The oddities of mortgage approvals: Beware of these surprising snags
Securing a mortgage should be relatively straightforward for many borrowers, but problems can arise during application. At first glance, prospective homeowners are typically well-versed in the basics: maintain a good credit score, have a steady income, and save a substantial deposit.
However, beneath these well-trodden paths lie some rather unexpected, even weird, pitfalls that could derail your application. Here are some surprising obstacles that impact your mortgage approval:
1. Your name's Googleability
In an age where your digital footprint can be as significant as your physical one, having a common name that yields thousands of search results—or worse, shares with a notorious figure - can cause issues.
Lenders or their automated systems increasingly perform online checks as part of their due diligence. If they find something concerning tied to your name, it might prompt further investigation, slowing down your application.
Aaron Strutt, product director at Trinity Financial, says: "Negative Google entries can cause issues. Lenders do online checks and run anti-money laundering reports, they may also search for anything to show up on the property. They are looking for negative press, criminal records, deviations from information on the application form, sub-letting properties, and politically exposed people. Cifas checks can also cause significant issues."
2. Frequent cash deposits
Lenders might raise an eyebrow if your bank statements show regular cash deposits. This could be interpreted as a lack of financial traceability, raising concerns about money laundering. Even if it's just a habit of depositing cash tips from your job, it might warrant additional explanation to assure lenders of the money's legitimate origin.
Some lenders go through bank statements to check for any transactions that haven’t been declared, like school fees or ongoing credit commitments. If a lender spots cash deposits, they may ask what’s happening and want to understand why it is being deposited.
3. Subscription services
An abundance of monthly subscriptions or memberships could be perceived negatively. Suppose your bank statements are littered with payments to various entertainment platforms, gyms, clubs, etc. It may suggest to lenders that your lifestyle expenses are high, potentially affecting your ability to make mortgage repayments.
Multiple Klana entries may also be an issue when they go into the mortgage affordability calculator and may reduce the maximum loan size. Regularly using payday loans will also significantly reduce the number of lenders accepting your application.
4. Historical debt with the same lender
If you're applying for a mortgage with a bank where you previously defaulted on a debt, even years ago, this could haunt your application. Some financial institutions have long memories and internal records that could influence their decision-making process.
The standard lenders don’t like adverse credit. If someone has missed payments, they may put them on a standard variable rate rather than offering a new deal if the credit issues are wrong in the lender's view. Thankfully, mortgage options are available to borrowers with missed repayments, mainly when they are on mobile phones or utility bills.
5. Participation in gambling websites
Even if you're not regularly withdrawing cash for gambling, participation in online gambling platforms can be a red flag. Subscriptions or frequent transactions with gambling sites, regardless of amounts won or lost, suggest a risk-taking behaviour that might concern lenders.
Lots of people are addicted to gambling, and multiple gambling accounts could be flagged. The lenders don’t want people to miss their repayments for any reason. That said, we get mortgage enquiries from time to time from professional gamblers.
6. Foreign income and buyers living overseas
Many banks and building societies do not lend to borrowers paid in foreign currency like Euros or US dollars. They also struggle with overseas expats and foreign nationals buying a home in the UK. Our brokers often have to approach lenders who are keen to issue mortgages with foreign income or overseas elements.
7. Unusual properties
Banks and building societies can be very picky when it comes to properties. Lenders offer mortgages on flats and houses, but they may have issues if the property has a short lease, is a new build, has lots of land, or is a flat above a shop. Some lenders can have issues if the property has a self-contained flat within a large house, may the house has lots of bedrooms, or if it is in an undesirable location. If a property has unusual features which make it harder to sell, the lenders may also have issues.
8. The wrong type of income
Most lenders want a track record of income to demonstrate that a mortgage is affordable. As a result, some may not accept income from trusts, buy-to-let rental properties, bonuses from work, retained profits for limited company owners or vested stocks/restricted stock units. Just because a lender will not accept certain types of income, it does not mean one of its competitors won't.
9. Older borrowers
Some banks and building societies cap the maximum age, and they are not partially keen to attract older borrowers, maybe in their sixties, seventies or eighties. Thankfully, many of the niche lenders and building socistets are keen to attract older borrowers provided they can demonstrate the mortgage is affordable with income from pensions, investments or employment.
Source: Trinity Financial and ABC Finance.
Call Trinity Financial on 020 7016 0790 to secure a mortgage, book a consultation, or complete our mortgage questionnaire.
The information contained within was correct at the time of publication but is subject to change.
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