Mortgage Rejected by Halifax: What Are the Next Steps?

Receiving news that you’ve been refused a mortgage by Halifax can feel like a huge setback, and may leave you asking questions like “why did Halifax decline my mortgage?” and “Can I get another mortgage?” .

If this has happened to you – there’s no need to worry. You can still secure the mortgage that is best for you.

A mortgage rejection does not mean that you’ll never receive another mortgage offer, and there are plenty of reasons why Halifax may have decided to refuse your mortgage application. As a leading lender in the UK, Halifax will have stricter lending criteria that all mortgage applicants will need to adhere to, rejecting those who fall outside their specific criteria.

In this article, we will explore all the reasons why Halifax might reject your mortgage application, what your next steps should be, and how you can improve your chances for future success. Let’s jump in.

 

How Easy is it to Get a Mortgage with Halifax?

As a renowned high-street lender, Halifax offers a wide range of mortgage products, including fixed-rate, tracker, and variable-rate options. In recent years, Halifax have honed their criteria to accommodate and support first-time buyers, those who are looking to move, and remortgages.

The Halifax lending criteria is very similar to other high-street lenders. Halifax will complete an affordability assessment, evaluating your income, credit history, employment status, and your available deposit.

The catch to applying for a mortgage with a leading high-street lender – like Halifax – is that their lending criteria will generally cater to the majority. This means that there is often less flexibility or room to manoeuvre if you do not follow a typical income against outgoings financial structure.

For example, if you’re applying for a mortgage with Halifax but have a low or fluctuating income, financial dependents, or have a history of unemployment, you may not fit the criteria set out by many popular high-street lenders.

Working with a trusted mortgage broker can help you ensure that your mortgage application is aligned with your chosen lender’s criteria. Here at Boon Brokers, we can help identify, compare, and match you with a lender that is tailored to your financial circumstances.

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Why Has Halifax Rejected My Mortgage Application?

Although having your mortgage application declined by Halifax can be understandably disheartening, there will be a reason behind the decision for Halifax to refuse your mortgage.

This decision could be based on a variety of factors, but will typically fall into one of the following categories:

  • Too much debt
  • Poor credit history
  • Small deposit amount
  • Affordability check failed
  • Employment history
  • Incorrect or insufficient documentation

Fortunately, Halifax won’t arbitrarily refuse mortgage applications. This means that the exact reason(s) for your mortgage refusal can be discovered, and potentially amended.

Understanding exactly why your mortgage application was declined is essential. Whether it was a bad credit score, small deposit, or even insufficient documentation, knowing what caused your refusal will allow you to take steps to improve your overall financial standing and next mortgage application.

What Are the Reasons for Having a Mortgage Application Rejected by Halifax?

There are several factors that could lead to Halifax refusing your mortgage. Let’s take a look at some of the most common reasons why mortgage applications are refused:

Bad Credit History

Having a history of bad credit is one of the most common reasons that lenders will refuse mortgage applications.

If you’re looking to secure a mortgage with a leading high-street lender like Halifax, it is best to first ensure that all of your financial affairs are in order before submitting your application. You can check your current credit score, and compare this with the Halifax credit score requirements, with any of the following credit check agencies, including:

Missed payments, defaults, or County Court Judgements (CCJs), can all signal financial risk to the lender. In the case that you have any missed payments or issues, this will leave a mark on your overall credit score for six years. During your affordability assessment, lenders will check for any missed credit card or loan repayments. This reflection in your total credit score will indicate to lenders the risk to reliability ratio of your financial profile.

While a low credit score can present itself as a hurdle to securing your mortgage, it does not put a stop to your mortgage dreams entirely.

If a bad credit history is the reason behind Halifax refusing your mortgage application, then choosing a specialist lender who understands allows for bad credit mortgage submissions could be a solution.

Credit score report

Income Issues

Income will be the primary factor that every lender will need to assess. As such, the Halifax mortgage affordability calculations will generally follow the same structure as other leading lenders.

Essentially, lenders will want to see that you can reliably repay any loan that you are looking to borrow. Should your income be too low, or your expenses too high in relation to your earnings, lenders may view your application as too risky – providing the grounds on which to refuse your application.

Understanding how your chosen lender completes their affordability calculations can help provide you with an insight on what they will likely conclude you can afford to repay.

It’s important to note that if you receive income less frequently due to your financial setup, lenders will normally record the lowest figure between your total earnings over the past 12 months, creating an average over the last two years.

This would also include income streams like bonuses or commissions. For example, if you’re earning a base salary of £30,000 per year but receive an annual bonus that varies each year:

  • Last year’s bonus: £10,000
  • The year before that: £6,000

Since the average figure is £8,000, lenders will use this amount in their affordability calculations.

For those who are self-employed, verifying your expected income can be an additional hurdle. Lenders will request to see your income from the last 2-3 years in order to work out an average income for each year moving forward. This will be calculated from tax records or business accounts, for example:
If over the last three years your net profit (after expenses) is:

  • Year 1: £25,000
  • Year 2: £30,000
  • Year 3: £35,000

Lenders will typically take the average of the last two or three years’ earnings to calculate affordability.

  • If using a two-year average, they would conclude your annual income as £32,500
  • If using a three-year average, they would conclude your annual income as £30,000

Working with a trusted broker – like Boon Brokers – can help ensure that your income doesn’t block your mortgage deal. Our expert mortgage advisers can help guide you through the best mortgage options on the market today, tailored to your income – for free!

Employment Status

Employment status and history will be another key aspect that lenders like Halifax will look to evaluate.
As we mentioned during the Income Issues section, a lenders’ main concern is to assess and make sure you can reliably repay any loan you borrow. In this respect, employment and income will always be closely linked.

While your actual earnings will contribute to the borrowing power calculation, maintaining a consistent employment with a stable income will always make lenders look more favourably on your application.

If there are any inconsistencies with your employment history, this could negatively impact your application. For instance, if you haven’t been employed for an extended period of time or have recently changed jobs, lenders may see this as an increased risk on your reliability to repay the loan.

Specifically, Halifax will request a bank statement or payslip from your employer as proof of your employment. For those who are self-employed, you will need to provide tax records and/or business accounts from the previous 2-3 years.

Not Enough Deposit

It goes without saying, a larger deposit can greatly improve your chances of approval.

Simply, the deposit is a great way to access more favourable rates and decrease the overall risk for lenders. This is because your deposit size is directly linked to the loan-to-value (LTV) ratio. If the total amount borrowed for a property is lower due to a large deposit size, lenders will be at less risk should the borrower default.

In the case that you haven’t got a sizable deposit available, some lenders may refuse a mortgage application. Halifax will typically ask for a minimum of a 5% deposit, with a higher deposit naturally making your application more attractive by lowering the LTV.

If you haven’t met the Halifax mortgage deposit requirements, it may be a case that you will need to wait and save a little bit more. Generally, improving the deposit size provides you access to more competitive interest rates and can save you a lot of money in relation to the mortgage term time.

For more information on mortgage deposits, check out our article – How Much Deposit Do I Need for a Mortgage? – and learn everything you need to know about the financial impact that your deposit will have.

 

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What Other Reasons Could Cause a Mortgage Rejection?

Sometimes, the reason behind your mortgage rejection won’t be the ‘usual suspects’ of credit scores or income. Instead, there are a few additional factors that can sometimes be overlooked but will affect your mortgage application nonetheless, including:

Missing Important Documents

Occasionally, misplaced or incorrect documentation can be the reason for your mortgage applications refusal. For example, if Halifax can not accurately identify your overall affordability or value of your desired property purchase, this will inevitably lead to a declined mortgage application.

Property Valuation Issues

The value of the property can also be a potential reason behind your mortgage application. In the case that your chosen lender values the potential property you wish to purchase lower than the amount you applied for, this might then be seen as too risky for the lender.

Additionally, the property itself could be a problem. For non-standard homes, including thatched-roof houses, high-rise flats, or a listed property, the lender may be more cautious with your application due to the potential risks associated with non-standard homes.

Age Restrictions

Halifax, like many leading lenders, will have an age limit. Specifically, the Halifax mortgage age limit is 80 years for all repayments to be completed and 70 years for an interest only mortgage. Should your mortgage term extend beyond the typical age of retirement, this may negatively affect your mortgage application.

If you are looking to secure a mortgage and the mortgage term will extend into your retirement, lenders will request an affordability assessment for both before and after your retirement age. For example, Halifax will assess your income before and after – including potential pension funds – to establish an accurate financial profile post retirement.

Too Many Recent Credit Applications

If you have been actively applying for multiple credit or loan applications, this will raise a huge red flag for lenders. Many high-street lenders – like Halifax – will view a flurry of credit or loan applications as concerns about your financial stability, poor credit history, and can ultimately lead to a refused mortgage application.

To ensure that one or more of these reasons do not contribute to your mortgage rejection, it is best to work with a mortgage expert. At Boon Brokers, our expert mortgage advisers have a wealth of experience in securing mortgages and can help guide you through the entire mortgage application process, from start to finish – completely free.

Credit Application Form

Why Did Halifax Decline My Mortgage After the Agreement in Principle?

An Agreement in Principle is a preliminary approval that is in palace to provide the borrower an insight into what they would likely be able to borrow in the case that their mortgage application is approved.

Unfortunately, an AIP is subject to change if there are any discrepancies found between the initial affordability assessment, information provided, and final lender evaluation. For example, if there has been a change in your financial situation, a new mark on your credit score, or problems with the valuation of the property, all can lead to a mortgage in principle being declined.

If you have recently received a mortgage refusal after an AIP, it is important to ask the lender or work with a mortgage broker to find the reasons why. In the case that Halifax is your chosen lender, they should try and help provide details of the issues they found, providing you with some insights into what you perhaps need to improve before your next mortgage application.

What Are the Best Ways to Respond After Halifax Rejects My Mortgage Application?

It is important to understand that receiving a Halifax mortgage rejection – or rejection from any specific lender – does not mean you cannot secure a mortgage deal that is right for you. Instead, there are two very important steps to take after receiving a mortgage refusal, and they are:

Do Not Reapply for a Mortgage Immediately

While it might be tempting to reapply for a Halifax loan – or any other chosen lender – straight away, multiple applications within a short time period can actually negatively impact your credit score.

The best practice is to take a moment to reflect and assess exactly why your initial mortgage application was refused. Work with a trusted mortgage adviser and ask all the questions you have to make sure your next application ticks all the boxes of your chosen lender’s criteria.

Find Out the Reasons Why Halifax Declined Your Application

Understanding the specific behind the refusal of your mortgage application is crucial to moving forward. Request a copy of your credit report, review the Halifax mortgage criteria, and work with a mortgage expert to help refine and fix any faults found in your application.

Irrespective of whether you discover that you need to improve your credit, save for a bigger deposit, or provide more documentation, you will know how to move in the right direction to improve your next mortgage application.

 

Frequently Asked Questions About Declined Mortgages

Can I Appeal a Rejected Mortgage Application?

Yes, you are able to appeal a rejected mortgage application. However, it is important to first review the reason behind the application refusal, and pinpoint the issues that led to the initial rejection. Working with a trusted mortgage broker can help you through this process.

When Should I Apply for a Mortgage Again?

It is best practice to wait and reflect before applying for another mortgage. Reviewing the reasons behind the refusal of your first mortgage application could provide valuable insights into what you need to improve to help secure an approval from your next application. This could include improving your credit score, saving for a larger deposit, or even waiting for an increase in your overall income

Can I Use a Different Lender Instead of Halifax?

Absolutely. A rejection from Halifax does not mean every lender will see your financial situation in the same light. In fact, specialist lenders might be better suited for your financial standing, offering more flexibility when it comes to affordability calculations than leading high-street lenders.

It is best to explore all of your options with a trusted mortgage broker, like Boon Brokers. With whole-of-market access, we can find and compare all the mortgage products on the market today, and match you with the mortgage that best suits your needs.

How Our Mortgage Broker Can Help You

At Boon Brokers, we understand how stressful and disheartening a mortgage rejection can be. Fortunately, we’re here to help you.

From start to finish, our trusted mortgage advisers can help you identify the reasons behind your mortgage application refusal, and guide you through a new application that matches you with the best mortgage deal for you – completely free.

With whole-of-market access, we can help you compare between leading lenders like Halifax and specialist lenders alike. Our aim is to find you the mortgage that best suits you, and is tailored to your financial requirements.
Contact Boon Brokers today for free expert mortgage advice.

 

Team of Brokers

 

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.