In this brief guide, we are going to discuss why a Bank of Scotland mortgage application may be declined and what you can do about it.
Why a Bank of Scotland mortgage application may be declined?
There are various reasons why a Bank of Scotland mortgage application may be declined, they include:
- Too much debt
- Low or no credit score
- High monthly expenditure
- Low Mortgage deposit
- Low salary
- Complex income
- Property type
- Errors on application
- CIFAS marker
- Retirement age
- Undervalued property
- Unsuitable proof of mortgage deposit
Bank of Scotland mortgage Declined because of too much debt
When assessing your mortgage affordability, Bank of Scotland will usually look at your credit file to see how much debt you currently have.
If you have way too many debt commitments then your Bank of Scotland mortgage may be declined due to this.
Bank of Scotland may feel you have too much debt and you may struggle to keep up on all your debt repayments or they may feel your monthly mortgage repayments will just fit inside your disposable income after all your other debts have been paid.
In any case, some mortgage lenders may just have a maximum number of debt accounts that a borrower can have before they will automatically decline the mortgage application based on affordability whilst other mortgage lenders may have a maximum debt to income percentile that a borrower can have before they will decline the mortgage based on affordability.
Your Bank of Scotland mortgage application can therefore be declined if you have too much debt and a high debt to income ratio.
Bank of Scotland mortgage application declined because of your credit score
Bank of Scotland may discover things on your credit score which it doesn’t like such as:
- A County Court judgment
- An Individual voluntary arrangement
- A debt management plan
- A default (especially a mortgage default)
- A bankruptcy
- A home repossession
Having bad credit could, therefore, be a reason why your Bank of Scotland mortgage application is declined.
Although you may be able to find a mortgage lender who will lend to you even with bad credit, you may need to use a specialist mortgage broker such as a bad credit mortgage broker.
Different mortgage lenders will have different criteria for how they treat the things on your credit file. E.g a mortgage lender may not decline your mortgage application if you had a CCJ but it was satisfied years ago. Other mortgage lenders may decline you based on affordability for the same thing.
Bank of Scotland mortgages will likely have various lending criteria for their different mortgage products and they may have a suitable product for you if you have bad credit.
Bank of Scotland mortgage application declined because of your monthly expenditure
If your monthly expenditure is too high you may find that your Bank of Scotland mortgage application could be declined.
Mortgage lenders like to see that you have some room between what you earn and what you spend. This is called your disposable income.
If your disposable income is not big enough to cover the monthly repayment cost of a mortgage then your Bank of Scotland mortgage application could be declined.
When you initially get a mortgage in principle, Bank of Scotland may not look in-depth into your finances but once it comes round to making a mortgage offer you will find that they will take a much deeper look at your finances before giving you a mortgage offer.
This means if your transactions have a lot of red flags your Bank of Scotland mortgage application could be declined.
Bank of Scotland mortgages will look for transactions that may indicate that you aren’t good at handling your finances well. This could be gambling or constant payday loan repayments.
Many prospective borrowers have been declined for a Bank of Scotland mortgage for this very reason.
Bank of Scotland mortgage application declined because of your mortgage deposit
If you haven’t got a large enough mortgage deposit then you may find that Bank of Scotland may decline your mortgage application.
You could use a government scheme to increase your mortgage deposit.
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 the 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.
Most mortgage lenders have strict lending criteria and will not lend beyond their loan to value rates.
A mortgage broker will likely advise you on what mortgage lenders may be willing to lend to you based on the mortgage deposit you have and the price of the property you intend to purchase.
Bank of Scotland mortgage application declined because of your salary
If you don’t meet Bank of Scotland’s mortgage multiple criteria then your Bank of Scotland mortgage application could be declined.
Mortgage multiples are a number that mortgage lenders use to multiply your income to see the maximum they may be able to lend you. A mortgage multiple is better known as an income multiple.
Your salary is the main determining factor on if you could afford a mortgage or not. Mortgage lenders usually use their mortgage multiple as the first basis of your mortgage affordability.
If you don’t meet the minimum salary requirements for a Bank of Scotland mortgage then your Bank of Scotland mortgage application may be declined.
The only alternatives you may have in this case will be to buy a property at a smaller price or wait till you get a job with better pay.
In some cases, a much higher credit score could allow you to get a mortgage with a much bigger income multiple.
Different mortgage lenders have different mortgage multiples and to avoid getting declined you should at least have an idea of what these mortgage multiples are before making an application for a mortgage offer or a mortgage in principle.
A mortgage broker may have an idea of what these mortgage multiples could be and will be able to place your mortgage application with the best mortgage lender suited to you.
This will hopefully avoid your mortgage application being declined on affordability.
Example: A mortgage lender who uses an income multiple of 5 will decline you based on affordability if you apply to their mortgage product for a £500,000 mortgage but you only earn £50,000 which makes you eligible for a maximum mortgage of £250,000 based on their income multiple.
Bank of Scotland mortgage application declined because of your income
All mortgage lenders will accept salary paid through PAYE and some mortgage lenders will accept benefits and other supplementary income but they will only accept a certain percentile of your supplementary income.
This percentile differs from one mortgage lender to another.
If your mortgage is made up primarily of supplementary income such as benefits then you may need to find a mortgage lender who accepts a high percentile of those if not you risk your mortgage being declined.
Benefits and supplementary income which mortgage lenders may accept include:
- Pension income
- Investment Income
- Overseas earned income
- Maintenance Payments
- Rental Income
- Attendance Allowance benefit
- Carer’s Allowance benefit
- Child Benefit
- Child Tax Credit benefit
- Disability Living Allowance (DLA)
- Incapacity Benefit (IB)
- Industrial Injuries Benefit (IIB)
- Maternity Allowance benefit
- Pension Credit benefit
- Severe Disablement Allowance
- Widow’s Pension benefit
- Working tax credit benefit
You should ensure you check with Bank of Scotland directly or through your mortgage broker to ensure that your Bank of Scotland mortgage application is not declined because of your income.
Bank of Scotland mortgage application declined because of the property
Your Bank of Scotland mortgage application could be declined because of the type of property you are looking to purchase.
If you have a non-standard construction property then you may find it much harder to get a mortgage with some mortgage lenders and this includes Bank of Scotland.
Other reasons why your Bank of Scotland mortgage application could be declined include:
Mismatch of information
Your Bank of Scotland mortgage application could be declined if there is a mismatch of information on what you put down on your mortgage application and what the mortgage underwriter discovers on the supporting documents you sent in with your Bank of Scotland mortgage application.
Another reason why your Bank of Scotland mortgage application could be declined would be if you have been recorded on the CIFAS record for fraud.
If this is the case then you should get your CIFAS record using a subject access request.
You can then dispute the CIFAS record if it was incorrectly noted.
Another reason why your Bank of Scotland mortgage application could be declined is if your retirement age is much closer and your mortgage term will end far beyond your retirement date.
If this is the case then you may find that Bank of Scotland and most mortgage lenders will decline your mortgage as they will want to know where your income will come from once you have retired.
If you are unable to show where your post-retirement income will come from then the mortgage lender may be right to question where you will raise funds to keep up the monthly mortgage repayments on your mortgage.
Another reason why a Bank of Scotland mortgage application could be declined is if there is an undervalued property.
This could be the case if you are paying a much higher price for the property than the property is valued at.
In this case, the asset is worth far less than the debt which will be placed on it and hence it is not a good use of funds for the mortgage lender.
This is primarily because if they had to repossess the property, it will be worth much less than they had borrowed you.
Unsuitable proof of deposit funds
If you cannot prove where your mortgage deposit has come from or it has come from an unconventional source that Bank of Scotland does not approve of then you may find that your Bank of Scotland mortgage application is declined.
In the end, if your Bank of Scotland mortgage application is declined then your only option will be to make a new mortgage application (sometime in the future) but you should only do this after you have consulted with a mortgage broker.
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 out 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.
In this brief guide, we discussed why a Bank of Scotland mortgage application may be declined and what you can do about it.