Home Loan Declined by Bank? 🏦🏚

Have you had your home loan declined or knocked back by your Bank? 🏦🏚

Lots of home loan lenders are being very strict when it comes to lending money to borrow using the excuse of the Royal Commission or changing lending policies, and this could be one of the reasons you have been knocked back…

…But it’s worth remembering that not all banks are the same!

They all have different lending policies and if you are working with an Experienced Mortgage Broker you will be able to find a lender that will work with your situation.

To help you understand why your Home Loan was Declined, we will take you through 9 reasons the banks knock back home loans.

 

9 reasons the bank may reject your home loan

 

1. Small Deposit

These days you will need 8-10% of the property value as a deposit to get a home loan…

BUT, there are situations where you can use a guarantor to help you borrow up to 100% of the property plus additional costs.

Best of all, you avoid paying lenders mortgage insurance which is usually payable if you have less than a 20% deposit.

Again the banks all have different credit lending policies, and a small deposit to one bank is completely fine with another.

south bank brisbane home loans

Having a small deposit and getting declined doesn’t mean the end to your home buying journey. It just means its time to speak to another bank!

 

2. Being over 45 years old

Although there are laws (check out the Discrimination Act) to make sure banks don’t discriminate because of your age, these days it is common for the lenders to ask for an exit strategy in paying off your home loan if you are over 45 years old.

In effect, these restrictions can limit your mortgage options because of your age.

While different banks have different policies, some common exit strategies for anyone aged over 45 years old is:

  • ✅ Moving to a smaller house and downsizing once you reach retirement age
  • ✅ Selling other investment properties, or shares.
  • ✅ Releasing funds from your superannuation to pay down the loan.
  • ✅ Recurring income received from your superannuation fund.

Read More: Mortgage Age Limits and Restrictions

 

3. Being too young

Don’t worry the young people get grief too from the banks!

You can’t apply for a home loan if you are aged under 18 years old, but did you realise that being aged under 25 can negatively affect your credit score? Being young you may have a very limited (or no credit history) at all to show you are a good borrower.

The good news is: that not all banks credit score, which an experienced Mortgage Broker will understand and help you navigate.

Read More: 16 [easy] tips to Find the Best Mortgage Broker in Brisbane 

 

4. Spending habits

When you apply for a home loan nearly all banks will want to see your last 3 months (Suncorp Bank want to see 4 months) day to day transaction account statements.

If you spend a little too much at Zara, or at Dan Murphy’s on the weekend this could affect your home loan application.

The banks will look into your monthly living expenses to determine if you can afford to make your home loan repayments.

This is an example of how some banks will categorise your monthly living expenses.

Monthly Living Expenses (detail expenses/costs)
Childcare $
Kids/Pets $
Clothing $
Education $
Groceries $
Insurances $
Investment $
Medical $
Other $
Owner Occupied Expenses (e.g. Rates) $
Recreation $
Connections $
Transport $
Rent/Board $
TOTAL $

Read More: 11 Hidden Costs of Buying a Home in Brisbane

first home in west end

If you’ve been eating out too much, or overspending at the shops the bank may decline your home loan!

 

5. Under 12 months in a job

Lots of banks will want you to be in your current job for at least 6-12 months to be able to borrow with less than a 20% deposit.

In other words, if you are borrowing more than 80% of the property value (with lenders mortgage insurance) you will get your loan declined…

Unless you work with a mortgage broker that knows which banks will lend to you if you have been in your job for less than 12 months.

We work with some lenders that will lend to you even if you have just started a new job.

Read More: Let me know if I qualify for a home loan given I have been in my job for under 12 months.

 

6. Being self-employed

In a lot of cases, the banks will decline your loan if you have been self-employed for under 2 years.

We are self-employed loan experts and work with several lenders that will consider home loan applications with people who have been self-employed for only 12 months.

There are lots of Mortgage Brokers (and banks) who are generalists and just find self-employed applications too hard.

We have a team of credit experts and will help find a lender that will work with you.

Read More: Self-Employed Finance Options

west-end-home-buyers

Being Self-Employed for under 2 years can mean instant home loan decline with some banks and lenders.

 

7. Buying a ‘difficult’ property

It used to be the case that buying a unique property with a helipad caused issues…

Unfortunately, the banks are being even more particular with what type of properties they will lend on.

Some banks have restrictions to lending on units, others will restrict you based on bushfires, or flooding restrictions.

In other cases, some banks will be ok with lending on apartments but have restrictions based on:

  • 🏘 The suburb or postcode where the unit is located, sometimes with restrictions based on high density or inner-city locations.
  • 🏘 How many floors the block of apartments has, sometimes with restrictions when it is higher than 4 stories.
  • 🏘 The total floor area inside the apartment, with restrictions if it is less than 40 square metres.
  • 🏘 If the bank already has too much lending in the building you are wanting to buy in.

Regardless of these limitations, you can still get your loan approved by going with the bank that is happy with that type of property.

Read More: How reliable is your pre-approval?

research home brisbane

The Flood Awareness Map lets you know what the history of flooding is at your property.

 

8. Bad Credit History

A bad credit history in the eyes of the banks involves small defaults, bankruptcies and judgements on your credit file.

If you haven’t seen your credit file you can either get in touch with us to get a copy or check out Equifax’s website to request a copy.

Defaults on your credit file as small as $100 can cause the bank to reject, or decline your home loan.

As an example we’ve recently had a first home buyer who had a small phone bill that was sent to their old address, they moved and it was never paid. This first home owner never received the bill, and wasn’t notified of it being overdue because all the mail was going to the wrong address.

As a result, the phone company put a default on their credit file for the amount owing and the first home owner didn’t become aware of this until they tried to apply for finance through their bank and got knocked back! Fortunately, they came to us, and we were able to help navigate around it and find a lender that would let them buy their dream home.

Having a black mark on your credit file doesn’t necessarily mean it’s the end of the world and your loan may not get declined, but we can help you apply with the right lender for your situation to make sure you get your loan approved speak with our Bad Credit Experts and call us on 1300 088 065.

Read More: What happens if I have a bad credit history?

 

9. Too many loan applications

If it wasn’t enough being too young, too old, or looking for a unique property the banks also regularly decline home loan applications because you may have had too many credit enquiries in the past 12 months.

In other words, if you have had more than 2 or 3 enquiries in the last 6 months the banks could give you a bad credit score, and reject your home loan.

Fortunately, there are banks and lenders that will consider your application provided there are fair reasons for the credit enquiries.

Our team regularly deals with these non-credit scoring lenders and can help find a deal that works for you.

Read More: How can Hunter Galloway Mortgage brokers help me?

chat-to-mortgage-expert

 

What to do if your home loan is declined?

Don’t worry, these days it is more common than not for a bank to decline your home loan application.

Did you know that almost 40% of applications were rejected earlier this year?

The first thing you can do is speak with an Expert Mortgage Broker to discuss your situation and options.

They will take the time to understand why your home loan was declined, and find other banks and lenders that will look at your situation fairly.

Call us on 1300 088 065 or complete a free assessment to speak with one of our expert mortgage brokers.

Mortgage Broker Brisbane

The Hunter Galloway Mortgage Broker Brisbane team is here to help. We have a team of home loan experts.

Call us on 1300 088 065 or complete a free assessment to speak with one of our expert mortgage brokers.