While formal affordability and stress tests have been axed as of August 2022, lenders do still need to check that you can afford the monthly repayments, so they will assess your finances during your application.
Affordability tests ensure that your mortgage fits snugly into your financial life and budget, ideally preventing any unexpected hurdles along the way. Let’s explore why affordability tests matter, and how they keep your mortgage experience as smooth as possible.
Understanding affordability tests
Simply put, an affordability test is your lender taking a look at your financial puzzle and ensuring it all fits together. They want to understand your income, your monthly expenses, any outstanding debts, and other financial commitments you have. This matters because it shows them how much you can afford each month, hence the name!
Shielding you from overcommitting
No one wants to bite off more than they can chew, especially when it comes to a mortgage. Affordability tests aim to mitigate this, ensuring you don’t end up with a loan that becomes overwhelming. By keeping your monthly mortgage payments in line with your budget, it will be easier to focus on the homeownership journey.
While we're on the subject of the homeownership journey, did you know we have an app designed to help you get on the property ladder?
Download the Mortgage Advice Bureau app
Our app is a digital mortgage coach designed to help you save up, plan, and track your home buying journey – whether you’re buying your first home, or just fancy a move.
We’ll guide you through step by step to ensure you always know what’s coming up next.
Playing by the rules
Affordability tests aren’t something that lenders cooked up on their own - they’re an essential part of the mortgage process in the UK. The Financial Conduct Authority (FCA) makes sure lenders follow these rules, putting you in good hands. So, when a lender mentions affordability tests, it shows they're playing by the book and have your best interests in mind.
A win-win for all
Affordability tests aren't just about protecting you; they benefit lenders too! A mortgage that's tailored to your financial situation means you're more likely to make timely payments. That's also a win for lenders, as it reduces the risk of defaults and keeps the lending process running smoothly.
Affordability tests are your safety net
Remember, affordability tests ensure you're not stretching beyond your means, empowering you to make the most of your homeownership experience. So, when your lender mentions an affordability test, rest assured they're looking out for you and helping you build a solid foundation for your new home.
If you’re in the process of saving for a home and looking to do an affordability test, then get in touch with us today. One of our expert mortgage advisers can help you find a mortgage that suits your individual needs and circumstances. Plus, if your affordability isn’t where it should be, they can offer helpful advice for getting on track.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
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