How we asses your ability to repay

We are committed to both responsible lending (from us) and to responsible borrowing (by you).

We will only approve a mortgage request where you can demonstrate a clear ability to repay the mortgage. This is to ensure that you do not find yourself in a situation where you may face difficulties in paying the mortgage and have an overwhelming financial commitment.

We will therefore ask for some financial information and supporting documentation to help us to assess whether or not you can afford to repay the loan. The information required can vary depending on your specific circumstances.

Information required

  • A completed application form which includes:
    • A summary of your monthly income and expenditure
    • A summary of your assets and liabilities,
  • Minimum three months' bank statements and payslips
  • Any other relevant documentation is requested (which will depend on your circumstances)
  • If you are self-employed we will require copies of your latest tax return and 1-3 years' financial accounts for your business.

Ability to repay

Based on your overall financial circumstances, we will then calculate the mortgage cost and assess whether or not you can afford to repay the mortgage. Please note that no reliance should be placed by you on our analysis of your ability to afford the mortgage or make the required payments throughout the duration of the mortgage.

Stress tests – interest rate risk and, if applicable, foreign exchange risk

In all mortgage circumstances, we will assess your application based on the interest rate for the mortgage, along with a further 3% stress added to the interest rate. This is to factor in how the payment might increase if the Bank of England base rate were to increase by 3% and whether you could still afford to repay the mortgage. It is important to remember, however, that potentially interest rates could increase by more than 3%.

Furthermore, in the event that your base currency (the main currency of your income) is in a different currency from the loan, there is a risk that a negative development in the rate of exchange between the two currencies could increase the cost of meeting the loan repayments. Therefore, we will also apply a 20% stress test to the exchange rate applicable at the time. This is to assess whether or not you could continue to afford to pay the mortgage in the event that the foreign exchange rate were to move against you. Please note that borrowing in any currency other than your base currency entails a high degree of risk and that potentially the exchange rate could move by more than 20%.