The Most Common Reasons for a Remortgage Decline
While every lender has its own specific criteria, the reasons for declining a remortgage application tend to fall into a handful of common categories. Understanding these categories is the first step towards getting your next application approved.
1. Credit score and credit history: This is the single most common reason for a remortgage decline. Lenders use your credit file to assess your reliability as a borrower. Late payments, missed payments, defaults, county court judgements (CCJs), and high levels of existing debt can all lead to a decline. Even relatively minor issues — such as a forgotten utility bill or an old mobile phone contract default — can cause problems with certain lenders.
2. Affordability assessment failure: Under FCA regulations, lenders must verify that you can afford the mortgage payments, not just at the current rate, but also at a higher stressed rate. If your income is too low relative to the mortgage and your other financial commitments, the lender will decline on affordability grounds.
3. Property valuation issues: If the lender's valuation of your property comes back lower than expected (a down-valuation), your loan-to-value ratio may exceed the maximum for the product you applied for. Additionally, the surveyor may flag issues with the property's condition or type that make the lender unwilling to lend against it.
4. Loan-to-value ratio too high: If you have limited equity in your property, fewer lenders will be available to you. Most competitive remortgage products require an LTV of 80% or less, and some lenders have a maximum LTV of 75% or even lower for certain products.
5. Employment or income issues: Being in a probationary period at a new job, having gaps in employment, or having income that is difficult to verify (such as freelance or contract work) can all lead to a decline. Self-employed applicants typically need at least two years of accounts to satisfy lender requirements.
Credit Report Issues That Cause Declines
Your credit report is a detailed record of your borrowing and repayment history, and lenders scrutinise it carefully during the application process. Here are the specific credit issues that most commonly lead to a remortgage decline:
Missed or late payments: Any record of missed or late payments on credit agreements within the last six years can affect your application. Recent missed payments are viewed more seriously than older ones. Missed mortgage payments are treated particularly seriously, as they directly relate to your ability to manage a secured loan.
Defaults: A default occurs when a lender formally records that you have failed to maintain payments on a credit agreement. Defaults remain on your credit file for six years and are a significant obstacle with mainstream lenders, though specialist lenders may still consider your application depending on the age and size of the default.
County court judgements (CCJs): A CCJ is a court order for payment of a debt. Like defaults, CCJs stay on your credit file for six years and severely limit your options with mainstream lenders. Satisfied CCJs (where the debt has been paid) are viewed more favourably than unsatisfied ones.
Too many credit applications: Every time you apply for credit, a hard search is recorded on your file. Multiple applications in a short period can suggest financial desperation and may lead to a decline. This is why it is important to be selective about where you apply and to use soft searches or broker assessments first.
Electoral roll registration: Not being registered on the electoral roll at your current address is a common and easily fixable reason for a decline. Lenders use the electoral roll to verify your identity and address. Registering is free and can be done online through your local council's website.
Financial associations: If you have a financial connection to someone with poor credit (such as a joint account or a joint loan), their credit issues can affect your application. If the association is no longer relevant, you can request a notice of disassociation from the credit reference agencies.
Property and Valuation Reasons for Declines
Even if your personal finances are in good order, issues with the property itself can lead to a remortgage decline. Lenders are lending against the property as security, so they need to be confident in its value and condition.
Down-valuation: If the surveyor values your property below the level needed for your chosen LTV band, the lender may decline or offer a less favourable product. Down-valuations can occur due to falling property prices, over-optimistic expectations, or the surveyor being more conservative than anticipated. You can challenge a down-valuation by providing evidence of comparable sales, but this is not always successful.
Non-standard construction: Properties built using non-standard methods — such as concrete frame (including Wimpey No-Fines, Airey, and Cornish units), steel frame, timber frame, or pre-fabricated construction — can be difficult to mortgage. Some lenders have blanket exclusions for certain construction types, while others will consider them on a case-by-case basis.
Structural issues: Evidence of subsidence, significant cracking, underpinning, heave, or other structural problems will concern most lenders. If the property has a history of subsidence but has been underpinned and monitored, some lenders may still consider it, but you will likely need a specialist surveyor's report and a broker who knows which lenders are more flexible.
Environmental factors: Properties at significant risk of flooding, those near landfill sites, or those affected by contaminated land may face lending restrictions. Japanese knotweed on or near the property is another common issue, with most lenders requiring a professional treatment plan before they will lend.
Lease length (leasehold properties): If you own a leasehold property and the remaining lease is short (typically below 70 to 80 years), many lenders will decline or restrict lending. Extending the lease before remortgaging can resolve this, though it involves additional cost and time.
Location and type: Properties above commercial premises, in certain high-rise buildings (particularly those with cladding issues), or in unusual locations can face lending restrictions. The cladding crisis following the Grenfell Tower fire has made it particularly difficult for some flat owners to remortgage.
