I deal with thousands of business owners every year, and a good number of those are company directors. As such, I have a great understanding of the reasons why mortgage applications fail.
It usually comes down to three reasons for company directors.
Mortgage applications are decided on lending criteria and decisions can often change depending on the strength of your financial status. If your credit rating is not great, instead of completely rejecting your application some lenders will ask for a larger deposit and a higher interest rate (as there is more risk involved for them).
Sometimes not being able to pay the deposits asked for can be a real sticking point. If you’re going for a £300k home and the lander is asking for a 25% deposit, then you’re looking at an eye-watering £75k just to get the mortgage approved for the remaining 75%. Few company directors have a spare amount like that lying around so you can see how this would be an issue.
In these cases, you’d have to save until you have the required deposit and then reapply.
Likewise, if you have a poor credit rating one of two things can happen. Either you can be completely rejected for a mortgage or the interest rate can be extremely high. This would either stop you in your tracks (rejection) or make it difficult for you to afford the monthly payments (high interest rate).
The other main reason for mortgage applications failing is proof of income. A lot of lenders ask for 2 years of accounts, which can be difficult if you’re only been trading for 12-18 months. In these cases it can often mean going back and waiting until you have 2 years of accounts, and reapplying.
Of course, recently I talked about lenders who are starting to only look for 1 year of accounts so all is not completely lost there.
Also these examples are the worst-case scenario. Therefore it’s best if you seek the advice of a broker before you start the application process. We can have a look at your financial status, how much you can afford to pay and give you an idea as to the likelihood of your application being successful.
For help understanding self employed mortgages please also visit YouTube, Facebook or make an enquiry via the website where the team and I will be happy to help you prepare for your mortgage application by giving you a clear picture of where you are now vs where you want to be.
You should contact a mortgage broker for personalised advice for your specific circumstances. Please also ask us for a personalised illustration.
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The overall cost for comparison is 5.4% APR, correct as of 05/03/2017.
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