When your current deal comes to an end you may look to remortgage. This could be to a lower rate to cut down your monthly payments or you may want to borrow more cash against your property. However, there are occasions when a remortgage just isn’t an option.
If you find yourself in this situation and you can’t remortgage, there are ways you can improve your chances of being successful in the future.
Are you a mortgage prisoner?
A mortgage prisoner is a term used for homeowners who would like to remortgage or move to a new house, but can’t because they are not eligible to remortgage. They are typically stuck on higher interest rates such as the lenders’s Standard Variable Rate.
I can’t remortgage – what’s the reason?
Mortgage lenders have their own eligibility criteria, so just because you’ve been turned down by one lender does not necessarily rule you out of borrowing from others. However, there are some very common reasons why someone can’t remortgage – these include:
All mortgage lenders will do an affordability check when you remortgage. They’ll look at your income and outgoings to ensure that you can afford the remortgage deal. If you fail these checks, you may be deemed too high a risk, and it is likely your application will be denied.
Whilst the lender is protecting themselves through these checks, they also don’t want to put you into any financial difficulty and lend you more than you can afford to repay. At worse, defaulting on your mortgage payments could put your home at risk and would certainly impact your credit score. This can make accessing credit even more difficult in the future.
Poor credit history
A lender will also check your credit history, which is a good indicator of how well you have managed your finances in the past. Having bad credit won’t necessarily stop you getting a remortgage, but it will certainly limit your options.
If you can’t remortgage, then it’s definitely worth looking into your credit history. Something like a poor credit score is repairable, and will have less impact over time.
Your loan-to-value is too high
The more you borrow against your property, the higher the loan-to-value will be. Most lenders have a maximum LTV they will lend, such as 90% or 95%. The reason that these limits are in place is to reduce the risk of you falling into negative equity. Negative equity is when your property is worth less than your outstanding mortgage balance.
Can I improve my chances of a successful remortgage application?
It can be frustrating and demoralising if you can’t remortgage. However there are several things you can do before you make your next application.
Reduce your debts
If you can afford to do so, use any spare cash and put it towards your outstanding debts, such as credit card balances or overdrafts. The less you spend on credit the better, and will improve your affordability checks. Seeing that you are paying off your debts will help you to come across as a responsible borrower.
Make overpayments on your mortgage
If you can’t remortgage at the moment for whatever reason, but do have some spare cash, then you may want to consider making overpayments on your mortgage. This will help to reduce your mortgage balance quicker as well as building more equity in your property.
Cut back on spending
If you can’t remortgage because you’ve failed affordability checks then try to reduce your non-essential spending to give yourself a boost.
If you can, try to create a budget which will help you to identify areas where you can cut back.
Check your credit score
You can check your credit score for free with any of the main UK credit reference agencies. This will give you an idea of where you stand and if there are areas for improvement. Simple ways to improve your credit rating include:
- Making sure you’re on the electoral register
- Setting up direct debits to pay bills
- Reduce your debts/pay them on time
- Use small amounts of credit with a credit-builder card
Consider speaking to a mortgage broker
A mortgage broker can take the stress out of finding a remortgage deal. They’ll be able to go through your individual circumstances and help you to find mortgage deals that are suitable and can check your eligibility before you even apply.
The above post does not constitute advice – financial, legal or otherwise. The information within this article is the author’s own opinion and do not necessarily reflect the views of SO Media or So Smart Money.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE