Mortgage Affordability Assessment

When you are planning to buy a property with a mortgage, then an affordability assessment becomes a crucial step in the process.


What is Mortgage Affordability and How is it Calculated?

Mortgage affordability is the process of demonstrating at application stage the applicants’ capability of repaying a mortgage monthly. The affordability calculation considers aspects such as the interest rate to be charged, potential interest rate increases (stress-test), annual incomes and monthly outgoings, and this then enables lenders to decide whether applicants can afford the mortgage they are after both now and should rates increase within defined parameters within the first five years.


Annual Incomes and Monthly Outgoings for a Mortgage

In addition to basic annual income from employment or self-employment some lenders can also include:

  • income from pensions and land and property (buy to let)
  • income in the form of benefits, child maintenance and financial support from ex-spouses/partners
  • any other earnings – to include foster caring, second jobs, or overtime, commission and bonus payments.

Evidence of any income in the form of P60, pay slips and an employer’s reference may be obtained for employed applicants, whereas self-employed applicants may need to provide two or three years accounts and tax returns. Bank statements are usually required as well.

As for monthly outgoings, your lender may verify your expenditure against your bank statements to ensure the calculator is as accurate as possible. Where new expenditure is unknown such as energy bills in a new home then the lender may use external data such as average UK consumer data provided by the Office of National Statistics.


How Much Can Be Borrowed For A Mortgage?

At esbs we allow mortgage applicants to borrow 4.49 times their joint incomes as standard with a higher multiple sometimes possible. This is known as the loan-to-income ratio. As well as the loan-to-income ratio being met, the applicants also need to pass the affordability calculation as mentioned above. The mortgage stress test also forms part of the affordability calculation.


What Is The Mortgage Stress Test?

The mortgage stress test demonstrates how well-prepared an applicant is, based on their current circumstances, to continue to repay their mortgage in the event of the interest rate being charged increasing during the first five years by an amount, typically, two or three percent.


When Is a Mortgage Application Declined?

Even though each lender has different criteria, the most common reasons for declining a mortgage are the following:

  • Not enough income to cover the loan-to-income ratio, or to pass the affordability calculation
  • Unacceptable type of income
  • Insufficient deposit
  • Bad credit history
  • Unacceptable property type, valuation or location

How To Apply

If you are planning to buy a property, or want to switch lenders on your current property, and thinking of applying for a mortgage, contact us at esbs today.

For more details please contact one of our Mortgage Team, who provide a professional and friendly service.  The Team can be reached on 01455 844422 or you can click on contact us.

To apply for a mortgage you must be aged 18 or over. All applications will be subject to valuation, status and the Society’s Mortgage Conditions. We offer an advised sales process where we ask questions regarding your mortgage requirements/needs and your income and expenditure to ensure that we recommend the most suitable product for you. We will accept applications from applicants purchasing or remortgaging in England or Wales. For further information, or for a European Standardised Information Sheet (ESIS), please call on 01455 844422 and speak to one of our Mortgage Team, visit one of our branches, or email



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