In this brief guide, we are going to discuss why a Halifax mortgage in principle could be declined and what you can do about it.
Why your Halifax mortgage in principle was declined?
You may have applied for a Halifax mortgage in principle application and then been declined or maybe your Halifax mortgage in principle application was originally approved but then you were later declined.
There are various reasons why your Halifax mortgage in principle application could be declined. Some of them are:
Not meeting the mortgage lenders criteria
Your Halifax mortgage in principle application could be declined if you are applying for a mortgage which you do not meet the mortgage lenders lending criteria.
It is very important that you apply for mortgages which you will likely meet the mortgage lenders lending criteria and this is what mortgage brokers will typically do to ensure your Halifax mortgage in principle application is not declined.
Another reason why your mortgage in principle application could be declined would be if you have financial associations which the mortgage lender seems to be troublesome or negative.
If you have ever had a co-borrower on a financial product then you may indeed have a financial association with this person and this could very much affect your ability to get credit if the person has bad credit or has been known to do fraudulent things.
This is especially the case if the person has a Cifas record.
You may be able to remove a financial association on your credit file by asking the credit bureau to make a notice of correction on your credit file explaining the association or how it no longer exists.
Missed payments or arrears
Another reason why your Halifax mortgage in principle application could be declined is if you have had missed credit repayments on your previous financial obligations such as mortgages, car finance, personal loans or credit cards.
If you have had missed credit repayments or arrears then your credit score may have been affected as this will usually be registered on your credit file and Halifax may not be so keen on approving you for a mortgage.
Other bad credit
If you have other bad credit such as the below thenHalifx may also declined your mortgage in principle application as they may not see you as being credit worthy.
Debt management plans
County court judgements
Individual voluntary arrangements
Payday loans etc
To check if you have any of these on your credit file, you should check your credit score.
If you are unsure of what your credit score is then you should check your credit score from the four credit bureaus in the UK: Experian, Crediva, Equifax and Transunion.
Some of these credit bureaus may charge you a fee to view your credit report so what you can alternatively do is request a statutory credit report which is a free credit report which each credit bureau must provide to you upon you requesting it.
Alternatively, you can also use credit score services such as Checkmyfile and clearscore to check your credit report.
Changes to your job or income
If there has been any recent changes to your job which has subsequently affected your income then you may find that Halifax may decline your mortgage in principle application as they may not view you as being creditworthy as your current level of monthly disposable income may not be viewed as sufficient to cover the monthly mortgage repayments which you will have with your mortgage.
Change of circumstances
Another reason why your Halifax could decline your mortgage application is because of change of circumstances such as a change in your job as mentioned above but your Halifax mortgage in principle application could also be declined if you have taken maternity leave, just given birth and hence have one more mouth to feed or any other scenario which may affect your ability to earn a stable and reliable income.
Mismatch of information
One of the main reasons why a Halifax mortgage in principle application could be declined is if there is a mismatch of information between what you have put on your mortgage in principle application form and the supporting documents you may have submitted or the third party information that Halifax was able to obtain when carrying out their checks.
If there is a general lack of consistency or too many instances where there is a mismatch of information between what you have supplied and what the mortgage lender has obtained from other sources about you then they may think that you are trying to be fraudulent and decline your mortgage in principle application.
Taking out recent credit
Taking out recent credit could also cause your Halifax mortgage in principle application to be declined.
This could especially be the case if it was credit such as payday loans.
Taking out more credit could change your debt to income ratio and hence make the mortgage you are applying for unaffordable as you may not have enough disposable income to pay for your mortgage each month.
If you are not on the electoral roll
A lot of mortgage lenders will decline mortgage in principle and mortgage applications if the borrower is not on the electoral roll.
This means your Halifax mortgage in principle application could be declined if you are not on the electoral roll at your current home address.
You can resolve this by simply signing up with your local council and getting registered on the electoral roll.
What to do if you have been rejected for a Halifax mortgage in principle?
If you have been rejected for a Halifax mortgage in principle then the good news is that it is likely not the end of the road for youl. There may still be numerous mortgage lenders who are willing to lend to you based on your current mortgage affordability.
Even if you are not able to get a mortgage lender to lend to you at this point there may still be things you can do to increase your mortgage affordability.
If your credit score or credit history is the issue then the below tips may be able to help you:
- Reduce your credit utilization below 30%
- Avoid getting rejected for credit
- Avoid missing credit repayments
- Avoid applying for too much credit in a short time
- Avoid payday loans
- Get a secured credit card, a credit builder card or loan to show good credit repayment behaviour
- Keep your credit accounts open as long as possible
- Get on the electoral roll.
Before deciding on what to do next you may want to consider speaking to a mortgage broker who may be able to help you by getting you a mortgage in principle with a new mortgage lender.
A mortgage broker could also advise you on how to improve your mortgage affordability using government schemes such as the below.
Use a Government scheme
Government schemes help you reduce the amount of mortgage deposit you may need to put down, reduce the price of the property or create a structure that increases your mortgage affordability much sooner than it would have been.
Some of these include first-time buyer government schemes whilst others in this list are accessible to you even if you are not a first-time buyer.
Government schemes are not available to you if you are getting a buy to let mortgage.
The Government schemes include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save a maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan– gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership– You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy– similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy– This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy– allows you to buy your home at a discount price.
- Preserved right to buy– same as above.
- Right to acquire– similar to the above.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
Use a mortgage broker for your mortgage in principle
You may want to use an independent mortgage broker to help you get a mortgage on your new home.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.
This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle.
This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application.
Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document that details the features of your mortgage including how much you will pay per month.
It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.
Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.
They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer, and set a completion date with the seller or their conveyancer.
This will then bring an end to the conveyancing process, at which point you will receive the keys to the house and move in.
In this brief vlog we discussed why a Halifax mortgage in principle application may be declined and what you can do about it.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.