Updated: February 22, 2022

What to do if You’ve had a Mortgage Declined on Affordability

Has your mortgage been declined on affordability? Are you struggling to remortgage for the same reason? There are options! Our guide will tell you what to do.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: February 22, 2022

Getting a mortgage can be a complex process and there are several aspects where things may not work out how you hoped. One problem you may encounter is your mortgage being declined on affordability grounds. But what does that really mean and what can you do to improve your chances of your mortgage application being successful?

This article will address the reasons why mortgages are declined for affordability reasons and help you consider your options if your mortgage offer is lower than expected or you are unable to remortgage due to affordability issues.

Read on to find out more or jump straight to a topic on the menu below…

Reasons why mortgages are declined on affordability

If you are declined a mortgage based on affordability, it usually means the lender has some concerns about your ability to meet the repayments based on the information you have supplied. Around 10% of mortgage applications are declined. The most common reasons are:

Reason 1: Not enough disposable income

Your application will detail your monthly incomings and outgoings. If the lender believes that your disposable income is too low to meet the mortgage repayments, they may decline your application. The lender may use a mortgage underwriter to delve into your income and expenses to assess whether you are a good risk for lending the amount you have requested.

They will do a stress calculation which checks the affordability of the mortgage should the interest rate increase by 3%.

Many lenders will lend up to 4.5 times your annual income but it is possible under certain circumstances to work with a broker who can identify a lender who will do 5 or 6 times salary.

Reason 2: Lender won’t accept certain elements of income (overtime, bonus, commission etc)

Your mortgage application may be declined on affordability if your lender does not allow certain elements of your pay to be included in the calculations. Many, but not all lenders will not allow applicants to add overtime, bonuses or commission to the basic pay when deciding on affordability because these elements are not guaranteed income. Sales professionals who rely heavily on commission will find they can earn a lot more with certain lenders. Speaking to an advisor will pay dividends and save you a lot of time and effort.

Reason 3: Too much debt

The lender will review your current credit situation. If you already have high levels of debt, such as credit cards, store cards or personal loans, the lender may decline your application on affordability grounds. Each lender will have their own acceptable debt levels, so being declined by one lender doesn’t necessarily mean you will get the same response from other lenders. An experienced broker would be able to help you choose lenders who look at debt more flexibly.

Reason 4: Lender doesn’t accept certain employment categories

In a similar vein to number 3, some lenders have lending criteria based on your type of employment. If you aren’t in a salaried job, you may find it more difficult to secure a mortgage. Whilst there are lenders who will offer mortgages to people who’re self-employed and freelancers, these applications are often subject to much more financial scrutiny than those of employed workers. Brokers who have experience in helping self-employed applicants can assist you to find the right lender for you.

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What to do if your mortgage is declined on affordability

Firstly, don’t panic. Mortgages can sometimes be declined by one lender where another is perfectly happy to make an offer. The important thing now is to get more information from the lender about why they have rejected you so you can start to tackle the issue.

1)     Gather the relevant information about the rejection reason(s)

2)     Spend some time dealing with any issues on your credit report such as late or missing payments

3)     Seek advice from a broker who specialises in helping people in similar circumstances to your own – we can help you with this by matching you with your ideal mortgage advisor, for free

What to do if your mortgage offer is lower than expected

Sometimes lenders will come back with a mortgage offer that’s lower than the amount you applied for. This could be because they have valued the property you wish to purchase lower than the offer you have made to the seller. It could be because the lender is concerned about your ability to afford the larger mortgage or it could be as simple as a processing error on the application.

If this happens, have your broker double check all the financial information you supplied. They may also be able to identify an alternative lender who would be prepared to lend the higher amount. Another option is to approach your seller, explain the situation and see if they will accept a lower offer for their property – after all, if the lender doesn’t think the property is worth the asking price, other buyers are also likely to run into the same issues with getting a mortgage.

What about remortgaging?

It’s not just property movers who can run into difficulties getting a mortgage agreed. Existing homeowners can also experience issues with remortgages being declined for affordability reasons.

Some of the same reasons apply equally to existing homeowners as those outlined already but there are a couple of other – unique – reasons why you may be unable to remortgage due to affordability.

Your loan-to-value is too high

The loan to value (LTV) is the amount you are remortgaging or compared with the value of the property. If you borrowed £144,000 to buy a £180,000 home, the LTV is 80%. If your home dropped in value to £160,000 and you still have £136,000 outstanding to pay back, then the LTV is 85% which could be a problem for the lender.

Your income has dropped, or expenses have increased since you took your initial mortgage

If you’ve changed jobs since you took your initial mortgage, and your income is lower than you may have affordability issues on remortgaging. If your monthly outgoings have increased substantially, this could also be a reason why your application is declined.

You’ve moved from employed status to self-employed

Similarly, if you have changed your employment status, some lenders may not accept your new status as part of their affordability checks.

You’ve missed mortgage payments or have mortgage arrears

Many lenders will be reluctant to offer remortgages to borrowers who have a history of missed or late payments or are still in arrears with their mortgage.

What to do if your remortgage is declined

Don’t re-apply immediately without first trying to establish why your application was rejected. There are usually other lenders who will offer you a remortgage deal but you may need some help to identify the most appropriate lender before you re-apply.

Having multiple rejections on your credit report could cause you problems in the future so don’t rush in without taking advice from a mortgage broker who specialises in your circumstances. If the reason why you have had your remortgage declined is that your LTV has increased, your broker may be able to find an alternative lender who is willing to lend on a higher LTV.

Another alternative might be a product transfer, which is basically switching to a new deal with your current mortgage lender. If you were turned down for a remortgage with another provider, your broker could explore whether there is a better deal with your current lender available.

Getting support for dealing with mortgage declined on affordability

Rather than wasting precious time trying to figure out exactly what the problem is and how to fix it, it makes sense to talk to a friendly, specialist mortgage broker who understands the whole market as well as your personal situation. They can advise you on which lender(s) to approach next for the best chance of success.

At Online Money Advisor, we have a large network of experienced mortgage brokers who can access the whole market and find the perfect lender for your needs. Maximise your chance of buying your own property or remortgaging for a better deal by calling our team today on 0808 189 0436 or making an enquiry online.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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