If you are looking to buy a home or property by taking out a mortgage, the UK housing market is currently full of opportunities. As of early 2025, many UK lenders have cut their rates to avoid a downturn following the fallout from US tariffs. The average two-year fixed mortgage rate was lowered to 5.3%, while the average five-year fixed rate was bumped down to 5.15%. As such, taking out a mortgage has become more affordable, which can open up more chances for people to apply for one. 

However, securing a mortgage is a significant investment, and borrowers should ensure that they are able to afford to pay it off diligently. Right now, it’s critical to consider your financial standing before working towards getting your mortgage.

Determining how feasible a mortgage can be for you involves looking at your assets and liabilities. Your liabilities subtracted from your assets inform your ability to repay your loan, which is important to lenders who want to avoid approving a mortgage to someone who cannot pay for it reliably. Asset liability management can make the process of evaluating what you have and owe much more efficient, detailed, and accurate, bolstering your chances of getting favourable rates on your mortgage. 

Here’s a closer look at how assets and liabilities can affect your mortgage and how to manage them for the best outcomes:

What are assets?

Assets are anything you own that has monetary value, such as cash, cash equivalents, liquid assets, physical assets, and more, that are expected to provide a future benefit. Any money you have on hand or in savings accounts, checking accounts, or any other account can be listed on a mortgage application. Physical assets of value that can be sold for funds, like jewellery, vehicles, art collections, and luxury watches, can also be included. These are tangible items you can touch and can convert to cash when sold. Lenders also look at liquid assets like stocks, bonds, mutual funds, and other investment accounts that can be converted into cash. 

Assets boost your ability to repay the mortgage and showcase financial stability, reducing risk for lenders. Substantial assets also help you qualify for a, alongside a good credit history and high net worth. This type of mortgage offers various benefits, including greater borrowing capacity, lower interest rates and fees than traditional mortgage types, tailored and flexible lending solutions, and increased negotiation power. Taking stock of your assets can help you secure an ideal mortgage for your home.

What are liabilities?

Liabilities can impact your capacity to repay a mortgage. These are typically financial obligations and debts that can reduce your income. Outstanding loans like auto loans, student loans, and personal loans are considered liabilities since you also have to manage and repay them on top of your mortgage. Credit card debt is also another liability that can affect affordability when applying for a mortgage. Spousal and child maintenance can also be added to your list of recurring payments. 

More liabilities can affect your mortgage application and fees, which lenders will take into account. Not keeping track of what you owe can make it more challenging to repay your mortgage and can extend your lending period, impacting overall financial stability in the long run. In the UK, many are facing a retirement crisis, as 500,000 Brit retirees are still paying off their mortgages, and the trend of longer-term mortgages is increasing. If you have more liabilities than assets or a high debt-to-income ratio, they can be a cause for concern to lenders who may be apprehensive about approving your mortgage.

How assets and liabilities affect your mortgage

Lenders look at your assets and liabilities to ensure that you’re capable of paying off the mortgage. They make up your net worth, which is the total value of your assets minus your abilities. If you own more than you owe, you have a positive net worth, while a negative net worth indicates that you owe more than you own. You may face limited options or find difficulty qualifying for a mortgage if your liabilities, like loans and debt, significantly impact your financial stability. 

Credit score also plays a crucial role in determining your creditworthiness. A spotty payment history and a high amount of debt can hamper you when applying for and paying off a mortgage. Conversely, substantial assets from a diverse portfolio can have a positive outcome on your mortgage qualifications and payments. Even if you have liabilities, your assets can still allow you to repay them comfortably, provided you also pay off your debts on time and in full. Assets and liabilities inform your debt-to-income ratio and overall financial strength, so managing them is crucial for your mortgage and ensuring long-term affordability.

How to practice asset liability management for a positive impact on your mortgage 

Use technology 

Banks and other lenders can use technology to analyse mortgage risks by assessing your assets and liabilities, benefiting from more accurate and predictive information that can lead to better mortgage outcomes and crediting choices. Asset Liability Management software can perform flexible balance sheet modelling, stress testing, and dynamic planning to help manage potential challenges and make strategic decisions while still complying with regulatory requirements. Users can explore various scenarios and simulations with a holistic view of risks from a single data source and improve strategies to avoid losses and maximise profitability. Features such as liquidity gap and contingency analysis, dynamic balance sheet optimisation, and scenario modelling with combined market, credit, and behavioural stress all help with taking action to manage risks. 

Similarly, you can also harness the power of software to manage assets and liabilities, helping you get a better understanding of your financial situation, risks, and points of improvement. You can explore software and apps to track how you give, save, spend and invest your money, making it easier to understand how much of your income you have, how much of it goes to paying off your liabilities, and how you can comfortably fit in a mortgage. Financial management apps like YNAB (You Need A Budget) offer plans that help users create financial goals and categorise their income, including debt payments, bills, savings, and other expenses. You can use it to ensure each asset and liability is accounted for and that your income is utilised to its maximum potential. These apps are also compatible with budgeting trends like zero-based budgeting, which is when your income minus your expenses should equal zero. This means all of your money should go to payments, savings, or transactions, allowing you to properly track where your money goes and how to optimise the flow. 

Work with an accountant

Asset liability management can be challenging and confusing for those looking to buy a home for the first time. Without fully understanding the impact of assets and liabilities, you might not be able to get the whole picture of what you have, what you owe, and how that impacts your mortgage qualifications and payments. You can miss out on listing a valuable account or item to use as an asset, leading to less than satisfactory rates. Working with an accountant can help you manage your assets and liabilities while making it easier to apply for a mortgage. 

Accountants can help you keep track of your finances, identify cost-saving opportunities, and offer strategic guidance for improving your financial management, among many other duties. They’re especially invaluable if you have a complex financial situation, as they can help make sense of where your money is coming from and where it’s going. They can also keep detailed records of your assets and liabilities, making sure each is accounted for and managed efficiently. 

You can also obtain an accountant’s certificate to help make the mortgage approval process faster and smoother. Our Why an Accountant Certificate Matters for Your Mortgage? notes that an accountant’s certificate is a document prepared by an accountant that provides evidence of your income and expenses, helping you prove that you can reliably pay off your mortgage payments. It can improve your chances of approval by showcasing that your financial standing is in line with the lender’s criteria, even if you don’t meet the minimum requirements or don’t have a strong credit score. You can negotiate better rates by showing the effort it took to compile evidence of your income, expenses, assets, and liabilities. 

Asset liability management is vital for assessing your financial standing and ability to repay a mortgage. Understanding your assets and liabilities can help you determine if taking out a mortgage is feasible and can allow you to negotiate for the best rates. It can also help you identify risk areas and points of improvement to help optimise your financial management strategies and ensure you’re able to save, spend, and repay efficiently. Securing a mortgage is a significant investment, but knowing you’re able to pay it off can help you feel more confident, and lenders may deem you a trustworthy borrower.

FAQs

Why do assets and liabilities matter when applying for a mortgage?

Assets and liabilities paint a clear picture of your financial health, which lenders consider when determining your mortgage rates. Your net worth influences how well you’ll be able to pay off your mortgage payments. If you have a negative net worth and a substantial number of liabilities, lenders may deem you unreliable for a mortgage, and approval may be difficult to acquire. A positive net worth and a diverse range of valuable assets can make mortgage approval easier and faster, enabling you to negotiate for better rates and more flexibility. You will also be able to explore alternative mortgage options, such as High Net Worth Mortgages, which have a higher loan-to-value ratio and tailored solutions. 

What are the benefits of asset liability management in the context of a mortgage?

Asset liability management can help make sense of your financial situation and how you can use or improve it to gain approval for your mortgage. It allows you to take stock of where your money is coming from, where it is going, and how these can help you negotiate better rates or increase your chances of approval. If you’re unsure about what assets you have and can use, what debts you are currently paying off, and how the two affect your net worth, you might not be able to provide lenders with a clear idea of your ability to repay your mortgage. This issue can result in rates that aren’t suited for your financial situation or the possibility that your mortgage application won’t be approved. Asset liability management can also help you find areas of improvement to help minimise liabilities and find opportunities to increase your assets.

Can I use my assets to take out a mortgage?

If you have a valuable asset, you can use it to secure a mortgage instead of the property. This is an asset-based mortgage, and it is beneficial if you don’t have much cash but are asset-rich. Lenders typically look at liquid assets, such as high-value stocks and shares portfolios, luxury vehicles like private jets or yachts, art collections, and the like. You can also secure the mortgage with cash and gold, which are more low-risk investments. 

However, your returns may not be as high compared to using more substantial and more valuable assets. An asset-based mortgage may be difficult to come by and is typically used by those with high net worth. Still, it may be worth pursuing if you don’t want to liquidate most (or all) of your assets to buy a property or want lower rates compared to traditional assets.

How can I track my assets and liabilities?

You can track your assets and liabilities by diligently monitoring and listing down your transactions, monitoring debt repayments, and budgeting your income. You can start by taking stock of your current assets, such as cash, accounts, stocks and shares, valuable and luxury items, and more. You should also look over your loan repayments, credit card debt, and other liabilities you are paying off. 

You can also ask for help from an accountant or financial professional to see and clarify what assets and liabilities can be listed in your mortgage application. This information can be used to paint a picture of your current financial health, and you can start tracking your transactions from there. By listing down where you spend your income, you can see how much you spend repaying loans and debts and if you’re able to accommodate a mortgage. You can use spreadsheets or budgeting apps to categorise your transactions, enabling you to budget more efficiently so you have enough to pay off liabilities and maintain assets. 

What happens if I am struggling to pay off my mortgage due to changes in net worth?

If you’re having trouble repaying your mortgage because your net worth has changed, your lender may repossess your home, but there are also other options available. You can discuss solutions with your lender if there have been significant changes in your assets or liabilities that are making it challenging to keep up with payments. 

For instance, you may have lost valuable assets due to losing your job, an illness or death in the family, or significant damages or losses to physical items due to circumstances out of your control. Loan rates are also changing; if you’re not paying a fixed rate, you may end up paying more than you can afford, increasing your liabilities. You may be able to negotiate changes in payment schedules, ask for reduced rates for a temporary period, or renew or refinance your mortgage. 

Should I get help from an accountant?

You aren’t required to work with an accountant when taking out a mortgage, but an accountant can offer valuable advice and help when managing assets and liabilities. They can take on more detailed and complex work and help you accurately track your income, expenses, assets, and liabilities. If you aren’t able to meet all the requirements of a lender, they can provide documents that can help you more easily secure a mortgage. 

You can also consider working with one if you have a complex financial situation or are self-employed, as their expertise can help you navigate and organise your finances and the necessary paperwork to eliminate the guesswork. Seeking out an accountant’s services isn’t mandatory, but they can be a big help if you’re unsure where to start with managing assets and liabilities or taking out a mortgage.

For additional assistance with your mortgage, we offer a highly efficient financial advice service supported by a team of specialist mortgage brokers who use the latest technologies. Our staff can help you with all kinds of mortgage applications in the UK, even if you have a bad credit score or a limited deposit amount. Call us today so we can plan how you can climb onto the property ladder and reach your financial goals.