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Mortgage declined on affordability

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Jan 8, 2023

Emma Lunn

Fact Checked By:
Emma Lunn - Finance Editor

Mortgage declined on affordability

A mortgage declined on affordability grounds can be devastating for homeownership dreams. But it is possible to save them.

This guide will teach you…

  • What to do if your application for a mortgage has been denied because you are unable to meet the monthly payment
  • Based on your income and expenses, how you can find a mortgage lender that’s more likely to approve your mortgage application
  • How a mortgage broker can help in such a situation

Although it can be distressing if your mortgage application is declined on affordability, don’t panic. Just because one lender declined your mortgage application, it doesn’t necessarily mean that others will.

Contact us today for mortgage advice, as a mortgage broker we have a number of mortgage lenders who have different lending criteria. Your mortgage application may have failed with one lender but another lender may have different lending criteria which will pass your mortgage application.

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What should you do if your mortgage has been declined due to affordability?

Your mortgage application declined on affordability is a kick in the teeth nobody needs, but don’t lose heart. While it is natural to feel disappointed and upset if you have had a mortgage declined due to affordability, don’t give up.

Not all mortgage lenders calculate affordability the same way. Therefore, being declined on affordability by one does not necessarily mean the same outcome with other mortgage lenders.

Contact us today for free mortgage advice, as a mortgage broker we can introduce you to a mortgage lender if you have been declined on affordability.

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How to increase your chances with mortgage lenders

These are the steps you can take to increase your chances of getting the financing you need if you have had a loan application declined on affordability.

1. Do not re-apply immediately
While there may be other lenders that would approve you based on your income and expenses, it is best to not seek one out immediately. A lot of applications in a short time period can negatively impact your credit history and make it difficult to get finance.
2. Get the right advice as quickly as possible
A mortgage broker can help you assess your options and maximise your chances of passing another lender’s affordability checks.
3. Consider a bad credit mortgage
Some lenders will lend to borrowers with bad credit, as well as those who have been declined by other lenders due to affordability.
4. Consider an appeal
A broker can also help you appeal a lender’s decision not to approve you due to affordability.

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Reasons why mortgage applications are turned down on affordability grounds

A mortgage lender will tell you that they are declining your application due to the fact that you have failed their affordability assessment. What does this actually mean?

Here are some possible reasons.

You don’t have a high enough income

This is the most obvious reason an application fails the affordability checks. However, if a lender tells you otherwise, it could be that they are referring to your salary not being in line with the multiples on which they base their mortgage offers.

While most mortgage providers will offer mortgages based upon 4.5 times an applicant’s income, there are brokers within our network that can help you find lenders who use higher income multiples. A lender who offers five times or six times the income of your salary, even though you may have been denied, might be able to help you.

Use our mortgage calculator to find out how much you can borrow based on these income multipliers.

You have too many outgoings

When conducting affordability checks, mortgage lenders will consider your ratio of debt to income. This is your net income minus your fixed outgoings. The lender can then see how much money you have left after meeting your financial obligations.

The amount of money you can borrow will be affected if you have significant outgoings. However, this is often determined on a case-by-case basis. A lender may not tell you what percentage of your income you need to have in order to qualify for a mortgage. However, if they do, a broker might be able to find another lender with a different policy.

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Your total income isn’t accepted by the mortgage lender

Maybe you had other income sources to increase your financial stability. While some mortgage lenders won’t allow you to declare more than a certain percentage of your income, others may not.

The good news is that some lenders may allow you to declare 100% of any…

  • Over time, bonuses, or commission
  • Benefits
  • An investment income
  • Rent income
  • Retirement income
  • Any other legal source of capital that you may have

You have an unsustainable financial situation 

When assessing your affordability, mortgage lenders will not only look at your income and expenses but also consider how they might change. They might decline your mortgage application if they believe your financial situation might change or that you would struggle to pay higher interest rates.

This could have happened to you. Keep in mind that each mortgage lender is different and may not be willing to take on risk. Talk to a broker to find out if they are better suited to assist you.

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What to do if your affordability prevents you from remortgaging

You may find yourself in this situation if your circumstances have changed since you took out your original mortgage. Your current mortgage provider may not be able to finance you if your income has decreased or your outgoings have increased during the mortgage term.

We can help you find a fall-back solution if you have been denied a mortgage due to affordability. We can help you find a broker that specialises in salvaging remortgage applications just like yours.

Our network is a specialist broker who can match you with a lender that might consider the following:

  • Higher income multiples
  • Customers with higher debt-to-income ratios
  • Any additional income sources you may have
  • Mortgages deemed ‘riskier’ than average

There’s a chance you didn’t approach the right lender if you were declined for a mortgage remortgage due to affordability. You can be sure that our broker-matching service will match you with the right lender for your income.

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These are the key takeaways from this article

  • Other lenders may calculate affordability differently

While most lenders will offer mortgages on the basis of 4.5 times your salary, it is possible to find a mortgage provider that offers mortgages up to 5-6 times your income. Some lenders are willing to accept income from supplementary sources and take on higher risk.

  • A good mortgage broker will help you find the right lender

You can find a mortgage broker that specialises in helping customers looking for second chances at mortgage approval if you have been denied on affordability grounds. They will examine whether there are grounds for appeal and search the market to find an alternative lender.

  • It is risky to do it all alone

    If your affordability has been denied, you don’t want to have negative marks on your credit history. This could happen if you do it yourself and apply again without consulting a specialist. Your chances of getting a better outcome the next time around can be significantly improved by hiring a broker.

  • We can assist you in finding a quick solution

If you are looking to purchase a home, timing is crucial. We designed our broker-matching service so it is quick and easy. Send us an enquiry to arrange a chat with a real human being who has the knowledge and experience you require.

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  • Can I get a mortgage without having to meet the affordability requirements?

No. According to the latest responsible lending guidelines, mortgage lenders are legally required to evaluate affordability before offering a mortgage. In the past, a self-employed person or someone with limited income could have applied for a ‘self-cert’ mortgage. However, this type of finance is no longer available in the UK.

  • What would cause a self-employed applicant to fail a mortgage affordability evaluation?

    The same reasons as we discussed in this article: not being able to earn enough, or having too many expenses. It could also be that they approached the wrong lender.

    Different lenders have different ways to assess self-employed income. For example, a lender who is based solely on retained profits might not be able to provide a mortgage, while a specialist provider would.

    Self-employed applicants are often assessed on the average of their last two years’ earnings. However, your borrowing power may increase if you are paired with a lender that bases their mortgages on your past 12 months’ accounts.

  • Does bad credit affect mortgage affordability?

    Your credit score can have an impact on your ability to get a mortgage depending on your age, severity, and cause. You might need to pay more or settle for a higher interest rate.

    If you have a bad credit history, it will only impact your ability to afford a mortgage if a large portion of your income is going towards debt repayments like an IVA or CCJ. This is likely to be taken into consideration by the mortgage lender when assessing your debt-to-income ratio.

    If you are looking for a mortgage offer contact us today.

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