Mortgage Affordability Checks

Confused about what’s involved with a mortgage affordability check? Here’s how these assessments work and what you can do to give your application a boost.

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Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Jon Nixon

Reviewer: Jon Nixon

Director of Distribution

Updated: February 23, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

February 23, 2024

When you’re planning to buy a property, mortgage affordability plays a crucial role. But, what do lenders check in their assessment when calculating what they think you can afford?

This guide covers all the essential details you should know about mortgage affordability checks. You’ll find out what plays a part in the calculations, the different criteria involved, and tips for getting the best home loan.

Keep on reading for all the details or click on a link below to jump straight to a section…

What is a mortgage affordability check?

A mortgage affordability check considers factors like your income, expenses, and existing debt. Lenders use a loan-to-income ratio, comparing your mortgage amount to your gross annual income. They also assess your credit history and conduct stress tests to ensure you can handle potential interest rate increases.

An important point to keep in mind is that a mortgage affordability check is not the same as a credit review. How much you can afford to borrow and your credit history are two separate areas of the process. Your credit scores will play a role, but it’s not information that tells lenders anything conclusive about affordability.

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How do mortgage lenders work out affordability?

Each lender will have its own way of calculating mortgage affordability. The most basic system is to use an income multiple as a rule of thumb. The reason income multiples are used is that looking at your mortgage to earnings ratio gives lenders a straightforward window into what you could be able to afford.

This can give you a good ballpark figure to work with. But, the multiples used can vary quite a lot. The average used is 4-4.5x your salary, but some will only offer 3 times your income. There are also lenders who will use bigger income multiples of 5x income, and in a few cases – 6 times salary.

However, your gross salary doesn’t tell the full story. And so, affordability assessments often involve checks into your major outgoings to look at your disposable income. This allows lenders to get a more complete picture of what you can afford with your mortgage.

Can you include additional income on your application?

Yes, this is definitely possible. If you earn commission, bonuses, or overtime – some lenders will allow this in their total assessment. Certain lenders will also permit income from extra freelance work you do. Or, income you receive from investments (including other properties).

So, if your income does come from multiple sources, it’s worth dealing with a lender who will take all of it into account when looking at your application.

How eligibility criteria can affect your application

Affordability assessments are carried out by lenders as a basis for them to see how much you may be able to borrow, but they are not the be-all and end-all when it comes to your mortgage application being approved.

Each lender will have their own internal eligibility criteria which could indirectly affect your chances of securing the mortgage you need.

The key factors would include:

  • Type of employment: it’s not just how much you earn, but where that money comes from. Whether you’re an employee or self-employed will affect how your application is assessed. Some lenders will have tighter criteria or alternative rules if you run your own business.
  • Source of income: some lenders will have strict definitions about what they can accept as income. So, if you earn commission, bonuses, overtime, or any other income type – it’s worth dealing with a lender who will take all this into account. This is a great way to stretch what you can afford without needing to access a higher salary multiple.
  • Credit scores: this gives lenders a brief overview of your financial history. It’s worth downloading all your credit reports before you start the application process. Doing this will allow you to spot any errors or make improvements ahead of time. A poor credit record could indirectly affect how much you can borrow in the sense that it will limit the number of lenders willing to consider your application.
  • Outgoings: lenders will look at your typical monthly outgoings to spot patterns and make sure there’s no cause for concern. There will be a thorough review of your bank statements to see how much you spend, and what you spend money on. If you spend as much as you earn, lenders will be able to see and potentially let you borrow less.

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What outgoings are considered when applying for a mortgage?

Each lender will be different. But there are some specific monthly outgoings most will check when carrying out an affordability assessment. This will likely include the areas below.

Debt-to-income ratio (DTI)

This is an important piece of the process because it’s a way for lenders to measure your income against your current debts.

The calculation works by dividing the total cost of your monthly debts by your gross monthly income. So, you can work this out for yourself. Common monthly debt payments include the likes of:

  • Credit cards or store cards.
  • Personal loans.
  • Student loan repayments.
  • Rent or existing mortgage payments.
  • Child support.
  • Car finance.

When you work out your debt-to-income ratio (DTI) as a percentage, ideally it’s best to be around 20-30% for the top deals. But, some lenders will still offer competitive rates with a higher DTI. However, if your DTI is over 50%, it may be worth clearing some debt first.

You can see how this works for you on our calculator below:

Debt to Income Ratio Calculator

This calculator allows you to calculate your debt-to-income ratio and will indicate whether mortgage lenders will classify it as low, medium, or high risk.

The amount you get paid each month, after any taxes or contributions have been deducted
Be sure to include all of your fixed outgoings, as well as any loans or credit card payments you make

Your Results:

Your Debt to Income Ratio is %

Good news! Most mortgage lenders will class your debt-to-income ratio as low. You’re unlikely to be declined for a mortgage based on your outgoings, but speaking to a mortgage broker before applying is still recommended as they can improve your chances of getting the best deal.

Most mortgage lenders will class your debt-to-income ratio as moderate, which means some of them might view your application with caution. Some lenders are much more strict than others when it comes to affordability and debt, so it’s important for you to find a lender who’s more lenient. You should speak to a mortgage broker before you apply to ensure you’re matched with a lender whose criteria you fit.

Most mortgage lenders will class your debt-to-income ratio as high. But that’s where we can help! With so much of your monthly income going towards debt repayments, you could struggle to get approved for a mortgage without the help of a mortgage broker. We can help you find a lender who’s more lenient on debt and affordability, and could still secure a mortgage approval.

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Regular monthly costs

This isn’t a complete list. But, examples of other monthly outgoings that are considered can include regular payments or existing direct debits for things like:

  • Mobile phone contracts and utility bills.
  • Streaming services.
  • Gym memberships.
  • Regular investment contributions.

This will all be looked into as part of the mortgage affordability checks. So, it’s worth having a run through all your typical outgoings on a practice questionnaire before starting the application process.

Do affordability checks cover gambling?

Yes, and this can be a red flag for lenders. Although online gambling with sports has become popular in recent years, be wary that it can negatively impact your assessment. It’s worth cutting down or stopping altogether before you start applying for mortgages. Or, get your broker to introduce you to lenders willing to accept applications from occasional gamblers.

Mortgage affordability calculator

Our affordability calculator can tell you how much you can potentially borrow from a mortgage lender.

Simply enter your total household income below and our calculator will do the rest.

Mortgage Affordability Calculator

Use this calculator to determine how much you could potentially borrow for a mortgage, based on the typical salary multiples used by most UK lenders.

Input full salaries for all applicants

Your Results:

You could borrow up to 

Most lenders would consider letting you borrow

This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.

Some lenders would consider letting you borrow

This is based on 5 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.

A minority of lenders would consider letting you borrow

This is based on 6 times your household income, a salary multiple you will struggle to get without a broker. Six-times salary mortgages are usually only available under very specific circumstances.

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Why a lender might decline your mortgage application

There can be lots of reasons why this might happen. Because each lender often uses different criteria any one single area could let you down.

Here are some of the common ways your mortgage application may be declined based on affordability: 

  • Not enough income.
  • Type of income isn’t accepted by the lender.
  • Minimal disposable income after your outgoings are taken care of.
  • Too much regular debt or a high DTI.
  • You have bad credit. – this could indirectly affect your application as it will restrict the number of lenders who will consider it

Using expert advice can prevent any further unnecessary rejections or marks on your credit file. A knowledgeable broker will introduce you to the most suitable lender to reapply with, giving you a better chance of approval. Just make an enquiry and we’ll introduce you for free.

How affordability checks differ between types of mortgages

The type of mortgage you’re applying for can change the way that affordability is calculated.

Here are a few scenarios that involve different checks and assessments:

  • Buy-to-let (BTL): with a buy-to-let mortgage, your income isn’t as important. Because this is an investment, the expected rental income will be more relevant. Usually, this needs to be 25-30% higher than your mortgage payment. You may also need to be able to afford to put down a larger deposit for a BTL property.
  • Commercial mortgages: for a commercial mortgage, there will be no strict blueprint as each loan will be set up on a case-by-case basis. This makes it harder to prepare your application without the support of an expert broker. Because, each lender will look for different things when it comes to affordability.
  • Bridging finance: for bridging loans, lenders will want you to use an asset as security rather than looking at how much you earn. The value of the asset you’re using is much more pivotal in the affordability assessment as is the exit strategy you plan to use.

Affordability checks if you’re self-employed

For those who are self-employed or own a business, your assessment and checks will be structured slightly differently.

It’s not always straightforward, but here are some areas that are more likely to play a key role in calculations:

  • Whether you’re a sole trader, company director, or contractor.
  • 2 to 3 years of trading history and accounts.
  • Your share of net profit or dividends.
  • How much you contribute to your pension or SIPP.
  • Business and personal expenses.

Remortgage affordability checks

There are some alternative areas of importance if you’re remortgaging. Whether that’s with your existing lender or switching to a new one.

Along with looking at the normal criteria outlined above, when you plan to remortgage, lenders will also check:

  • Interest rate stress tests.
  • Property valuation for your home.
  • Your ability to cover the fees involved (application, valuation, and solicitor’s fees).
  • Any changes to your credit scores.
  • Whether there is an early repayment charge for your existing mortgage.

Speak to an expert broker to prepare you for affordability checks

The best way to make sure you’re properly prepared for mortgage affordability checks is with the support of a skilled advisor. An expert broker can help structure your application in an attractive way. And, introduce you to the right lenders from day one.

We offer a free, broker-matching service. This means we’ll quickly assess your needs and then pair you up with a knowledgeable broker we work with. One who can find you the right mortgage that meets your affordability requirements.

Just call 0808 189 2301 or make an enquiry. We’ll set up a free, no obligation chat between you and an experienced broker today.

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This will depend on the lender you approach. Usually, at least 3 months. But sometimes it’s based on the length of your probationary period, which can be longer than this. Each situation is different, so it’s worth exploring your options with a broker no matter how long you’ve been employed.

No, it will depend on what type of mortgage you’re applying for. The assessment checks can vary, and affordability plays a big role, but it will be calculated in various ways. It will depend largely on what kind of mortgage you want and which lender you speak to.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

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Pete Mugleston

Mortgage Advisor, MD

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