Nothing is more frustrating than being turned down for a mortgage when you know you're a good-quality borrower and the loan is affordable. However, in the current environment, lenders are increasingly risk-averse and are turning down applications they deem unsuitable – even for minor reasons. If a lender has turned you down for a mortgage, we explore the options available to you and what Enness can do to help you access the loan you want.
Understand How Lenders Make Decisions
In most cases, lenders will assess your financial situation to determine your suitability for a mortgage. Broadly, they will be looking at your financial situation and your background. They will consider (amongst other factors) your employment status, earning power, deposit, liquidity, any other debt or liabilities, your assets, and your overall wealth. They will look at these factors against the amount you want to borrow and the mortgage product you want to apply for. Lenders will use all this information to determine if the loan is affordable and to carry out stress tests, which usually form the basis of a lending decision. It's worth noting that even if you meet affordability and stress tests, if lenders see something they don't like in your finances or background – even something minor – they may still turn you down for a mortgage.
I'm A Quality Borrower. Why Did I Get Turned Down For A Mortgage?
If a mortgage is affordable and you have a good financial background, but a lender has rejected your application, it's not game over – we can help. This scenario happens regularly, especially in today's environment when lenders take a highly cautious approach and want to reduce risk as much as possible. What will usually have occurred is that the lender you approached will have either:
- Taken a very conservative approach to underwriting and turned you down on that basis
- Misunderstood something in your finances or background that meant they couldn't green-light a mortgage
- Didn't think the numbers add up based on being unable to take a broader view of your situation (i.e. tickbox lending criteria)
A lender might turn you down for a loan for several reasons. However, common scenarios include:
- An employment status the lender doesn't 'like'. This may be that you just have changed jobs, you may have considerable income but are self-employed, have a relatively low base salary but a very significant bonus'
- Coming up to retirement age
- Non-standard income, which covers an array of scenarios, such as having little day-to-day income but a significant asset base, you generate income from a business or businesses, you have irregular or multicurrency income, or you generate income from corporate or wealth-planning structures like a trust
- You are a foreign national buying property in the UK as a resident or non-resident
- Individuals waiting on a liquidity event such as a divorce settlement, sale of a business or inheritance that will dramatically change their financial status
- Lenders perceive there is a greater risk than there actually is because they don't understand your finances, you have a delicate or unusual scenario or requirement, your tax returns don't reflect the strength of your financial situation for legitimate reasons and so on
Ultimately, there are infinite reasons why a lender may choose not to grant you a mortgage. In many cases (including those listed above or in complex situations requiring more careful explanation and 'making a case' to a lender), our brokers can help overturn the decision or find you a competitive mortgage from another lender.
A Lender Turned Me Down For A Mortgage. What Next?
If a lender has turned you down, we will first look to understand why. A lender might not share this information with you, but either we will be able to identify why from your documentation, or we will ask. We will then pull together a plan of action to present to you.
If you're a suitable candidate for the mortgage you want from a financial basis, but you've been turned down for a loan, we will look at three different options with you:
1) We Will Make A Second Case To The Lender That Turned You Down
We work out what the lender that turned you down would need to approve a loan. We will then approach the lender and explain in more detail why you are suitable for a loan, carefully presenting your case. This is more than just an informal chat or a request delivered via a different source: we will need to present the facts carefully and arrange the information so that the lender can actually change their mind. Underwriting is always black-and-white, and lenders don't do favours. If we present your case to a lender that previously turned you down, we'll usually need to present more documents and information, backing up our arguments with solid facts that are absolutely watertight.
2) We Will Find A Lender That Will Offer You A Mortgage At The Same Rate (Or A Better One)
In many cases, we will identify a lender that might be better placed to offer you the mortgage you want. This might be because they will understand your situation better, because they specialise in a specific part of the market or because they can take a more holistic approach to considering your background in a way your initial lender couldn't. If we think this is the best path forward, we will discuss this route with you and explain why we believe an alternative lender is better. We are independent brokers with whole-market access, and our network consists of more than 500 lenders. We will negotiate the transaction and, wherever we can, work to get you the same interest rate and loan-to-value ratio as the lender that turned you down.
3) We'll Identify What Needs To Change To Get You A Mortgage
Sometimes, we will identify something in your situation or background that's effectively creating a 'block' for lending, and most or all lenders won't be able to offer you a loan. However, this doesn't always mean you can't get a mortgage, although we will usually need to think outside the box to find a solution. As long as the loan is affordable and your background supports borrowing, we will look at other options for you. We might look at alternative assets you could use as collateral, different types of loans, or determine what you'd need to change in your background to put you on better footing to get approval for a mortgage. In many cases, you may need to tweak or restructure something straightforward to access the mortgage you want.
Get In Touch
Get in touch if you have been turned down for a mortgage but still want a high-value loan. We will look at your situation and see if we can help – initial discussions are always no-obligation. In many cases, we will be able to quickly identify alternative routes to explore, different solutions available to you or more suitable lenders we can approach on your behalf.
This guide is for information and illustrative purposes only and nothing contain within should be construed as advice or a recommendation.
Financing options available to you will depend on your requirements and circumstances at the time. Any changes in your circumstances, any known likely changes, or omissions in the information you provide can affect the suitability of the options available to you. These should be communicated to us as early as possible.
If you are considering securing debts against your main home, such as for debt consolidation purposes, please think carefully about this and consider all other options available to you.
Your home may be repossessed if you do not keep us repayments on your mortgage or other debts secured on it.
Where we have quoted rates, the actual rate available will depend on your circumstances and are subject to lender variation at any time, without notice.
Toby has 11 years’ experience working across London’s property and financial services markets.
