Don’t lose confidence over the chance of getting a mortgage – Just watch what you spend your money on!

  • Author: David Crosby
  • Posted on: 28th April 2014
  • Posted in: Blog

The new mortgage application system, which comes into force fully on 26 April, ensures that lenders conduct a full affordability check on mortgage applicants.  This will have practical implications for the amount that people can borrow and the length of time that an application might take and is mainly due to the fact that under the new rules, it will be the lenders, not the borrowers, who are checked by the regulator to ensure affordability checks for mortgage repayments are being carried out properly.

The aim is to prevent any return of the pre-crisis mortgage lending that many described as "reckless".  This doesn’t necessarily mean it will be tougher to get a mortgage as lenders will still want to lend.  What it does mean is that the lenders are interested in how much money is spare in a borrower's personal budget. So any regular payments could be asked about in the application process.

This could range from the cost of regular haircuts, online entertainment and club subscriptions and deliveries, to holidays, travel season tickets and childcare. So lenders will examine your bank statements to see what you spend your cash on. Regular ongoing commitments such as pension contributions, childcare costs or school fees could hit your chance of being approved for a loan.  Other direct debits will also be taken into account, such as gym memberships, pet insurance and mobile phones to paint a picture of how much money you go through each month.  Lenders may also look askew at regular payments to wine companies or bookmakers, considering them evidence of an expensive lifestyle.

Brokers say it will be important to have a household budget clearly worked out before starting the application process and that lenders are likely to ask for a number of documents that prove income and outgoings figures, such as payslips and bank statements. 

So do not let the new so-called ‘stress test’ stress you out if you are considering applying for a mortgage,  but do get all the receipts, regular payments and any outgoings collected together ready to make the application and if you are considering having a flutter on the FA Cup final, pop down the high street with that spare cash you have rather than doing it online!

Please contact Crosby & Woods Solicitors' Conveyancing Department on 01273 734600 or to discuss all your Conveyancing needs.