Why mortgage applications are declined and what to do next

Money Advice Service

If your mortgage application gets declined, there are a number of things you can do to improve your chances of getting approved next time. Don’t rush off to another lender as each application could show up on your credit file. This guide will help you understand why your application might have been refused and what you can do to increase your chances next time.

Common reasons for a declined mortgage application and what to do

Poor credit history

Check your credit file with the credit reference agencies (Experian, Equifax and CallCredit) to see what information they have about you.

If any of the information on your credit report is wrong, you can correct it.

Not registered to vote

You need to be on the electoral register at your current address so lenders can confirm who you are and where you live.

It’s quick and easy to do online at aboutmyvote.co.uk or through your local council.

Too many credit applications

When you apply for credit, the lender will search your credit report to check your suitability.

Most searches are recorded, leaving a footprint on your credit history.

Repeatedly applying for credit makes it look like you have problems, so try to avoid taking out new credit deals at least 12 months before you want a mortgage.

Too much debt

Look at our Budget planner to try and bring down your existing debt.

If you’ve got money worries, there is plenty of free and confidential advice out there to help you.

Payday loans

Any payday loan you’ve had over the last 6 years will be listed on your file, even if you’ve paid it off on time. It could still count against you as lenders might think you won’t be able to cope with the financial responsibility of having a mortgage. The impact of having a payday loan will differ from lender to lender and this won’t necessarily mean you will be turned down for a mortgage.

Administration errors

Lenders aren’t perfect. Many of them put the details from your application into a computer so you might have failed because of a mistake or error on your credit file. A lender is unlikely to give you a specific reason why you have failed with a credit application other than it relates to your credit file. If this occurs then the lender should provide you with the details of the credit reference agency they used.

Not earning enough

Use our Mortgage affordability calculator to see what you can afford to borrow.

You can ask for a smaller mortgage, or see if you qualify for shared ownership or help with one of the government home buying schemes.

Not matching the lender’s profile

Some lenders prefer to lend to a specific demographic.

An independent mortgage adviser has experience of the market and is likely to have a better idea of the type of borrower lenders will want to attract.

Small deposit

See our ideas on saving for a deposit.

There are also several schemes available to buyers with only a 5% deposit.

Other reasons you might have your mortgage declined

Did you know?

Three out of four borrowers are accepted for a mortgage (Source: Intermediary Mortgage Lenders Association)

If you’re self-employed or a contract worker

You have to prove you have a steady income by showing tax statements and business accounts for at least the last two to three years.

You might also have to prove you have work secured for the future – but the decision will vary from lender to lender.

If you’ve lived in the UK for less than three years

Most lenders are unwilling to lend to new arrivals, but not all.

You’ll need to show your employment contract and a visa, which proves you have permission to live and work in the UK.

Where to go for help if mortgage application is declined?

A professional mortgage broker or independent financial adviser who specialises in mortgages will have regular dealings with a wide selection of lenders.

They will be aware of what different lenders require before offering a mortgage, and will speak to the lender on your behalf.

Read our guide on Choosing the right mortgage.

Your next step

This article is provided by the Money Advice Service.

Links with an * by them are affiliate links which help Rest Less stay free to use as they can result in a payment or benefit to us. You can read more on how we make money here.

See deals from the whole of the market to find out what you could save. Or, if you’d like to talk to someone, you can get high quality, fee-free mortgage advice from Fluent – our experienced broker partner.

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