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Making sure you can afford your loan

The Financial Conduct Authority (FCA) have introduced new rules recently to ensure that borrowers don’t take out loans that they can’t afford. A person’s ability to repay a loan will now be put under greater scrutiny by a lender, with a borrower’s income and outgoings being looked at in much more detail. It is hoped that these more detailed checks will prevent irresponsible lending practices of the past.

FCA’s chief executive Martin Wheatley said “Getting a mortgage can be one of the biggest financial decisions people will ever make, so it needs careful consideration. Our new rules will hard-wire common sense into mortgage lending.”

A mortgage lender will now have to check that a borrower can afford their repayments now and in the future. To do this they will need information on a person’s income and outgoings. Monthly payments and household expenditure, including pension contributions, childcare, household utilities, as well as any loans and credit cards, will betaken into consideration and validated during the application process. A lender will also look at how a rise in interest rates might affect someone’s ability to keep up with the monthly payments.

You can get advice about mortgages directly from a lender (like a building society or bank), or Finest Properties can direct you to a financial adviser.

Posted on Saturday, 24th May, 2014
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