Why might you have an unsuccessful remortgage application?
Often, having an unsuccessful remortgage application is down to affordability assessments and changes to residential mortgage regulations, which could have altered since you took out your original mortgage application. Here are some other reasons your remortgage application may have been rejected:Bad credit history
When applying for a remortgage, lenders will check your credit report to see how well you have been able to manage your money in the past. This information is used to predict future behaviours and ultimately helps decide whether or not they lend to you. Having a poor credit history can limit your ability to remortgage. If you get accepted, you may face higher interest rates than your previous mortgage due to the risk the lender is taking by lending to you.High loan-to-value ratio
Your loan-to-value ratio is the relationship between the size of the mortgage you want to take out and the value of your property. The more money you borrow against your property, the higher your LTV ratio will be. Each lender has its own maximum LTV. Many lenders won’t allow you to borrow more than 90% of your home's current value. This limitation is in place to try and reduce the risk of borrowers falling into negative equity. If your LTV is high, this can make remortgaging more difficult.Affordability
When applying for a remortgage, lenders need to be confident that you are able to afford to make the repayments. There are measures in place such as the Loan-to-income flow limit, that prevent you from borrowing more than you can afford. Due to the LTI, lenders cannot allow you as a borrower to take out a loan that is more than 4.5 times your annual salary.How can I improve my chances?
Use eligibility calculators
Each lender has its own criteria, so getting rejected by one lender, doesn’t mean you will be rejected by every lender. There are some lenders that specialise in providing finance to those with less than perfect credit scores, so these can be an option if your credit score has dropped, or doesn’t meet other lenders' requirements.Using online calculators such as our mortgage calculator means you can check your eligibility before you apply, without risking your credit score. That way, you will only apply for remortgage deals that you’re eligible for.
Consider making overpayments on your current mortgage
If there is no rush to remortgage, it could be beneficial to wait a bit longer before you begin applying for a remortgage. Making sure your payments are always made on time will help build up your credit score, and show lenders that you are able to manage your money. If you’re in the financial position to do so, making overpayments towards your current mortgage can reduce the balance quicker and will increase your equity, thereby reducing your LTV ratio.Improve your credit score
You can check your current credit score by using a number of different online tools, and many of these won't affect your score. You can usually also request a credit report on yourself so you can see if any issues are flagged up. From this point you can work out the best plan to increase your credit score. Are there any errors or associations that need removing? Have you got lots of obsolete accounts that need closing down? Or conversely are you lacking in credit history?If you’re worried about remortgaging or need help and advice about how to increase your chances of a successful remortgage application, speak to one of our expert advisors. They will be able to talk you through your individual circumstances and help you find the best deals that you are eligible for.
