Buying a home is an exciting but complex financial decision. If you need a mortgage, you must determine how much you can afford to borrow and be aware of additional costs beyond the purchase price.
How Mortgage Lenders Assess Affordability
When you apply for a mortgage, lenders will consider:
- How much you can borrow
- Whether a deposit is required
- If you can afford the monthly repayments
Mortgage Affordability Assessment
Lenders assess your ability to repay the loan based on:
- Your income (salary, bonuses, other earnings)
- Your current expenses (utility bills, insurance, Council Tax)
- Future risks (interest rate changes, job loss, or reduced income)
Tip: Use the Money Helper mortgage affordability calculator to estimate how much you can borrow.
Additional Costs When Buying a Home
Beyond your mortgage, you’ll need to budget for other expenses such as:
- Stamp Duty Land Tax (SDLT) – A tax on property purchases above a certain threshold.
- Property surveys – To check for structural issues.
- Solicitor’s fees – Legal costs for transferring ownership.
- Mortgage fees – Charges for processing your loan.
- Search fees – Local authority checks on the property.
- Land registration fees – Registering ownership with HM Land Registry.
Ongoing Property Running Costs
Once you own a home, there are regular costs to consider:
- Council Tax – Based on the value of your property.
- Heating & utilities – Gas, electricity, and water bills.
- Broadband & other services – Internet, TV, and maintenance.
If You’re Buying a Leasehold Property
If the home is leasehold, you may also need to pay:
- Service charges – Covers building insurance and maintenance.
- Ground rent – A yearly fee to the freeholder.
Find out more about leasehold charges before committing to a purchase.
How Your Credit Score Affects Your Mortgage
Your credit score impacts:
- Whether you qualify for a mortgage
- The interest rates and deals available to you
Higher credit scores increase your chances of getting better mortgage offers.
Tip: Check and improve your credit score through resources like Money Helper.
Identity Checks When Buying a Home
To prevent fraud, you’ll need to provide proof of identity to:
- Estate agent
- Solicitor
- Mortgage lender
Before buying a home, it’s essential to assess mortgage affordability, prepare for additional costs, and check your credit score. Understanding these factors will help you avoid financial stress and secure the best mortgage deal.
If you’re buying a leasehold property, make sure you’re aware of service charges and ground rent. Always double-check your identity documents to prevent delays in the process.
FAQ’s
How do lenders determine how much I can borrow?
Lenders assess your income, current expenses, and financial stability, considering factors like job security and potential interest rate changes.
What extra costs should I budget for when buying a home?
In addition to the mortgage, you’ll need to pay for stamp duty, solicitor’s fees, surveys, mortgage fees, and land registration.
How does my credit score affect my mortgage options?
A higher credit score improves your chances of getting approved for a mortgage and accessing lower interest rates and better deals.
What are leasehold service charges and ground rent?
If you buy a leasehold property, you may need to pay service charges for building maintenance and ground rent to the freeholder.
Why do I need to prove my identity when buying a home?
Identity checks help prevent fraud and are required by estate agents, solicitors, and mortgage lenders before finalizing a purchase.