phil-spencer

Your trusted property experts

Mortgage Declined – What’s Next?

Author avatar
Share Share article to LinkedIn Share article to Twitter Share article to Facebook

If you’ve had your mortgage declined, it’s easy to think the worst.

But, your dreams of buying a house aren’t over. This doesn’t have to be the end!

Let’s take a look at what to do next.

Why has my mortgage been declined?

First things first, let’s look at why your application may have been refused. There are a number of reasons for this, including:

  1. Debt
  2. Poor credit rating
  3. Smaller deposit
  4. Lack of affordability 
  5. Not registered to vote
  6. Too many credit applications
  7. Payday loans
  8. Not a match for the lender’s profile
  9. Self-employed
  10. Time lived in the UK

Some of these are to be expected, however, others might come as a surprise. Let’s unpick why you might have been refused a mortgage.

Too much debt

This is an obvious reason; your mortgage lender will want to know their money is secure. If you have a large amount of debt, you’ll be seen as a higher risk.

Try and pay off any debt where possible.

Poor credit history

Similarly, a bad credit rating will make you high risk in a lender’s eyes. Always run a credit score check to get an idea of where you stand.

Check Your Credit Score

You can get a mortgage with bad credit, but it does make things harder. Improve your score by paying all bills on time, paying off any debt and keeping your credit card balance low. 

Small deposit

Lenders need to know you can meet a specific loan-to-value requirement to see if you’re suitable for a mortgage.

When you apply for a mortgage, it’s recommended to save as big a deposit as you can. Chances are, you’ll receive a more attractive payment plan and interest rates. If possible, aim for 20% of the sale price. 

When saving for a house deposit, cut back on the luxuries and be strict with your spending. Take care of the pennies and the pounds will take care of themselves, as they say!

Mortgage declined on affordability

If a lender believes you can’t afford or keep up with repayments, you might find your application declined. This decision will largely be based on how much you earn, and if you’re buying with someone else or not. 

Lenders have different rules. For example, some will include commission as part of your salary, some won’t. Some will include it, but only if it’s over 50% (or another amount). Therefore, if one lender decides you can’t afford something, this doesn’t mean others will. 

Speaking to a mortgage broker can help you get a better idea of where you stand. 

How Much Could You Borrow?

Not registered to vote

Ensure you’re on the electoral roll, as lenders need to know who you are and where you live. If you’re not registered to vote, this might have been why you were declined. 

Credit applications

All credit applications leave a traceable footprint, which could harm your mortgage application. The more you’ve applied for, the more likely it is a lender will view you as a risk. 

Payday loans

Even if you paid your loan off in time, one taken out in the last six years could count against you. This goes back to the risk assessment; lenders may doubt the safety of their money. 

Not a match

Some lenders will have a very specific profile when it comes to offering a mortgage and are looking for a particular demographic. For example, many will only lend to couples earning well over a certain amount. If you don’t meet this criteria, you may find yourself declined. 

Self-employment

Those who are self-employed can struggle to get a mortgage, as lenders want to see a steady income. Contract workers often find themselves facing the same problem. 

You’ll need to prove your current situation is stable as well as secured in the future.

Time lived in the UK

Some lenders are reluctant to lend to those who have lived in the UK for less than three years. It’s important to point out this isn’t the case for everyone. 

Agreement in principle declined

It’s important to remember one rejection doesn’t mean you’ll be rejected by another lender. 

But, if you fall at the first hurdle, it’s likely due to one of the reasons mentioned above. Bear in mind that if you apply for a mortgage multiple times and a rejected each time, it could make lenders even less likely to lend you the money.

Mortgage declined after agreement in principle

Getting a mortgage in principle can make you appear a more attractive buyer to sellers, however it doesn’t necessarily mean the loan will be approved. 

Essentially, lenders take some basic information to start with, and may find something that doesn’t meet their criteria later on down the line. 

If you are declined after the agreement in principle, always ask why. If the problems are easy to correct, try and do so before going ahead with another application.

Mortgage declined after valuation 

Rejections can happen much later than previously expected. 

Your lender will always carry out their own valuation of the property you’re hoping to buy. This isn’t the same as a property survey, but is concerned with the safety of their loan.

If they decide the property poses risks to the security of the loan, you may find yourself refused. This is usually severe damage to the building.

Another common issue some buyers face is a surveyor down-valuing a property as a result of their findings. This could be due to subsidence or structural issues, for example.  

If this happens, it’s up to you to decide what your next step should be. Some buyers choose to walk away from the property entirely, others use this as a chance to offer less.

Will I be rejected after exchange?

There’s a lot that goes on between exchange and completion – and it’s unlikely you’ll be rejected at this stage.

However, it has happened to some hopeful homebuyers. 

A mortgage offer is withdrawn usually because of a failure to disclose important information, or trying to hide a past issue such as bankruptcy. There are things that can go wrong between getting your mortgage offer and completion.

In the case of extremely delayed completion, some mortgage offers can expire by the time it comes around. Most lenders will let you extend it, however they’re not obligated to do so. In this case, you’ll need to reapply. 

Mortgage refused – will this affect my credit score?

No, being declined won’t directly affect your score, but applications will show on your report. The more applications you make, the more this could count against you, as it will be evident you’ve had rejections.

Bear in mind your application could have been rejected due to your credit rating.

Check Your Credit Score

What happens if a mortgage application gets rejected?

If your mortgage application is rejected, don’t panic. There are many other steps you can take to put yourself in a stronger position.

Here’s what to do next:

Find out why

Always ask the lender exactly why it was you were denied. You may not get an answer, but it’s always worth trying to find out. 

If you do get given a reason, try and rectify the problem before the next application. 

Take your time before applying again; try to find the lender most likely to accept you. This could mean looking somewhere new. 

Improve your chances

There are many ways to make yourself more attractive to lenders and improve your chances of getting a mortgage:

  • Analyse current spending habits and make changes where necessary
  • Close any old or inactive accounts
  • Pay off long-term debts 
  • Avoid using your overdraft
  • Don’t apply for more credit (up to 3 months before)
  • Get an understanding of your money and spend
  • Pay all rent, bills, etc. on time
  • Save as much as possible
  • Provide clear evidence of all earnings
  • Avoid unusual properties (e.g. situated above busy bars, or with quirky renovations – these can be harder to sell)
  • Use a mortgage affordability calculator
How Much Could You Borrow?

Make your money go further

It’s likely you were rejected on the assumption you won’t be able to afford monthly loan repayments. So, try maximising your savings and stretching your money further. 

For example, government property schemes could help you afford properties that may have previously been out of your reach.

Use a mortgage adviser

So, while things can feel tough there are options. We can help you explore them.

Our recommended mortgage advisers are online with a team of experienced advisers – they offer fee-free advice in 24 hours and a decision on your mortgage in 5 days. Or they will pay you £100! Terms and conditions apply to the mortgage decision promise.

Mortgage Quotes

Your home may be repossessed if you do not keep up repayments on your mortgage. Terms and conditions apply to the mortgage decision promise.

Last Updated: April 8th, 2022