Securing a mortgage is a pivotal step in the homebuying journey. Given the current disparity between property prices and salaries, relying on a bank loan is often the only way to step onto the housing ladder.
Unfortunately, there are some instances where a lender may refuse to give you a mortgage on your house.
There are various factors that can lead to mortgage refusal, both related to your finances and the property itself. In this blog, we delve into these issues and provide actionable advice on how to address them, offering potential solutions to your mortgage struggles.
1. The house has ‘non-standard’ construction.
Rest assured, you’re not alone in this. In many cases, the reason you are denied a mortgage has nothing to do with your personal finances and is instead because of the property itself. For example, if your house was built using ‘non-standard’ construction methods, then this may cause some lenders to refuse to offer you a mortgage.
Some of the most common examples of non-standard construction include:
- Timber framed houses
- Log-style cabins
- Properties constructed out of concrete
- Metal framed houses
In general, mortgage lenders consider these property types a ‘greater risk’ because there may be associated health and safety hazards, more maintenance required, and fewer people interested in these houses.
Some less traditional lenders offer mortgages on these types of properties, but each case is usually handled individually. You should look around and see which banks will work with you.
2. The property has a short lease.
If you are looking to purchase a flat using a mortgage, the length of the lease will become relevant. Traditional lenders do not usually offer a mortgage on any property with less than 80 years remaining on the lease, mainly because extending the lease becomes far more expensive and much less attractive to potential buyers.
When you are looking to remortgage on a house you already live in with a short lease, you may need to speak to the freeholder about extending the lease. Once you can get it higher, you may then be able to get a mortgage.
Similarly, if you want to buy a house with a short lease, you will either need to find a way to pay for the entire property in cash – or speak to the current owner about whether they can extend the lease themselves.
If you opt for the second option, this will usually need to be reflected in the price you buy the house for (i.e., the seller will want their costs covered).
3. Japanese Knotweed
Japanese Knotweed is one of the most common ‘natural’ challenges homeowners face in the UK. It is an invasive plant species known to cause structural damage to properties, especially since it proliferates.
Japanese Knotweed can damage tarmac, paving, and drains and cause the walls of your house to be unstable. This can make selling your property more difficult, especially at the same price that you bought it for, which, therefore, increases the lender’s risk.
You can pay experts to attempt to mitigate or remove Japanese Knotweed in your house. You can also find guides on how to carry out this prevention yourself.
4. The house is in a known high-flood-risk area.
When your house is in a location with a notoriously high flood risk, it will damage your chances of getting a mortgage—and if you do much to get one, it may be more expensive.
Lenders consider houses in a high flood-risk area to be a greater risk because they are more likely to be damaged by the weather. Any flood damage can decrease your property’s value, making it more challenging to sell and affecting the lender.
Your lender will usually feel more comfortable offering a mortgage if you have obtained adequate building insurance for the house. An independent surveyor’s report that clearly outlines the levels of risk and what could be done to mitigate it will also help.
5. Affordability
It is not only features relating to the property that may prevent you from getting a mortgage. Often, it will be because of your finances.
Banks usually lend you between 4 and 5 times your annual salary. Therefore, if this figure (combined with your deposit) does not match the value of the house you are buying, you may be unable to afford it.
Other factors may influence what the bank decides you can afford – for example, how long you have been in your current job or whether you are self-employed and can provide three years of accounts.
Remember, there’s always a way. The solution to this problem is to find a way to save up more money for your deposit or to increase your salary at work. It may seem challenging, but it’s definitely doable.
6. You do not have a strong history of making credit payments
As you will undoubtedly have heard before, your credit history significantly affects your ability to get a mortgage.
In short, the lender wants you to have a strong track record of making payments. They need to feel safe lending you money because they want to ensure you meet all your repayments.
If you have a poor credit score, this will hurt your chances. Equally, applying for a lot of credit from different places can also be a red flag – especially if you’ve done this in the months leading up to your mortgage application.
Even if you have no credit history, a lender may feel nervous because they cannot verify whether you are a ‘safe bet’.
The way to navigate this particular hurdle is to improve your credit score. Taking time to prove that you can meet all your credit payments and speaking to a mortgage advisor about what else you can do to improve your score is a significant first step.
7. The house has been overvalued.
Even if you have agreed on a property price with the seller, the bank will usually send someone to value the house themselves.
If they decide that the house has been overvalued and is worth less than the mortgage amount you are applying for, then they are within their rights to pull the brakes and amend their mortgage offer.
In this situation, if the surveyor states that home improvements are needed, you may be able to show that the extensions you will make will significantly increase the house’s value.
Alternatively, you may need to find a way to negotiate a new sale price with the owner or increase your deposit to compensate for the reduced mortgage offer.
What to do if I can’t get a mortgage on a house?
You have several options if you are struggling to get a mortgage on your house – and we have outlined many of these throughout our blog above.
Firstly, you may need to find a way to improve your personal finances—either by increasing your deposit size or improving your credit history. This may put you in a better position to try again.
As a second option, you may want to speak to some less ‘traditional’ lenders, who could offer you a deal in circumstances other banks would not.You may even be able to borrow against your house, meaning that you put a property you own up as collateral against the amount you borrow. Click on the link for more guidance on this subject.
