Halifax Mortgage declined, why? Next steps?

 What to Do If Your Halifax Mortgage Application is Declined

Experiencing a mortgage decline is never a great feeling. However, in many cases, an alternative or workaround can be found. In this guide, we explore what to do if your Halifax mortgage application has been declined and some of the possible reasons for the decline.

Why have I been refused a Halifax mortgage?

There are several reasons why your Halifax mortgage application might have been declined:

• Credit Score : While there is no set minimum credit score for a Halifax mortgage, they will conduct an overall risk profile assessment. Halifax may consider applicants with light adverse credit depending on the loan-to-value (LTV) ratio of the case. Applications with larger deposits might be treated more leniently compared to those with smaller deposits.

• Affordability: You might not be able to borrow as much as you need based on your income and outgoings. A broker should check your income and expenses before the application to ensure that, as long as everything matches what was entered, you have a good chance of success.

• Undisclosed Credit: If you have not declared items such as loans or other credit commitments, this can lead to a decline. It’s important to fully disclose all financial obligations during your application.

• Bad Account Conduct: Halifax might decline your application if there is evidence of poor account conduct, such as gambling, excessive spending, or frequently exceeding overdraft limits.

• Self-Employment Issues : Being recently self-employed (less than two years) or having inconsistent self-employed income can be a factor in your application being declined. While Halifax considers applications with 1 years accounts, they must have a strong overall case to have a good chance of success. Eg experience in industry or positive projections for the second year 

• Property-Related Issues Certain types of properties may not be acceptable to Halifax. These can include high-rise council blocks, non-standard construction homes, or properties with structural issues. If the property does not meet Halifax’s criteria, the mortgage application may be refused.

Understanding these potential reasons can help you address any issues and improve your chances of success if you decide to reapply or seek an alternative mortgage solution.

Next steps following mortgage refusal 

If your Halifax mortgage application has been declined, here are the steps you should take to move forward:

• Find Out Why: The first step is to understand the specific reasons for the decline. Ask your broker for detailed feedback from Halifax. The next steps will depend on the reason provided.

• Addressing Credit-Related Issues:  If the decline is due to credit-related issues, you may need to address these directly. This could involve repaying a missed bill, settling a default, or taking other steps to improve your credit profile. In some cases, you might need to find a lender that is more lenient towards adverse credit or consider putting down a larger deposit. Leniency towards credit improves with larger deposits; for example, applicants with 5% deposits will need a well-maintained credit profile, while those with 25-40% deposits may experience greater leniency.

• Property-Related Issues: If the issue is property-related, you may need to find a new property or approach another lender that may consider non-standard construction or other unique property types. If the decline was due to a down valuation or retention held because the property is currently unsuitable to lend on, you might be able to negotiate a price reduction or request that the seller carry out the necessary work to make the property acceptable to lenders.

• Affordability Issues: If the decline is due to affordability, consider putting down a larger deposit and borrowing less. Alternatively, you might try applying with a different lender that has more favourable affordability criteria. Ensuring that your income and expenses are accurately represented and match the lender’s requirements is crucial.

By understanding the reasons for the decline and taking appropriate steps, you can improve your chances of securing a mortgage with Halifax or another lender in the future.

How to reduce chances of being declined

To improve your chances of being approved for a Halifax mortgage, consider the following steps:

• Work with a Broker: Collaborating with a mortgage broker can be highly beneficial. They will check Halifax’s criteria and assess your affordability as thoroughly as possible before you apply. Brokers have expert knowledge and can guide you through the process, increasing your chances of success.

• Secure an Agreement in Principle (AIP): Obtain an Agreement in Principle at the earliest stage. This preliminary check can help identify any potential issues early on, allowing you to address them before submitting a full application.

• Check Your Credit Report: Get a copy of your credit report and review it for any issues. Address any errors or problems, such as missed payments or defaults, to improve your credit profile. This can significantly enhance your approval chances.

• Maintain Clean Bank Statement Conduct: Ensure that your bank statements reflect responsible financial behaviour. Avoid gambling, excessive spending, and exceeding your overdraft limits. Lenders will review your bank statements to assess your financial stability.

• Check Lender’s Property Criteria: When viewing properties, especially flats or flats above commercial premises, ensure that they meet Halifax’s property criteria. This includes minimum lease lengths and other specific requirements. Knowing these criteria in advance can save time and prevent disappointment.

• Put Down a Larger Deposit: The larger the deposit you can put down, the better your chances of approval. Larger deposits reduce the lender’s risk and can also result in better mortgage rates and terms.

• Ensure Stable Employment and Income: Having a stable employment history and a consistent track record of earnings can improve your chances of mortgage approval. Ensure that your income documentation is accurate and up to date.

By taking these proactive steps, you can reduce the likelihood of your mortgage application being declined by Halifax and improve your overall chances of securing a mortgage.

Halifax lending criteria  

Halifax’s lending criteria are fairly flexible. Permanent employees have no minimum time requirement in employment. Self-employed individuals can be considered with as little as one year’s history, though typically two years are preferred for a stronger case. 

Halifax takes 100% of basic income and often 60% of variable income like bonuses or commission into account. They usually lend 4.5 to 5 times annual income, and up to 5.5 times for higher earners. A good credit score and a larger deposit can also improve your chances of approval.

 How Long Should I Wait Before Reapplying After a Decline?

The waiting period before reapplying for a mortgage after a decline depends on the reason for the decline. If the decline was due to your credit score, it is advisable to wait at least three months before reapplying with the same lender. However, you can apply immediately with another lender if they are comfortable with your case. If the decline was property-related, you can reapply as soon as you have found a new property or a lender that considers the type of property in question.

How to Appeal a Halifax Mortgage Decline

You can appeal a mortgage decline either through your broker or directly with Halifax. Appeals are usually considered if you have an existing relationship with Halifax or the Lloyds Banking Group. The appeal process typically takes about a week for a decision to be made.

How can Strive Help?

At Strive, we are committed to assisting you if your mortgage application with Halifax has been declined. We start by identifying the specific reasons for the decline, whether it is related to credit issues, affordability, or property concerns. With this information, we provide personalised advice on how to address these issues, such as improving your credit score, adjusting your financial situation, or finding a suitable property. 

If necessary, we can guide you through the process of appealing the decision with Halifax. We also explore alternative mortgage options with other lenders who might be more lenient or better suited to your circumstances. Throughout this process, we offer continuous support and expert advice to increase your chances of securing a mortgage successfully.

FAQ’S

• Does a Decline Impact My Credit Score? A decline itself does not directly impact your credit score. However, the hard inquiry made during the application process can have a small, temporary effect on your score.

• Can I Be Refused a Mortgage After an Agreement in Principle (AIP)? Yes, you can be refused a mortgage after receiving an AIP. The AIP is based on initial information and credit checks, but the full application involves a more detailed assessment of your financial situation and the property.

• Does an Agreement in Principle Guarantee Mortgage Success? No, an Agreement in Principle does not guarantee mortgage success. It indicates that you meet the basic criteria, but final approval depends on a thorough review of your financial details and the property you intend to purchase.

• Is Halifax a Good Lender? Yes, Halifax is considered a good lender. They offer a range of mortgage products with competitive rates and flexible criteria, and they have a solid reputation for customer service.

Contact us today, and we’ll work hard on your behalf to find you a competitive mortgage.

For more information on mortgages for contractors, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.