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The MMR checklist – are you ready?

The MMR checklist – are you ready?

Category: Mortgages

Updated: 17/04/2014
First Published: 14/04/2014

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

If you're thinking of applying for a mortgage in the near future, there's one thing you need to make absolutely certain you know about – the Mortgage Market Review.

What is the MMR?

The Mortgage Market Review, or MMR, was a comprehensive investigation of the mortgage market which found that there were too many instances of high-risk lending prior to the financial crisis, which left a lot of people unable to afford their mortgage repayments. As a result, the Financial Conduct Authority brought in a package of measures with strict lending checks to ensure mortgages will still be available to customers who can afford it, while ensuring those who can't won't be left struggling.

Be prepared

Those rules will officially come into effect in less than two weeks' time – April 26th – and all lenders will be required to abide by them. They'll need to apply additional criteria to current affordability checks which could have an impact on your ability to get a mortgage or the amount of loan you'll be eligible for, and that's why it's so important to be prepared.

With that in mind, we thought we'd put together a quick overview of what you'll need to do to boost your chances of acceptance.

PROVIDE EVIDENCE OF INCOME

You'll need to provide thorough evidence of income so your lender can fully determine your eligibility. Chances are you'll already have to do this but when the rules kick in there'll be no leeway, so just what will you need to provide?

  • Payslips, usually covering the six months prior to your application
  • Evidence of any overtime, bonuses or other allowances
  • Other income such as maternity pay
  • Evidence of any tax credits/state benefits
  • Evidence of income received from investments or rental property
  • Retirement income, if applicable
  • Bank statements as further proof, again up to six months' worth

KEEP A RECORD OF OUTGOINGS

While providing the above evidence is routine, when the new rules come into play you'll be expected to provide further details regarding your outgoings. Having a basic layout of money coming in versus money going out won't be sufficient – from now on you'll need to keep a detailed record of everything you spend, including:

  • Payments for utility bills
  • Evidence of unsecured loans, credit cards or hire purchase agreements, complete with usual monthly repayments
  • Payments towards lending secured against your house
  • Council tax
  • Child maintenance payments and/or childcare costs
  • Essential travel costs i.e. to school or work
  • Buildings and contents insurance
  • Any other insurance payments (e.g. health or life insurance policies)
  • Ground rent or service charges, if applicable
  • Housekeeping, including food and money spent on cleaning services (for example)
  • Telephone, TV and broadband payments
  • Entertainment, including money spent on cinema trips, restaurants etc.
  • Holidays
  • Regular savings or private pension contributions

In a nutshell, you'll need to provide details of everything you spend money on – and you'll probably be expected to provide evidence of that spending too, usually in the form of bank statements.

The whole point is to make sure you're not already stretching yourself too thin, with the lender needing to be confident that you could not only afford the repayments now, but that you could do so should interest rates start to rise.

So, if you're about to apply for a mortgage make sure you've got the evidence you need to prove affordability, and of course make sure you stick to as strict a budget as possible. Then all you've got to do is find the rate that can keep your repayments even more affordable!

What Next?

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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