Our bank won't give us a mortgage. Will anyone help?

7 September 2016

Q

My husband and I are ‘mortgage misfits’. We are over 50, self-employed and buy-to-let (BTL) landlords. Our bank has rejected our mortgage application.

We are very disappointed in the bank as we only required a mortgage of less than 20% loan to value (LTV) and although we have credit card debts, we also have savings, which would eradicate 90% of the debts. We have already paid off a loan and one credit card.

But this made no difference and the bank has said it won’t lend us any amount. We are reluctant to pay off the rest of our debts with savings, as we may need them should we decide to move.

At the moment, we don’t want to move because of all of the costs incurred. We are considering selling one of our BTL properties, but would rather not because we view them as are our future pensions. Will someone else provide us with the small mortgage we need?

From
VD/Hastings

A

The first step you need to take is to try to find out exactly why your bank isn’t happy to lend to you.

A single credit search won’t necessarily damage your credit score, though if the reason for the decline was an already low score it won’t help. If that’s the case, it’s worth getting a copy of your credit file to understand what it shows and what you may be able to do to improve it. That’s easily done online through sites such as Checkmyfile.co.uk or Noddle.co.uk.

 

Many of the smaller building societies do not credit score, so they could be worth approaching. If you’ve had credit difficulties in the past, there are some specialist lenders, which may be able to help, though interest rates will be substantially higher than high street lenders offer.

You mention credit card debts, so affordability could also be an issue. Although you have savings, unless debts are actually cleared, repaying them will still be taken as a monthly commitment. So the lender may have felt additional borrowing would take your monthly outgoings beyond their comfort level.

 

If there are mortgages on the let properties it could also be that your bank isn’t comfortable with your total amount of borrowing – especially bearing in mind that interest rates could be higher in the future.

However, it’s important to remember that this is about what the lender’s own affordability assessment says, and every lender has a different calculation. So if affordability is the issue, it may be that other lenders would look more favourably on your situation.

There are other possibilities as well: if you are looking for the mortgage to run into retirement, lenders will need to see your pension income is sufficient to support it, not just your current earnings.

Or being self-employed – if you’ve had fluctuating income over the past couple of years, your bank may have taken the lowest figure (worst case scenario) and deemed that not enough.

These are all areas of lending policy that can differ widely between lenders, so there may well be someone out there able to help. It is understandable that you may not want to take a ‘pot luck’ approach and run up yet more credit searches, so it would be worthwhile speaking to a mortgage broker who will be able to assess your situation in detail and discuss it with potential lenders before committing to anything.