Article Four: I can't get a mortgage.

publication date: Feb 5, 2009
author/source: Kate Faulkner
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Buyers' Property Problems Series
Article Four: I can't get a mortgage

There are usually two reasons for not being able to get a mortgage. The first is you may not have enough deposit for lenders to be sure the property can be bought without any loss to them, and secondly, you either don't have the income to support the mortgage you want or have a difficult credit history which can put lenders off.

Deposit Not High Enough
Typically lenders used to offer mortgages up to 95% of a property's value. Prior to the credit crunch, some mortgages were offered at over 95% but this has caused problems for many buyers and they are typically best avoided.

During the credit crunch, lenders offer their best mortgage to those with 25% or more equity in their property. So if you have less than 25% deposit, you will pay higher rates and higher charges and may have to pay for a mortgage indemnity agreement too.

While the credit crunch continues to exist, it is more difficult to find 90% or 95% mortgages, so you should either save for a bigger deposit or visit individual lenders and a qualified independent mortgage broker to see if you can secure a mortgage with the deposit you have.

Not Enough Income
The only real way of securing a bigger mortgage is to find more income. You could do this by seeing if there are extra hours you could do at work, or if you could get a better paid job, or if your partner could work if they don't already. However, it may be better to purchase a property you can afford now that you can build onto in the future when you can afford to.  See Article One.

Bad Credit History
It's tough to get a mortgage when you have a record that goes against you. There are two choices here, either visit specialist mortgage lenders that will look after you or decide it may well be better to rent/live at home in the short term and save for a bigger deposit to help make you more 'attractive' to lenders. If you go to specialist mortgage lenders, don't forget they typically charge higher fees and interest rates, so you must make sure you can afford the mortgage at these higher rates now and if they go even higher in the future.

Always seek independent financial advice for a mortgage. Make sure the person you deal with is qualified and if you have to pay for the advice, make sure you agree a fixed fee upfront.

For more information visit our buying a home section where you can download our Buying a Property eBook and refer to financial services to help get a mortgage.   


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