Why is a Mortgage Declined on Affordability?
Affordability isn't a static concept across every lender - they all use different calculations and assessment methods to decide whether they perceive you can afford the mortgage you're applying for.
For example:
- Some lenders use averages and others exact figures. That could be from last year, the last three, or the last six!
- If you're on probation in a new job, some providers will outright refuse. Others won't be concerned, as long as you've got a contract in place.
- Many people have multiple income streams, perhaps due to being self-employed or having a rental home and an employment role. Again, it's up to the lender whether they consider all of your income or just a fraction. The same applies to commissions, overtime or bonuses.
Generally, a lender will work out four times your annual income and set that as the upper limit for what they'll offer - others will go up to five or even six times.
Others work on a stress test, so they'll take a worst-case scenario interest rate, apply it to the mortgage value, and see if they believe you'd pass an affordability assessment on that basis.
Therefore, it's impossible to quantify precisely why a mortgage has been declined for affordability reasons without asking the lender - the methods used to make these decisions can vary substantially.
Actions to Take After a Mortgage Declined on Affordability
First, check-in with the lender and ask for information about your mortgage refusal - you'll need to know why you've been turned down.
Next, look at your income structure and see if there is an apparent reason.
Perhaps they've eliminated a chunk of your earnings from the calculations or work on a three-year income average, and you now earn considerably more.
Let's take a quick example:
- Mr B earns £20,000 a year, plus £60,000 in commission.
- Lender X includes 50% of commissions in their affordability assessment, so they consider Mr B as earning £50,000 (not the actual £80,000!) and offer a maximum mortgage of £250,000.
- Lender Z incorporates 80% of commissions, so they calculate Mr B earns £68,000 a year and offer a mortgage of up to £340,000.
That basic example illustrates the point. You can't earn more and probably won't want to apply for a smaller mortgage if you've found your dream home.
The answer is usually to contact an independent broker who will assess your income and match you to a lender with suitable policies that enable them to approve you, based on their affordability calculation method.
Can I Have a Mortgage Declined After Agreement in Principle Offer?
If you've got an agreement in principle on the table, you might be surprised to find that you've been turned down when it comes to making the final application!
In short, a lender works through two assessment stages:
- They'll check you meet their basic lending criteria. If everything looks good, you get an agreement in principle.
- The complete application process undergoes a more rigorous analysis and a risk assessment by the underwriter. If they decide that the agreement doesn't meet their risk profile, they can still turn you down.
Now, the basic qualification criteria are also variable, so if you don't get past the mortgage in principle stage, there is likely something specific that doesn't comply with the lender's policies.
That could be:
If you've been declined after the agreement in principle, it means you've passed all of these evaluations, and there is something more particular.
Perhaps the property valuation has come in lower than expected, or the underwriter has uncovered a previous credit issue that wasn't declared on your initial application.
The good news is that if you've had an agreement in principle, it's usually not too tricky for an experienced broker to switch your application and get you complete approval.
Actions to Take After a Mortgage Declined After Agreement in Principle
As with any mortgage refusal, step one is to check what went wrong. Some lenders might not disclose the reason if it's related to credit, and they can't reveal information due to data protection rules.
However, in that scenario, they'll usually advise you to check your credit report since that gives you a nudge in the right direction.
Most of the time, it's possible for Revolution Brokers as your broker to dig a little deeper and determine which policy resulted in the refusal.
Don't worry if you're finding it hard to get feedback from your lender - we can usually assess your application and the lender's policies and use our experience to pinpoint the driving factor.
The next stage is to go back to the drawing board, signpost your application to a better-suited lender, and negotiate terms.
You may also strengthen your application to mitigate any perceived risks and start fresh with a new lender.
Why Might I Have a Mortgage Declined by Underwriters?
It can be massively frustrating to have a mortgage rejected at underwriting, particularly if you're keen to push on with your purchase.
Sometimes, you can resolve this by speaking with your lender and solving any concerns raised by the underwriter to request a new appraisal.
Most underwriter refusals relate to:
- Information on your application or missing from your application.
- Documents submitted being deemed unacceptable.
- Difficulties including all of your income streams.
- Being concerned with the reasons for the mortgage.
The trick here is to ensure your application is packaged in a way that mitigates risk and covers every point - so providing complete supporting documentation and evidence of deposit sources, so the underwriter is comfortable with your application.
Actions to Take After a Mortgage Declined by Underwriters
One option after an underwriter declines a mortgage is to appeal their decision.
It's not likely to be successful, but if you think they've made a mistake, or you simply forgot to include a supporting piece of evidence, you can appeal and ask for the decision to be reconsidered.
Alternatively, you can provide new information to prompt a favourable decision, although note that it's unusual for an underwriter to overturn an adverse decision.
As with most of these scenarios, the best solution is often to seek out a lender with alternative policies who won't have the same challenge in approving your application.
Can I Have a Mortgage Declined Due to Late Payment?
Late payments aren't generally a severe credit issue, so it might be surprising to be turned down for a one-off late payment in the last six years!
Most rejections due to credit scores are more likely to be around a low credit score or a more serious credit issue that makes the mortgage too high a risk.
Low credit scores can happen because you haven't used much credit borrowing before, so it doesn’t mean you won't find a great deal elsewhere.
There are all sorts of reasons you could be turned down, such as:
- Not being registered on the electoral roll.
- Using your bank overdraft.
- Having high debts elsewhere.
- Being new to your job.
- Offering a low deposit.
- Having a high-risk occupation - which could include being a lorry driver or roofer.
Actions to Take When You Have a Mortgage Declined Due to Late Payment
If you've been rejected for a mortgage due to credit issues, there are several available actions:
- Review your credit file. Request any errors be removed, and ensure everything is up to date.
- Improve your credit score. That could mean closing unused accounts, paying back small outstanding debts, registering to vote or driving up your score with a specialist credit card.
- Waiting it out. Credit reports disappear from your file after six years. If you have a long series of large late payments, it might be worth hanging fire until they've been removed and won't pose an ongoing problem.
You can also look into bad credit lenders, who take a more flexible approach to assess mortgage applicants with late payment or other credit history problems.
Give Revolution Brokers a call if you have any concerns about your credit file, and we'll run through a few options to help you make an informed decision.
Is it Common to Have a Mortgage Declined Gambling-Related?
Gambling recreationally isn't likely to have a massive impact on your mortgage application. However, severe gambling expenditure or being a professional gambler might make it tough to get a mortgage through a mainstream lender.
As a profession, gambling is a high risk since there isn't much stability or guarantee that your income levels will remain high.
Therefore, a lender will usually look for a long-term financial review to see how likely they think you are to keep up with your repayment schedule.
Actions to Take After a Mortgage Declined Gambling-Related
One of the possible options is to put down a larger deposit.
If you're paying a higher down payment, the LTV is lower, and the risk reduces, which might bring your mortgage file down into an acceptable risk profile for the lender to approve it.
It's also worth using personal funds rather than a gifted deposit if possible. The lender will perceive that you have a more significant investment in the property and may reverse their decision.
Otherwise, many niche lenders consider alternative income streams and non-standard employment, so get in touch, and we'll help you find a mortgage based on your gambling revenue averages.
Professional Assistance After a Mortgage Refusal
Whatever the situation, mortgage advisors is on hand to provide independent, impartial advice to resolve your mortgage rejection issues and get your application back on track.
Give us a call on 0330 304 3040, or drop an email to the team at [email protected], and we'll work with you to identify the best deals, with the right lenders, at a competitive rate to get your mortgage approved.
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2023-05-09 
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