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What to Do if You Have Had a Mortgage Application Declined

If you’ve been declined a mortgage, you are one of many thousands of people who are declined mortgage borrowing, and the most important step is to determine the reasons the lender chose to decline mortgage offer and work out the next move following your declined mortgage application.

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Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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What to Do if You Have Had a Mortgage Application Declined

Getting a declined mortgage application can be disappointing, but there are countless reasons you might be declined mortgage lending – and many of them are relatively simple to overcome.

If you’ve been declined a mortgage, you are one of many thousands of people who are declined mortgage borrowing, and the most important step is to determine the reasons the lender chose to decline mortgage offer and work out the next move.

As a whole-of-market, independent team, Revolution Finance Brokers can steer you through the decision-making process, looking at when will mortgage rates decline and improve affordability or why one lender has returned a declined mortgage application – and which alternative lenders might be more suitable.

Mortgage Application Declined: What Next?

One of the crucial things to recognise following a declined mortgage application is that millions have been declined a mortgage, and there is often nothing you could or should have done differently. Lenders might decide to decline mortgage offer applications because of changes to their own policies and lending rules.

Around 50% of homeowners have been declined mortgage borrowing for one reason or another, and even though one lender might decide to issue a declined mortgage application, it can be a good opportunity to take stock.

In most cases, the primary factor in a declined mortgage application isn't so much your application but the lender you have chosen, so even if you've been declined a mortgage with one provider, that doesn't preclude the outcome you'll get from another.

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How Long to Wait After Mortgage Declined to Reapply?

Reapplying immediately to a declined mortgage application is rarely a good move, partly because you should have a thorough understanding of the reason for the declined mortgage before you apply again. An alternative lender may be a much better match, so after having a mortgage application declined, it is important to assess your options.

Choosing a new lender with comparable lending policies will inevitably mean you have a declined mortgage application and could negatively affect your credit report if you accumulate multiple hard searches.

Why Would a Mortgage Application Be Declined?

There are thousands of reasons a lender might use their mortgage decline letter sample to reject your application. In some scenarios, they simply aren't offering the product any longer so will automatically issue a declined mortgage application.

Credit is one of the most common issues in a declined mortgage application, so we recommend you review your credit scoring and history before applying. Can underwriters decline mortgage applicants even for minor credit issues?

They can indeed, so if you have even small issues, such as a late payment a couple of years ago, this will influence your choice of lender and may result in a declined mortgage application. It is always wise to consult an independent broker to ensure you don't have a further mortgage application declined.

Independent Advice After Being Declined Mortgage Lending

Our recommendation is always to contact Revolution Finance Brokers to discuss the reason for your declined mortgage, the possible options, and how to ensure you significantly reduce the prospects of having a declined mortgage application again.

It may be a case of switching to a different lender if your mortgage declined by underwriter is likely to be a similar response from another mainstream provider. However, knowing the reasons for your declined mortgage application is essential.

How Often Are Mortgages Declined, and What Is the Most Common Reason for Being Declined Mortgage Approval?

The most typical reason people have a mortgage application declined is that their requirements, circumstances, income, or assessed risk are incompatible with the lender they have chosen.

You could have a declined mortgage application because of poor advice, relying on a regular bank, or a lack of awareness of lender policies that mean they are very likely to decline mortgage offer.

High street banks do offer mortgage products, but they have very strict lending criteria, so a declined mortgage application is more common. How often are mortgages declined? Probably far more often than you might expect!

Why Would a Mortgage Application Be Declined By a Bank?

Next, we’ll run through some of the most frequent reasons for a bank to decline mortgage offer – although this isn’t an exhaustive list, and your lender could have a different reason altogether for your declined mortgage application!

Declined Mortgage Application Due to Affordability

If your income isn’t sufficient to meet the lender’s affordability assessments, you will have a declined mortgage application. Lenders tend to use multiples of your annual income to decide on the maximum to lend, but if your mortgage get declined due to affordability, it may also be because of your income structure.

For example, people who earn a proportion of their income through commissions, bonuses or self-employment may be more likely to have a mortgage declined by underwriter if the lender’s policies exclude non-standard earnings. Other lenders will issue a declined mortgage application because they exclude specific types of income.

Declined Mortgage Because of Bad Credit

Applicants with bad credit or a low credit score are often declined mortgage borrowing immediately by mainstream lenders who have exceptionally low-risk tolerances. Other lenders might not decline mortgage offer applicants outright but will have caveats and conditions that could result in a declined mortgage application.

Adverse credit is far from unusual, but you need a lender with appropriate policies to ensure you don’t have a declined mortgage application based on your credit history.

Having a Mortgage Application Declined Because of an Insufficient Deposit

Most lenders will decline mortgage offer applications if the deposit is less than 10%. Some lenders have much higher minimum deposit requirements, so you could have been declined a mortgage on this basis alone – increasing your deposit could be a way to avoid a declined mortgage application.

Mortgage Declined By Underwriter Due to Debt

Almost everybody has some level of debt, including overdrafts, credit cards or finance agreements. However, overdraft usage can lead to being declined mortgage borrowing because the lender perceives that your finances aren’t under control. High debt to income ratios commonly contribute to a declined mortgage application.

While overdrafts don’t automatically mean you will be declined mortgage borrowing, any ongoing reliance on short-term debt can make it harder to secure a mortgage or mean lenders will notify you of a declined mortgage application.

How Often Are Mortgages Declined Due to Gambling Income?

Gambling carries negative connotations within the lending sector making a declined mortgage application more likely. Some providers will refuse to lend to anybody with gambling income – you could even have a decline mortgage offer because of occasional gambling as a hobby.

Applicants can also have a mortgage declined by underwriter after an initial agreement in principle if the lender concludes that a proportion of their income derives from gambling. Gambling income is often excluded from affordability assessments and may lead to a declined mortgage application.

Having a Declined Mortgage After Exchange

If you have been declined a mortgage after exchanging contracts, it can be very stressful, particularly if you are part of a chain and dependent on your mortgage borrowing to complete the transaction. A declined mortgage application could make it impossible to move forward.

Fortunately, an independent broker can help you appeal the decision or determine the right way to offset the lender’s concerns following a declined mortgage application to ensure you aren’t declined mortgage borrowing altogether.

What to Do If Your Mortgage Get Declined After Agreement in Principle

Agreements or decisions in principle (AIP or DIP) are tentative and a withdrawal is different from a declined mortgage application. They are not a sure-fire indication that you won't be declined mortgage borrowing once the underwriter conducts more thorough checks and calculations.

Most borrowers have a declined mortgage application at the AIP stage, and it is less common to have been declined a mortgage after the original offer – although far from unheard of.

Receiving a Declined Mortgage Notice After Valuation

Property valuations are an important part of the mortgage process and can contribute to a declined mortgage application. A lender could decline mortgage offer applicants at any point if the valuation shows that the property is worth less than they intend to pay.

You can also have mortgage declined by underwriter if the building has structural issues, defects, a lower-than-expected market value, or is made from non-standard materials such as a timber frame.

These common reasons for being declined mortgage borrowing demonstrate the vast range of circumstances that can end up having a mortgage application declined. There are multiple other scenarios where being declined mortgage lending is possible.

Why Would a Mortgage Application Be Declined for Any Other Reason?

Every lender has a range of rules, policies, calculation methods, and conditions they apply, and you could have a mortgage application declined for any reason that your finances, income, or intended property fall outside of the terms the lender is comfortable with.

We strongly recommend contacting Revolution Finance Brokers if you have had a mortgage application declined to work through the justifications and decide whether to amend your application or look for a more suitable lender.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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