan. A higher credit score will generally result in a better interest rate and more favourable terms.

Affordability stress tests: Lenders in the UK are required to conduct affordability stress tests to ensure that borrowers can still afford their mortgage payments if interest rates were to rise.

Your home may be repossessed if you do not keep up with your repayments

There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but will be agreed with you before proceeding.

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