Refused a Mortgage

Getting a mortgage is not always easy, especially your first mortgage. There are many reasons you can be refused or declined for a mortgage and lenders are much more careful about how they lend money these days. We hope you find the following tips useful.

Documentation

When applying for a mortgage you will be required to provide documentation which the lender will carefully review to try and ascertain how you conduct your affairs. This gives the mortgage lender an insight into your financial habits and assists them in deciding whether or not you are sufficiently competent to service a mortgage without it running into arrears. The lender will generally ask you for the following documentation:

  • Three recent payslips
  • Your last P60
  • A Salary Certificate from your employer
  • Three years certified accounts from your accountant (if self-employed)
  • Twelve months’ savings statements
  • Twelve months’ bank statements
  • Twelve loan statements
  • Twelve mortgage statements (if you are not a first time buyer)
  • Six months’ credit card statements
  • Proof of address (usually two utility bills)
  • Photo I.D. (Usually Passport or Driving Licence)

How do lenders assess your Documentation?

First, lenders will generally start with your income and see whether its sufficient to support the level of borrowings you are seeking. This really is the starting point and if affordability is insufficient, the mortgage will simply not be granted.

Often lenders will look closely at your loan statements. Having some form of loan is helpful for demonstrating that you are capable of managing your financial repayment obligations. However, too much debt is counter-productive as any debt will limit your ability to borrow and your repayment capacity. If you do have loans, you may need to clear them to have sufficient repayment capacity to afford your new mortgage. Therefore, a small loan can demonstrate your ability to manage repayments but can also be paid off if required prior to getting a mortgage.

Your ability to service rent

Another indicator to a mortgage lender is your ability to service rent in line with your required new mortgage. This criteria is not unlike your ability to save a deposit, generally lenders will want to see your ability to manage obligations demonstrated through one or the other. If you are not paying rent similar to a new mortgage, why are you not saving the difference? Where is your money going every month? Are you responsible enough to service the new mortgage? This is indicative of what a lender might consider in their assessment of your application.

What might be perceived as negative?

Lenders do not like bank statements that show wages going in and being quickly withdrawn, this may be an indicator of poor financial management or financial stress. Also, mortgage lenders do not like to see savings being made and then being withdrawn. Utility bills which have arrears and are not paid on time can be viewed as a negative.

Probably the most serious negative for a lender is a poor credit history showing arrears on your Irish Credit Bureau report. It is an excellent idea to order your credit report online before making a mortgage application. Sometimes loans can show arrears on the bureau for a technical reason, this is not the norm but it can happen. If an error has been made with the reporting of your loans, you should seek to have your credit report amended to reflect the correct payment profile. It is better to do this before approaching a lender rather than after your application has been submitted.

You can order your own credit bureau report online and this is not expensive at www.icb.ie and the report usually takes about ten days to reach you by post.

If you wish to discuss in more detail, please call one of advisers on 01 4804414 or request a call back. Alternatively, you can apply online and an Adviser will contact you.

Warning: If you do not keep up your payments you may lose your home