When you work out how much you could afford to borrow, the mortgage lender would look at the following:
- The income
It would be inclusive of your basic income, the income from your investments or pension, and the income in the form of financial support from ex-spouses or child maintenance. It would also include any other kinds of earnings that you have such as commission, overtime, or bonus payments or freelance work or second job.
You would be required to provide pay slips along with bank statements. It would be taken as evidence of your income. In case, you were self-employed, you would need to provide bank statements, details of income tax paid by you, and business accounts.
- The outgoings
It would be inclusive of credit card payments, maintenance payments, insurance, and any other loans or credit agreements that you might have. It would also take into its ambit any bills such as gas, water, phone, electricity, and broadband.
The mortgage lender would be able to provide you with estimates of your living costs inclusive of spending on clothes, childcare, and basic recreation. They would look forward to seeing some recent bank statements in order to back up the figures offered by you.
- Future changes that make an impact
The lender would assess whether you would be able to pay for the mortgage, provided the interest rates increase, you could not work due to illness, you and your partner lost their respective jobs, and your life had changed after a baby or break in career.
It would be imperative that you should think and plan how you would meet your respective payment. For instance, you could assist in protecting yourself against unexpected drops in income by building up savings as and when you have the chance.
It would be pertinent that you should ensure it comprises enough outgoings for three months. It would be inclusive of your mortgage payments.