In 2014 the Financial Conduct Authority made changes to mortgage rules, this was to ensure that you can only take out a mortgage which you can realistically afford to repay. Many directors are finding that their mortgage applications are being rejected. If you are looking to move home or remortgage in the near future the following guide can help towards the chances of a ‘yes’.
Lenders are now far more likely to look, in detail at your monthly expenditure. While they will want to know about your fixed outgoings, some may also ask about money spent on things such as holidays or clothes. For directors, most lenders with want to see 3 years’ of accounts and your SA302s, but you could also be asked for up to 5 years. However some directors are finding that even with this information their applications are being rejected. This appears to be a problems where a director owns at least 50% shareholding of the company as lenders class this category as self-employed rather than employed and are therefore seen as a much bigger risk.
Increasing your chances
Before you submit your application you could:
- Ensure that all applicants are correctly on the electoral register. If incorrect this can affect your credit rating. You can register to vote and update your name and address online providing you have your National Insurance number.
- Obtain a copy of your credit file and check that all your entries are accurate, if not you can challenge the entry.
- You should consider closing accounts that you no longer use e.g. credit cards as they may be deducted even if no longer used.
- If possible try to settle any outstanding personal loans or credit cards.
- Try to cut back on all unnecessary expenditure in the month prior to the application this shows lenders you are careful with money and are living within your means.