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★Why can’t I get a remortgage?
Posted on: 30th May 2018 | Filled under: How to Sell a House
Written by: Mark King
When you need cash in a hurry, accessing the money tied up in your South Wales property can be an ideal solution and a remortgage can be the answer to your cash flow problems. If you are struggling to remortgage your South Wales property, there could be a number of reasons this is happening, and it’s a good idea to take time to sit down and consider all the options before continuing to make more applications to lenders. Any mortgage refusal you have already received is likely to have a negative impact on your credit file, which could ultimately influence lender decisions on a remortgage even further.
There are a variety of reasons you could be missing out on remortgage approvals from building societies and banks. Just a few of these could be: that you have a bad credit score; you’ve previously missed some of your regular mortgage payments or other loan payments; your income is insufficient, or you are self-employed. Further discussion on the reasons why you can’t get a remortgage for your South Wales property are highlighted in more detail below.
Bad credit rating prevents remortgaging
Your credit rating is a record of your financial transactions and history and lenders will review your credit file in some detail when assessing your mortgage application. Some of the details included in your credit report are:
– information about credit card borrowings and payments
– utility bill records and repayment histories
– missed payments to creditors
Your credit file contains a complete credit history and snapshot summary of your finances and is accessed by mortgage lenders when they are assessing mortgage applications. Taking time to access your credit file will identify whether there are any likely risks associated with lending you money. You can also address any mistakes that are shown in your credit file by contacting the credit reference agencies direct.
It’s highly likely that any mortgage application you make will be recorded on your credit file, so refusals will have an adverse impact on your current credit scoring. You can get in touch with all the main credit reference agencies to obtain a copy of your credit report before making any mortgage application; this will give you some indication of your credit score and the likelihood of being accepted for a new mortgage. The three major credit reference agencies are Equifax, Experian and Callcredit.
Credit score is key for a remortgage
In general, the key to having a high credit score is a history of continued stability and consistency in the payment of bills and debts. It’s important that you’re registered to vote and ideally, you should have lived at the same address for more than three years. Being able to evidence that you’re in long-term employment and having a good banking record and no history of card issues will all provide lenders with confidence that you’re a solid bet for loans. Some people with great credit records can be shocked to discover they don’t actually have a good credit rating, this could be the case if you regularly pay your bills on time, have never taken out a loan, or taken out any form of lease agreement. It seems surprising but lenders often prefer to deal with a borrower who makes minimum credit card payments on a monthly basis, finances a car via a lease agreement and utilises store cards and loans for the funding of larger items, like furniture and appliances. This could be due to the fact that lenders can see vast potential for selling on additional interest-bearing products in future, alongside the mortgage. If you’re the type of person who always pays bills on the nail and don’t have any credit to speak of, you could raise your credit rating by taking out a credit card or loan and making regular repayments in the 12 months prior to making an application for a remortgage.
Some additional factors that could go against you when your credit file is being assessed include:
– any lack of financial history
– any County Court Judgements which are registered against your name for unpaid bills
– frequent records of late or missed payments to creditors
If you do have a poor credit record, it is possible to improve this if you prepare yourself thoroughly in the 12 months leading up to making any mortgage applications. This could help you pass the credit rating checks from lenders and you will find details about lifting your credit score are available at the Money Advice Service.
Low income may prevent your remortgage
If you’re on a low income or self-employed, you could find it difficult to remortgage your home and lenders will scrutinise your income and expenditure carefully to ensure you can make repayments. Some of the factors lenders will look into include:
– your living costs
– utility bills and any outstanding bills you have for credit or finance
– impact of the mortgage payments on your income
Lenders will also consider the likely impacts of any interest rate rises or changes in your personal circumstances on your ability to make regular mortgage payments. You can check out whether you will be able to pay your mortgage regularly online using a mortgage affordability calculator (insert link: https://www.moneyadviceservice.org.uk/en/tools/house-buying/mortgage-affordability-calculator). Again, taking time to sort out your finances prior to making mortgage applications, really does make sense. One of the things you could consider would be putting any credit card debt or store card loans under one umbrella, using a low-interest loan over a long period of time from a recognised provider. Taking out a loan of this nature would mean your monthly payments would be much less than likely repayments required on your credit card or store cards.
Getting a remortgage when you’re self employed
If you’re self-employed you could find it more difficult to find a lender that’s prepared to remortgage your property as it can be hard to evidence earnings. Early in the 2000s lenders introduced self-certification mortgages, which were geared towards borrowers with difficulties proving income or non-traditional sources of income. This way the borrower could certify their annual income as a method of obtaining a mortgage. Self-certification mortgages were extremely useful for self-employed applicants with a short trading history and lack of financial records, alongside applicants with second jobs or casual jobs as these people often found it difficult to evidence entire earnings. In the years leading up to the financial crisis of 2007/8 many banks and building, societies provided mortgages to applicants with a poor credit history or on the basis of self-certification of income. Indeed some of these mortgages were on a 100% basis and did not require any form of lender deposit. The credit crunch led to the UK government nationalising some of the big banks, including Lloyds TSB, Royal Bank of Scotland and Halifax Bank of Scotland (HBoS).
The 2008 financial crisis caused banks and building societies to re-examine their lending criteria, and self-certification mortgages have now disappeared from the market because they were so open to fraudulent applications or applications from people with a poor credit history. It’s generally the case now that lenders will have an expectation that borrowers evidence at least 12 months’ employment and self-employed applicants will be required to provide business accounts and confirmation of at least two years’ trading. If you can’t provide this information, you may still be able to find a mortgage provider if you go through an independent mortgage broker, but it will be difficult. In general, you should not expect any lender to provide a remortgage if you’re asking for a loan that’s more than four times your salary and it’s usually the case that lenders offer a maximum mortgage of three times your salary.
You may not be accepted for a remortgage if you don’t have enough equity in your home
If the equity in your current property is fairly low or non-existent, you could struggle to be accepted for a remortgage as lenders might feel that you don’t have a sufficient deposit available. This is because lenders will look at the Loan to Value ratio (LTV) before making any decision. The LTV is the percentage amount of total unpaid mortgage of your property in relation to the current house price (want to learn more about LTV? Click Here). In effect, if you have a mortgage of £75,000 on a home that has now got a current value of £100,000, then your LTV will be 75%. In the present economic climate, many lenders will be unwilling to lend to anybody with an LTV greater than 85% – they prefer to remortgage to applicants with an LTV of 75% or lower. Where LTV ratios are higher you can also expect to pay higher rates of interest on your loan. The reason lenders are so hot on good LTV ratios is that if a worst case scenario should occur and they have to repossess your property and sell it on, they need to know they will recover the value of the outstanding loan.
Over the past 20 years, many people did remortgage to finance property or purchase buy to let properties. At the time lenders were prepared to accept applications with higher LTVs because house prices were rising by up to 20% a year. The onset of the credit crunch in 2008, problems experienced by the banks and building societies, and a falling house price market has made lenders much more cautious. Many of these people that got a remortgage with 90% or higher LTVs may be finding themselves in a situation of negative equity and will be unable to remortgage their home until their LTV percentage has improved significantly.
When you’re looking for a remortgage
All building societies and mortgage lenders have their own criteria for mortgage lending, so it’s quite possible that a different lender could be prepared to finance your remortgage if you shop around. Using a mortgage broker is one good way to access mortgages from a number of different sources, with differently available deals such as fixed rate or interest-only mortgages. You will also discover that mortgage lenders very often charge a higher interest rate if you have a poor credit history.
A quick cash sale could be the solution to your South Wales property remortgage issue
One fast answer to problems with a remortgage on your property could be arranging a quick cash sale, and we are a South Wales-based property investor with vast expertise in the South Wales housing market. If you’re struggling to remortgage your property in South Wales and need a quick cash house sale, get in touch so we can discuss all the details. We will arrange a speedy purchase transaction for your South Wales property and you could be sitting pretty with the cash in the bank within just a few weeks. We buy any house in South Wales regardless of condition.
Sell any South Wales house fast with Mark King Properties. The no.1 Sell House Fast service in South Wales.
