Almas Uddin
Founder and Mortgage Advisor
20 Jun 2022
Applying for a remortgage can be stressful enough, but it can make it difficult to know how to move forward if your lender turns you down.
There are multiple reasons to review your mortgage regularly and remortgage onto a better deal or a lower interest rate, and several common reasons lenders reject applicants.
Today Revolution Finance Brokers explains some of the typical causes behind a remortgage refusal and what you can do to ensure your next application isn't just successful - but also affordable and competitive.
Primary Reasons Homeowners Find it Difficult to Remortgage
It's impossible to collate an exhaustive list of the reasons mortgage lenders won't remortgage, but we can run through some of the likely factors that have contributed.
Much of the time, it's all to do with affordability assessments and changes to residential mortgage regulations, which could have changed considerably since you took out your original mortgage.
For example, a few years ago, you could apply for a mortgage as a self-employed person through a process called 'self-certification'.
In essence, a lender would take your word for it that you earned a certain amount per year without any further evaluations.
Now, lenders are legally obliged to adhere to regulatory practises, including affordability assessments, to ensure they don't lend to any applicant if they perceive an issue keeping up with the repayments.
What is a Mortgage Prisoner?
The term mortgage prisoner refers to homeowners who end up tied into high-interest mortgage products, or the lender's standard variable rate, without any option to move onto a more affordable deal.
Even if they have never missed a repayment and have a good credit rating, the affordability metrics could mean they find it impossible to remortgage, including a like-for-like replacement loan without any equity release.
An experienced broker can help, recommending alternative mortgages and niche lenders who offer the opportunity to break out of high-interest rates and take back control over your mortgage costs.
Remortgaging Rejections Due to Adverse Credit
Low credit scores will inevitably make a remortgage application a little harder - and even approval could mean higher interest rates and less favourable arrangement fees.
While it can take time to build up a decent credit rating or wait six years for serious issues to disappear from your credit report, there are lots of options available if it's holding you back from remortgaging.
If you are in arrears on your existing mortgage or have missed any mortgage payments in the last 12 months, it may be very challenging indeed to secure a remortgage.
The lender will perceive that you will likely default or fall into arrears with the remortgage, although it might be possible to negotiate around this stumbling block.
For example, suppose your income is stable, and you remortgage over a longer term to reduce the monthly payments to a manageable level.
In that case, a broker may liaise with a lender to present a better circumstance for remortgage approval.
Please contact Revolution for independent advice about finding a great remortgage deal with adverse credit to contend with.
High Remortgage Loan to Value Ratios
Property values can go up and down, so when you decide to remortgage, you might find that your Loan to Value (LTV) is higher than expected if your home is worth less than you thought.
LTV means the amount you apply to borrow as a proportion of your home's value, so, for example, if your home is worth £200,000 and you want to remortgage for £160,000, you are applying for a remortgage at 80% LTV.
If that same property drops in value to £175,000, and you apply for the same remortgage, you're looking at an LTV of 91% - a much harder sell for a lender given the increased risk.
Remortgages can be particularly difficult for homeowners who took out 100% mortgages, or even 120% mortgages which aren't products regularly available on the post-credit crisis market, if at all.
Negative equity can make life difficult if you need to remortgage, but you owe more than your property is worth.
Affordability Issues in Remortgaging Applications
Our final common reason for remortgage rejections relates to your income.
Lenders need to check how much you earn a year and multiply that income by a multiplier to decide the maximum they can lend.
If your income has dropped, or you have changed jobs, you might find that you need to put some extra work into identifying remortgage lenders with a higher income multiple or a flexible policy to include variable income in their calculations - including things like regular overtime, commissions and bonuses.
Again, an experienced broker can suggest solutions and match your remortgage plans with a lender best suited to your income level and the amount you wish to borrow.
Please contact Revolution Brokers on 0330 304 3040 or via email at [email protected] for advice on resolving any of these common remortgage rejection reasons, and identify a strategy to get your property financing back on track.
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