Affordability Assessment

An affordability assessment is a process used by lenders or financial institutions to determine whether a person can reasonably afford a loan or mortgage. It involves reviewing the borrower’s financial situation, including income, expenses, debts, and other commitments, to ensure that they have sufficient funds to make ongoing payments without financial strain. The goal is to ensure that the loan is suitable for the borrower’s current circumstances, reducing the risk of future repayment difficulties. This assessment helps promote responsible lending and ensures that borrowers do not take on more debt than they can comfortably handle.