HSBC bank has recently rejected a couple in their 40s for a mortgage, on the grounds that the husband would be too old by the time the term was complete.
Despite the financial ombudsman upholding their complaint, and the bank being forced to pay compensation to the couple, as anybody who has gone through the process will tell you, applying for a mortgage is one of the most stressful financial experiences you are likely to experience.
As well as seeking professional advice from an independent financial adviser, there a number of steps you can take to try and increase your chance of being accepted for a mortgage.
Check your Credit History
There are 3 credit reference agencies than can provide you with a copy of your credit report:
You have a legal right to check your credit score, though the reference agencies will charge you. You may be able to get a free trial from one or more of the agencies in order to check, though if you wish to review your credit report in the future you will have to pay to sign up.
It is worth checking all three agencies as they will each hold different information.
Register to Vote
Lenders need to be able to confirm where you live before they can accept you for a mortgage.
The easiest way to do this is by registering on the electoral register. It’s a quick process, and as long as you’ve got your National Insurance number to hand it shouldn’t take more than 5 minutes.
You’ll also have to be registered to vote in this year’s General Election, so head over to www.aboutmyvote.co.uk and get registered before starting the mortgage application process.
Alleviate some of your spending
Lenders will not just look at your regular in and out-goings (rent, bills etc.), they’ll want to know everything that you spend, from what you spend on groceries and fuel, to how much of your cash goes on clothing or socialising.
They’ll also know whether you occasionally dip into the red, so if you’re one for drifting into your overdraft at the end of each month, it’s worth postponing your application for around 6 months until you’re on top of this.
Unfortunately, some mortgages will be rejected (though only around 1 in 4, according to the Intermediary Mortgage Lenders Association), so it’s worth being prepared for what to do if this does happen.
First of all it isn’t worth getting panicked or upset over a rejected mortgage application, even though after saving up the deposit and finding the right property it can feel like a crushing defeat.
There could be any number of reasons why your application was declined: most of the time it’s due to the specific lender you applied with not being happy about specific details. Every lender has a different policy, so just because you’ve been declined a mortgage from one, doesn’t mean you will be rejected by all.
Check your Credit History
If you didn’t do this before your first application, now is definitely the time to do it. It could be something as simple as an anomaly in your past residence history, or something more series such as a fraud case alerted on your account.
Take a look, and then take steps to improve your rating or fix any other errors you see on there before your next application.
Talk to a mortgage broker
A mortgage broker (whether fee-free or working on commission) will be able to look at your financial and personal circumstances and cross reference them across a number of mortgage lenders. They also have expertise in matching you with the lender most likely to accept your application.
Some brokers will even specialise in certain circumstances, such as finding mortgages for those who are self-employed or for those with poor credit history.
Seek independent financial advice
If you’re struggling to be accepted, it may be worth seeking an independent financial adviser who can help you with your finances in the future.
There could be any number of reasons for being declined an application, but a financial adviser will be able to take all of your circumstances into consideration and figure out the best course of action for you moving forward.
Ryan Smith is part of the content development team at Local Financial Advice, connecting people with independent financial advisors in their local area, to help them achieve their financial goals.