Re-mortgaging is seen as a suitable way to downsize the burden of monthly payments. Besides, it will help you switch to better rates and terms. You can even release equity from your property.
Affordability checks are crucial even when you opt for re-mortgaging. It is not necessary that the lender will accept your re-mortgage application since you have timely paid your mortgage. They can reject your application if they find that your ongoing financial state is not favourable.
It may happen that expenses occupy a massive portion of your income. This shows the lender that not enough room is left to cover loan payments safely. This rejection can frustrate you, but this should not force you to give up.
This is because re-mortgaging is not the only way to raise additional funds. If you have to refurbish your property, you can look for other ways as well. Determine the amount you need and check if it can be fulfilled by loans for home improvement.
These are purpose-specific loan options that can be used for home renovation. The best part is that you can apply for them with a direct lender. They have easy terms and conditions for affordability checks.
Qualifying might be easier, but you should fulfil the given conditions. Before exploring these types of options, you must check out the steps you can try.
What to do if you cannot pass affordability checks for re-mortgaging?
Every application must go through affordability checks. This allows the loan provider validate if loan payments are practically affordable for you or not. During such assessments, the lender will analyse various pointers:
- Your income and employment stability
- Monthly outgoings and financial responsibilities
- Existing debts like credit card dues, other loan payments, etc.
- Credit profile i.e. your credit scores and history
- Your potential to afford repayments if interest rates increases
Go through these steps that can help you get a solution to this problem.
Contact the current lender
Do not come to any conclusion about your chances of getting loans after facing rejection from a new lender. It would be better for you to check with your existing lender first.
Speak to your existing lender regarding the possibilities of product transfers. This way, you can switch to a new mortgage opportunity without really going through full affordability checks.
You can take advantage of faster processing by the lender. Most importantly, you do not have to deal with the fear of facing variable rates by the lender. Understand this concept with the help of a realistic example.
| Scenario | Stepwise details |
| Borrower | Lisa, a homeowner took out a £180000 mortgage |
| Ongoing mortgage rate | 6.2% after her fixed deal comes to an end |
| Attempt to re-mortgage | She applied with a lender for 4.9% deal |
| Reasons for rejection | The lender finds that her income has dropped, and she cannot afford the payments |
| Product transfers | She contacted her current lender for product switches |
| New offer unveils | This lender proposed a fixed deal of 5.2% for 3 years |
| What does she get with this offer? | Payments will be fixed throughout the term, and no affordability checks will be conducted. She avoided variable rates |
Look for an option that accepts poor credit
One of the reasons for rejection could be low credit scores. The loan provider can easily figure out that you have pending payments to deal with. Amidst all these, arranging funds for re-mortgage payments will be difficult.
Stop trying for re-mortgaging as alternative solutions are available. You can apply for a bad credit loan for home renovation requirements. However, the borrowing range might not be that large because of your poor credit scores.
You can gather funds for small refurbishment work with the help of these loans. Consider them to address urgent repair issues. You do not need to worry about accepting a huge burden of interest rates if you can establish your repayment ability.
Improve your credit scores
If you think that the re-mortgage lender will give you a chance once your credit scores improve, try for this. Go through your credit report carefully to identify the real problem.
These can be inaccuracies in your report or unpaid dues. If any information has been wrongly demonstrated, report it immediately. This will help rectify this aspect as soon as possible.
If you are stuck with pending payments, you have to figure out ways to meet them as soon as possible. Modifying the budget plan can help you. Make sure that you are able to squeeze out the maximum amount from this plan to pay towards pending payments.
Apply for joint loans
You are not able to demonstrate the required affordability. This can be solved by involving another borrower. You need to apply for re-mortgaging jointly.
The combined affordability should be according to what the lender wants. Including another borrowing helps in elevating chances. This is because their income, expenses and debt situations will be evaluated.
Meet a mortgage broker
It might be frustrating to find and convince a lender. Maybe your search pattern is not right if you are encountering rejections time and again. In this case, you can contact a broker who can introduce you to the right lender.
Then, you will not keep repeating the same mistakes in looking for the right lenders. Besides, a broker is someone who has years of experience in the lending industry. How lenders work and what their requirements are very well known to the broker.
Increase your income
Oftentimes, the lender rejects seeing your expenses exceeding your income. Therefore, here the real issue is your earnings. You must look for ways to increase your earnings.
If you are doing a job, ask for a salary hike or promotion. In case these are not possibilities in your case, you can try doing freelance projects. You will work part-time to add more money to your income.
Using this additional income, you can repay previous debts. At the same time, you can convince the lender.
The bottom line
When successfully passing affordability checks is the main problem, you must take proactive steps. Then, you can navigate the challenges of re-mortgaging. Keep educating yourself so that you can make informed decisions.
Sarah Jones is a seasoned financial writer with over a decade of experience covering personal finance loans, and dedicated to provide the best lending solutions to the clients. Known for translating complex financial topics into accessible insights, Sarah contributes to leading loan providers like Arbitrageloans and contributes to the company’s growth via professional writing and loan guidance. She holds a degree in economics and is passionate about helping aspirants with tools to make informed loan decisions. She also loves to explore the world and its natural beauty. Sarah believes financial literacy is the base of legitimate lending and borrowing. She strives to make it understandable for all.
