Things that affect your application for a mortgage

Esther Shaw / 20 April 2015 ( 31 October 2016 )

Thinking about applying for a mortgage? Esther Shaw explains the factors which influence whether a lender will accept your mortgage application.

When it comes to applying for a mortgage, there are a whole host of factors which a lender will take into consideration before deciding whether to offer you a deal.

This includes your income and expenditure, your credit rating, your age, and even how long you have been in your job.

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How much can you borrow?

Generally speaking, lenders will usually want to see pay-slips from your employer – or typically three years’ accounts if you are self-employed.

They will then use income multiple calculations based on your salary to help give an indication of how much you can borrow.

You may be able to get around four times’ your salary if you apply on your own.

But remember that each lender will have different criteria, and will offer different income multiples, so you need to do your research.

How do they work out if you can afford a mortgage?

Affordability calculations are a big part of the application process, and will be a major consideration when a bank is deciding whether or not to lend.

Lenders have got a lot tougher on affordability since a new initiative – known as the Mortgage Market Review – was introduced in April 2014.

As a result, mortgage providers will now scrutinise a potential borrower’s expenditure far more closely than ever before to ensure they can afford the home loan both now and in the future.

They will go through your statements with a fine-tooth comb and weigh up your income against your monthly outgoings.

This will include debt repayments (such as personal loans and credit cards), utility bills, insurance payments, as well as “lifestyle costs” or discretionary spending, such as socialising and eating out.

Securing a mortgage when over 50

Mortgage lenders will look at your credit history

Mortgage lenders will look carefully at your credit report before making a lending decision, as this shows how financially responsible you are.

They will use your credit report – along with your salary and personal details – to work out how much of a risk they think it is to lend to you.

The stronger your record, the better your chances of getting accepted for a deal.

Equally, if you have any black marks against your name, such as a recent County Court Judgement (CCJ), this could make it very hard for you to get a mortgage.

Also bear in mind that simple oversights, such as not being registered on the Electoral Roll, or failing to close down credit card accounts that you no longer use, can have a negative impact on your credit rating.

Before applying for a mortgage, you should always check your credit report carefully to see if there are any reasons why your application could be refused.

You can get your credit report from a credit reference agency, such as Experian.

Find out more about checking you credit report

Does your age affect your mortgage application?

Banks and building societies are often less willing to lend to older borrowers, as they are often unhappy about granting mortgages to people who will have retired before their mortgage term ends.

Lending has tightened further still since the new rules were introduced last April.

What you need to know if you still have a mortgage in your 50s

The key here is being able to be able to prove to a lender that you have adequate income to support the mortgage after retirement. This might include proof of regular income from pensions and investments, as well as from insurance policies – and possibly from a buy-to-let property if you have one.

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.