Finding the right mortgage is more complicated than ever.
We help lots of clients who have been to their bank or building society, confident they will be accepted for a mortgage but then are refused with no real explanation provided, leaving them disappointed and confused.
Your mortgage broker should take the time to understand your circumstances, but also know the market well enough to see what your hurdles may be, to give you the right recommendation.
If you have been refused a mortgage, you may not have been told the reason. Here are the Top 5 reasons we find our clients have been refused elsewhere.
If you want to understand your options, our mortgage broker tools may help you start your search.
1. Debt Levels VS Income Levels
Although you may have a good income and feel you can afford your monthly mortgage payments, some lenders will ‘score’ you more harshly depending on your levels of debt, when compared to your income levels.
Certain lenders will apply restrictions or simply refuse an application if your debts are too high considering the level of income you have. For example, some may simply refuse your mortgage at the point of application if your debt levels are between 50% – 100% of your current income.
A common example of this is car finance. You may well have a good income and a lovely car on the drive, which you purchased with finance. If the outstanding finance is too high when compared to your income, this could impact on your mortgage application, even if you have the option to give the car back in the future.
A good mortgage broker will take the time to understand your current position and find the right solution for you. Contact ME today!
2. Background Properties
If you own other properties such as buy to lets, holiday homes or second properties, these can all have an impact on your mortgage application.
If you have a buy-to-let property, most lenders generally want to ensure you have sufficient rental income to cover the mortgage and costs of these in the background. Their criteria can vary greatly. Some may be comfortable that your rental income covers the mortgage payments alone, others want a specific surplus in rental income over and beyond the mortgage.
Other things that may need to be considered are, if the property has had any rental voids. Do you have sufficient personal income to cover this shortfall and other regulatory issues. If you own multiple properties, then this criteria can be even more strict still. Having background assets isn’t always an asset!
A good mortgage broker will take the time to understand your background properties and find an appropriate lender for you.
3. Your Planned Retirement Age
If your required mortgage term takes you past your planned retirement date, it’s important that you can afford your mortgage payments after your retire. The way lenders assess this can vary greatly, so choosing the right lender based on your circumstances is very important.
Some lenders will just require confirmation you have a retirement provision in place, others may complete a full analysis of your affordability after you retire.
Also, many lenders generally have a maximum age they will take the mortgage to, even if you plan to retire later. For example, you may have plans to retire past a certain age but the lender may still need to see retirement income, even if you plan to work longer
A good mortgage broker will understand your longer term plans and tailor the appropriate solution around you. Contact ME today!
4. Purpose of Borrowing
You may be planning to borrow some extra funds on top of your mortgage to complete some home improvements, fund the purchase of another property or consolidate some debts.
Depending on what your plans are, most lenders will have different criteria or maximum loan amounts for the different purposes. Some lenders may not lend for what you want to do with the funds at all.
A good broker will understand which lenders can consider your borrowing requirements and meet your needs.
5. Assessment of Affordability
All lenders will need to ensure that the mortgage you’re applying for is affordable… simple right!? Well, potentially not!
If you are employed and receive a basic salary, but also receive overtime, bonus or commission payments, the way lenders assess this income also varies. Some lenders will take 100% of this income if it’s regular enough, other will only take a proportion or none at all.
If you are self employed, the income the lender can consider could differ dramatically. Some lenders apply an average to your allowable income over a period of time, others can consider your most up to date financials. Also, what they can consider as income could really impact the amount you can borrow. If you have a limited company for example, it may be more beneficial for you if your net profits were considered as opposed to your salary and dividends.
You may also have children, or financial dependents which you receive benefits or maintenance payments for. Some lenders will also be able to consider this income and others not.
A good mortgage broker will understand these affordability ‘hurdles’ and find the right lender for your needs. Contact ME today!
This information is in no way exhaustive and should not be used for making financial decisions. It’s simply to give you an idea of how an experience broker should understand the mortgage market and give you the most appropriate advice.
If you require an help in finding the right mortgage for you, please Contact ME today!