Mortgage affordability test

Are you ready to take it?

It pays to prepare for an affordability check that decides if you can repay your mortgage

‘Can you afford to repay a mortgage?’ It’s a test that hundreds of thousands of would-be home buyers have to take every year.

Pass and you’re a big step closer to buying a home; fall short and you could end up having to think again.

The test – also called an affordability check – is designed to make sure you can meet your mortgage payments every month. It also aims to see how you might cope with a big setback for your finances, such as losing your job.

Think of it as a forensic look at all your personal finances, to check for proof you can afford the home loan you want.

Here’s what to expect, how to best prepare, and the steps to take if you don’t pass.

What is a mortgage affordability test?

In a nutshell, it’s simply a test – run by a lender as part of your application – to see if you can afford to repay your mortgage every month. 

It looks for evidence you’d be able to cover your monthly mortgage as part of your everyday spending, as well as meet other bills, debt payments and regular household expenses.

At the same time, it’ll also ‘stress test’ your personal finances to see how you’d cope in drastic circumstances. 

For example, could you carry on paying if interest rates rose, you lost your job, fell severely ill or started a family? 

You’ll take it as part of your formal application for a mortgage. 

Be aware, though, that an affordability check is very different from an Agreement in Principle (AiP) that you may already have. 

An AiP only gives you an idea of how much you may be able to borrow – it does not involve a detailed assessment of your personal finances. 

Do I need to prepare for the test?

Yes. You’ll be asked for plenty of details about your personal finances – so prepare for a long list of questions.

Among others, you’ll have to provide figures for your salary, credit card statements, daily spending, mobile phone bills, TV and music subscriptions, gas and electricity payments, and supermarket shopping habits.

There are no simple shortcuts for this, unfortunately.

So whether you’re a spreadsheet whiz or prefer to grab a pen and paper, set aside a good chunk of time to dig out all the info. And don’t worry if this feels daunting – start as early as you can ahead of the application, and go at your own pace. The list below isn’t exhaustive, as there may well be other categories or requests, but a lender will typically ask you for details of:

  • Your employment status. Are you employed, self-employed, full or part time? You must then say how much you earn before tax
  • Any extra income you have. For example, do you already receive a pension, investment dividends, benefits, child support, freelance work?  
  • Your household spending each month. Typically, this covers your council tax and bills for gas and electricity, water, broadband, loan or credit cards, car payments, childcare costs (and school fees if relevant) and insurance 
  • Other everyday expenses. This covers your regular personal spending such as on clothing, food, holidays, leisure and entertainment, TV subscriptions, gym memberships

What kind of evidence will I have to show?

You’ll usually need to send copies of all relevant docs by email.

For proof of your income, that means your most recent payslips (up to three months) and possibly your P60 annual tax statement. If needed, ask your employer or HMRC for this.

Self-employed? Lenders ask for different information, but you’ll likely need three years of audited accounts (signed off by an accountant), SA302 certificates or tax year overviews from HMRC. 

For your household (and personal) spending, it’s bank statements from the last three months or so.

How long does the affordability check take? 

There’s no one answer to this, as it depends on your lender. As a rule of thumb, the questions themselves can last about an hour or so, either over the phone, face to face or on a video call.  

Expect a lot of to-ing and fro-ing with emails and documents afterwards.

Once it has all your details, a lender can often take a number of weeks to work through your numbers and come up with a decision. (This is often largely due to the admin involved, demand from other customers, and any backlogs).

Is there anything to prepare for the affordability stress test?

No. Your prospective lender will simply run its checks on all your info and come to a decision. 

The sort of scenarios it may consider include

  • Could you cope with a rise in your mortgage interest rate? 
  • What if you lost your job or suffered a serious illness that meant you couldn’t work?
  • Could you afford to cover your mortgage if you start a family, and you or your partner is off on maternity or paternity leave?
  • If you’re planning a career break, how would you make your payments?

The idea is to see how your finances could cope with such pressure on your personal finances.

For instance, you may be asked ‘if you couldn’t work for three months, how would you pay?’

You might also be quizzed about savings or any other support such as an income protection or critical illness policy. 

How can I boost my chances of passing?

Put bluntly, the healthier your personal finances, the greater your chance of success. 

If you’re on top of all your household spending, have built up savings and can show a strong track record of carefully looking after credit such as a card or personal loan, you should be in a strong position.

As a very rough indicator, ask yourself the below if you’re not sure how you’d measure up

  • Did I stay within budget?
  • Did I pay all my bills on time? 
  • Is every credit account – cards, loans, car finance etc – up to date? 
  • Could I cut back on any everyday spending? 
  • Is there anywhere I could make savings? 

If you find there’s room for improvement on any of these, take time to address it well in advance of your mortgage application. 

Struggling to meet bills and credit payments? Until you’re on top of these, you’ll likely find it difficult to get far in your application. To help put you in a better position, we’ve plenty of guides on how you can sort out the financial basics.

If it’s more a case of cutting back, you can try these money saving tips and hacks for tips and tricks galore. 

Keeping your credit score in good shape can also give you a huge boost, as it’ll provide proof you can look after different types of credit and payments.

It’ll also help your application if you pay down as much debt as possible before you start. 

Try the government’s MoneyHelper service for a good place to start.

I passed the test. What happens next?

You can now carry on full steam ahead with a formal mortgage offer to buy your home – congrats! It’s usually valid for six months so even if you run into any bumps in the road – e.g. a seller pulls out – it may still be able to stand for other homes you might then look at.

What happens if I fail the affordability check?

It may well feel like a huge setback but it doesn’t necessarily mean you won’t get a mortgage. 

Not passing an affordability check is very different to not being able to afford a mortgage. 

There are often clear reasons for the refusal, a number of which you can take steps to fix.

For example, the lender may have decided you have too much debt compared to your overall income, and your credit history is patchy. 

Or it may tell you that you’re spending too much each month, and that you don’t have enough left to be able to manage a mortgage on top.

In these cases, you can spend time sorting out the issues and boosting your credit score before trying another application. 

Alternatively, at the point of rejection, you could find the lender is instead prepared to offer you a smaller mortgage.

With a new lower budget for buying a home, you may well need to rethink your choice of location and type of property.  

As a general rule, if the reason for your rejection is not clear, take time to talk to the lender you’ve been working with - and see if there’s anything you can do to improve your result with them. 

One thing to avoid is an immediate application with a different lender. 

This can be interpreted as a sign of desperation, and potentially damage your credit history. 

Instead, if you’d rather take a step back to consider your options, it could be worth chatting to a mortgage broker.

These specialists can sift through all your information and then search a wide range of possible mortgage providers for you. 

This can be particularly helpful if you have a poor or incomplete credit history, if you’re self-employed but with sporadic periods of work, or if you haven’t always lived in the UK.  

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