Why Can't I Get A Remortgage?

No proof of income

During the 2000s lenders created the "self certified" mortgage product, and this was made for the group of borrows who could not prove their income and could therefore certify their yearly earnings themselves with these new mortgages. This was very useful for self employed people who hadn't been trading long or couldn't provide any financial records, it was also good for those who had a second job in the evening such as casual waitressing or taxi driving where it is difficult to keep a clear record of your earnings. However, because of this it is also very open to fraud and people fixing their income to seem higher, and particularly in America there was a big problem with people not paying back when they should have done and this is often cited as a major contribute to the credit crunch.

Since 2008, therefore, many of these kinds of mortgages have disappeared and it's now a lot stricter in the mortgage world when it comes to assessing your income. Most lenders will now expect people to have at least 12 months of employment that they can verify and they will have to provide payslips and/or P60's. Self employed people will need to have all their account records available and often will need to have been trading for two years and have all their official documents to hand. If you don't have these, some lenders might accept other forms of proof and an independent mortgage broker is often a better option for this than a high street lender.

Poor Credit history

Between 2000 and 2007, a lot of mortgage lenders were made to help those who have a poor credit history so that they could obtain the loans they needed for a mortgage or remortgage. Although these were more costly than regular high street mortgages they meant that people who had CCJs and missed credit payments could find a solution which would allow them to make mortgage payments until their credit rating was up and they could move to a high street lender after their credit rose.

However, since the credit crunch most of these products have been removed and a lot of the companies that lent them have disbanded. At the moment it is very difficult for a person with a poor credit history to remortgage or get their first mortgage, although there are a few companies who will allow you to miss one or two payments in the last 36 months or a small CCJ. However, all missed payments and CCJs need to be cleared and fully settled when you apply and the interest rate that you are charged will be reflective of the higher risk.

If you have a poor credit history, but can manage your monthly remortgage payments as well as your other monthly expenses then it could well be better for you to stick with the lender that you're currently with at least until you have raised your credit history a little or until the credit history is erased from your file so that you have a clean slate. Sometimes this might not be entirely possible due to issues of illness or time off work or family issues- anything that could cause some sort of debt or financial problem for you. In these cases it will be virtually impossible for you to remortgage your house and instead you'll need to look into a debt management solution. If you are suffering from debt it's very important to inform all the relevant authorities such as your mortgage provider and any banks or credit providers you're with. At the moment in the current economic climate they could be sympathetic to genuine cases and can sometimes reschedule repayments for you or freeze your interest for you.

Low credit rating

Banks, building societies and any other lender that you get your mortgage from are now starting to put much more scope into people's credit score. Each different lender will look at your credit rating in a different way and will measure it against what they do and don't want their customers to be like financially. Mainly, the key ways to have a high credit score are continued stability and consistency with your money- being a voter, living at the same address for over three years, being in long term employment and having well organised bank accounts and cards all give the bank confidence that you're a good person to lend their money to.

However, if you're a person who pays their bills on time, has never had an unpaid loan and have never over drawn or has to take out a lease agreement you might think that you have an amazing credit rating, but could be disappointed to find that a lender might see it a little differently. When compared to a person who pays the minimum on their cards every month, has their car on a lease agreement and uses store credit to get furniture the banks will ultimately favour this other person because they see potential to sell them other interest paying products in the future along with their mortgage.

If your credit score is low, sadly there is no quick fix solution for raising it. You'll need to make sure that all the information that the credit agencies have is correct and the two that are mainly used by banks are www.experian.co.uk and www.equifax.co.uk. If you visit these sites you can get a copy of your credit record for free or a small fee and if you see something that is wrong you can contact the site to have it changed. Make sure you pay all your bills on time and are registered as a voter at your current address and avoid taking out too many loans or credit cards as this will give the impression that you are struggling financially

If you're unsure about how your credit rating affects your mortgage then it's always wise to discuss your concerns with a mortgage broker or advisor who can find you a remortgage deal that suits your personal situation or find you a lender that doesn't judge on credit ratings.

Low income levels.

No matter what your credit rating is, what you can get on your remortgage will be calculated on what your regular income is. Since the credit crunch of 2007 lenders have increased their checks on who they accept and who they reject, and one of the ways they have done this is by restricting the salary multiples that are available. A salary multiple is where the bank will set the maximum remortgage that is available to you based on what your gross salary is. For a long time, this was three or four times the amount of your annual income, so if you earned £25k a year then the maximum loan that would have been available to you would be between £75,000 and £100,000.

In the flexible period between 2000 and 2007 some lenders did relax this criteria a little bit and sometimes gave people more than five times their salary income. This habit of assessing the maximum level of mortgage funds that are available to a person has been closely watched since the credit crunch and now lenders are focusing more on your monthly outgoings and other financial commitments that you might have to see if you can pay the mortgage of the level you requested. Each lender has their own unique method, however for a basic understanding of what you could borrow the 3 or 4 times your salary rule is a good place to start.

High Loan to Value (LTV)

The Loan to Value ratio (LTV) is the percentage of your mortgage that is unpaid in relation to the current value of your property. So, if you have a £75,000 mortgage on a property worth £100,000, your LTV is 75%.

Because of the current economy, a lot of lenders are unwilling to lend to anyone with an LTV under 85% and are a lot more comfortable with remortgaging if your LTV is under 75%. Higher LTV ratios generally mean you'll pay higher interest on your loan and lenders will work through a series of assessments in order to see how much of a risk is involved with the customer and whether or not monthly payments will be met to repay the loan in full. A lender doesn't want to have to repossess a property, but they need the security of knowing that if they have to they can sell the house for the value of the outstanding loan. This means LTVs between 75% and 85% give them good security.

In the credit crunch a lot of people remortgaged to finance properties that were rising by almost 20% a year, and as such lenders accepted a lot of people with higher LTVs because they knew rates would soon drop back again. Because we're now experiencing a falling house price market and lower LTV limits many people have a mortgage worth over 90% of their property which can lead to negative equity and trouble remortgaging until the LTV is improved.



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