What should you do when your home loan is declined?

A declined home loan does not always mean you cannot borrow. Ask what stopped the application before you apply elsewhere: a missing document, a lender rule and an unaffordable loan need different responses.

Start by keeping the bank's response and checking which income, debts, deposit and property details it assessed. The six checks below help you work out what needs to change.

If the decline followed pre-approval, go to our declined after pre-approval guide. Otherwise, start with the 6 checks below.

The video explains common reasons a bank says no. The guide below takes you through the checks I make before another application.

One bank saying no does not tell you what another bank will do. First, find out what stopped the application: income, credit history, the deposit, debts and living expenses, employment, visa, property or missing information.

Sometimes the lender explains it. Sometimes all you get is one line saying you didn't meet its requirements. I start by finding the number or rule behind that answer.

The lender's decision is not ordinarily shown on your credit report. The credit enquiry can be.

When a credit provider accesses your report in connection with a formal application, that request can be listed as a credit enquiry. The OAIC says a credit enquiry can remain on your report for 5 years.

Applying elsewhere straight away may add another enquiry without fixing the reason for the first result.

Checking your own credit report is different. You can request a free copy every 3 months, and you can request another free copy if you were refused credit within the past 90 days.

When I review a declined application, I work through 6 practical questions.

Your payslip can be correct and the lender can still count less income than you earn. In this hypothetical example, a nurse earns $95,000 in base salary plus $25,000 in overtime and penalty rates.

If a lender counts 80% of the extra income, it uses $115,000. If another can count all of it, that becomes $120,000. That is $5,000 more income counted towards the loan, without the nurse earning any more.

I also check how the payslip labels those payments. Overtime and contractual shift allowances can be treated differently. The amount a lender counts depends on your role, payment history and documents.

I ask for the income figures used in the assessment. If they are lower than expected, I check whether the difference came from a percentage, a history rule or missing evidence.

See how lenders assess overtime, bonus and commission income.

Nicholas had a 20% deposit and was buying his first home. A $450 phone default from an old address stopped the bank's automated assessment.

I got proof the debt had been paid, documented the address dispute and took his application to a lender that would have a person assess it. The $432,000 loan was approved for the $540,000 purchase.

A paid default can still appear on your report. Payment changes its status; it does not make it disappear. I check the amount, age and explanation alongside your income, deposit and the rest of the application, then compare lenders that can consider it.

Read the bad credit home loan guide.

Some banks use an internal score to screen applications before a person reviews them. Your credit history, recent applications, income and other details can affect that score.

Each bank uses its own formula. I start by checking that the information is right and whether that bank is a sensible fit. Adding irrelevant details to try to change the score will not fix the underlying problem.

You can have enough money to buy and still fall outside a lender's genuine savings policy. This often happens with a family gift, a recent asset sale or money that has not been held long enough. The lender checks the source, holding period and whether the rule applies at your LVR.

A rental ledger may help meet a lender's evidence requirements, but rent already paid is not cash available for settlement. Check the deposit, purchase costs and any mortgage-insurance cost separately.

LVR means the percentage of the property's value that you are borrowing.

When I find a deposit problem, the next step is usually another document, more time, a different structure or a more suitable lender policy.

Compare low deposit home loan options.

At higher LVRs, lenders mortgage insurance may be required. That can create a second policy check. An application may fit the lender but fall outside the mortgage insurer's rules.

I check which insurer is involved and whether the same problem would come up at another lender. Some lenders can make insurance decisions themselves within agreed limits. Others need the insurer to assess the application.

Either way, the insurer's rules still matter. Before changing lenders, I check whether the new lender and its insurer can accept the issue that stopped the first application.

See how LMI waivers and mortgage insurance rules can differ.

A $0 credit card balance does not always mean a $0 commitment. Many lenders use the card's approved limit in their calculation.

For example, $30,000 in combined limits becomes a $1,140 monthly commitment if a lender counts 3.8% of the limit. That can happen without you owing a cent on the cards. The percentage varies by lender.

See how debts and commitments affect borrowing power.

Living with family rent-free can affect the result too. A lender may allow for rent or housing costs you don't currently pay. Ask what amount it used and whether that fits where you'll live after settlement.

HECS also needs a check. The lender may have an exception for a balance close to repayment, but don't assume every lender excludes it. Check your current repayment obligation.

See how HECS debt affects borrowing power.

These monthly amounts help explain why a quick bank calculator and a full assessment can give different answers. I rebuild the calculation line by line.

Under APRA's APS 220, banks generally test home loan repayments at least 3 percentage points above the actual rate. For example, a 6% loan rate would be tested at 9% or higher. A lender may also apply a minimum assessment rate.

That buffer is only one part of the result. Lenders also consider your debt to income ratio, living expenses and commitments visible in your statements.

I separate recurring expenses from unusual one-off spending, then check the figure the lender actually used. I also make sure every liability is disclosed accurately. A missing debt can become a credit problem as well as an affordability problem.

Debt to income compares everything you owe with your yearly income before tax. It is a separate check from whether you can afford the monthly repayments. A high ratio can limit the loan, even if the repayment calculation works. Since 1 February 2026, APRA has limited each bank to 20% of new owner-occupier lending and 20% of new investor lending at a debt to income ratio of 6 or more.

In one example, gambling transactions left the borrower about $500 out of pocket each month. The lender counted that as extra spending. I look at how much is regularly leaving the account, rather than just counting the transactions.

Tell me about every card, loan and ongoing payment, including accounts you intend to close. Check which ones need to be closed before approval or settlement, and keep the confirmation.

Two people can earn $130,000 and receive different answers because one is salaried and the other is casual, contracting or self-employed. For self-employed applicants, the lender may use the latest year, average 2 years or cap growth against the previous year.

Imagine a business earning $90,000 in one year and $150,000 in the next. A lender using the latest year would count $150,000. Averaging the 2 years gives $120,000.

If the lender instead capped the figure at 120% of the earlier year, it would count $108,000.

Those methods produce a $42,000 spread from the same tax returns. This is an illustration of different calculations, not a claim that a named lender will use each method.

For casual or contract work, I check how long you have been in the role, your work history and how the lender turned your payslips into a yearly income. Changing jobs does not mean every lender will ask you to wait another 12 months. Have your contract, start date, probation terms and payslips ready.

A time rule is fixed by waiting. An evidence rule may be fixed with another document. A policy mismatch may be fixed by choosing a more suitable lender.

See how self-employed income is assessed.

Tell me about a job change before relying on an existing approval.

Start with our income and employment hub, or the guide to applying after starting a new job. If you are changing to casual work, confirm the evidence and time requirements before relying on a pre-approval.

Sometimes your income and credit history are fine, but the lender will not accept your visa or the property. If you are a temporary resident or live overseas, I check which visas and foreign currencies the lender accepts, how much overseas income it counts and how much deposit it needs.

For the property, the issue may be:

• Valuation: the lender's valuation came in below the contract price.
• Apartment size: the internal living area fell below that lender's published minimum.
• Location: the postcode or property type did not fit the lender's rules.
• Use: a serviced apartment, display home leaseback or another unusual use changed the security assessment.

Two valuers can also reach different figures for the same property. A lower valuation can increase the LVR and change the deposit, mortgage-insurance or policy result.

Off-the-plan purchases and new builds deserve an early valuation check. Settlement may occur long after the contract, and a later valuation can leave a cash shortfall. Comparable sales and the property's condition influence the result. Ask about a valuation review or another suitable lender's valuation process without assuming a second valuation will be higher.

Imagine agreeing to pay $600,000 for a home, with a plan to borrow 80% of its value. You expect a $480,000 loan. But the lender values the property at $550,000, which brings that loan down to $440,000. You now need another $40,000 towards the same purchase price.

This example uses an 80% lending limit and leaves out buying costs. Your lender may use a different limit.

I would check whether the valuation can be reviewed, the price or loan reduced, or the gap covered with available funds. Another suitable lender may have a different valuation process, but I need its result before relying on it.

If the proposed loan term extends into retirement, the lender may also ask how the loan will be repaid. That is not an automatic decline based on age. I check the proposed term, retirement income, assets and whether the exit strategy is one that lender accepts.

An exit strategy might involve a shorter loan term, verified retirement income or a realistic sale of another asset. Do not assume age 45 is a cut-off, or that saying "I will downsize" is enough without figures.

Younger borrowers may have a shorter employment, savings or credit history. The lender still needs evidence of stable income, the deposit source and affordable repayments. Age alone does not replace those checks, and the application must meet the lender's minimum-age requirements.

Read the visa home loan guide.

An investment loan can be declined even when the expected rent looks enough to cover the repayments. Banks usually count only part of the rent and allow for vacancies and property expenses. They also assess your existing loans and living costs.

I would ask how much rental income the lender used, how it assessed your other loans and whether the valuation or property type caused the problem. That helps me work out whether to change the loan amount, provide better evidence or check another lender's rules.

If you are using your current home for the deposit, our guide to using equity to buy a second property explains the equity calculation. Having enough equity does not automatically mean you can afford the extra loan.

A pre-approval can turn into a decline if your finances change, the property does not qualify or an outstanding condition cannot be met. Some pre-approvals also leave parts of the credit assessment until later.

The 4 common changes are:

1. The valuation came in low: a lower valuation increases the LVR and may change mortgage insurance, deposit or policy requirements.
2. The property did not fit: the postcode, apartment size, title, condition or intended use was outside the lender's security rules.
3. Your circumstances changed: a new loan, higher card limit, job change, reduced hours or another commitment affected the calculation.
4. The pre-approval was conditional: the lender had not completed a full credit assessment or had not assessed a specific property.

Get the reason in writing if you can. I then separate a borrower problem from a property problem before I suggest changing lenders.

See what to do when a loan is declined after pre-approval.

Before another application goes in, you should know why the first one failed and what will be different this time.

Do not lodge with the next lender just to see what happens.

You may create another credit enquiry while sending the same unresolved problem into a similar policy.

Ask which part of the assessment failed.

Use these questions when you speak with the lender or broker:

• What income figure did the lender use?
• Which monthly commitments were included?
• Was the result caused by the affordability calculation, credit policy, application score, deposit evidence or the property?
• Was there a specific policy condition the file did not meet?
• Can the decision be reconsidered with corrected or additional information?

A lender must tell you if it rejected the application because of information in your credit report.

Ask whether the lender can look at the same application again and what extra documents it needs. Before sending anything, confirm whether it is updating that application or starting a new one that could add another credit enquiry.

Request your reports from the credit reporting bodies and check:

• The formal enquiries listed
• Open and closed credit accounts
• Credit limits
• Repayment history
• Defaults
• Financial hardship information
• Personal details that may be incorrect

If something is wrong, ask the relevant credit provider or credit reporting body to correct it.

Keep your correction request and the response. You can ask the provider or reporting body to fix an error for free.

This is the part I spend most of my time on. I rebuild the calculation from your payslips or tax returns, bank statements, debts, living expenses, deposit and property details. Then I compare the lender rules.

I want to find a loan that fits and that you can afford, rather than chase the biggest number on a calculator.

Once I know what went wrong, the next step might be to:

• Provide a missing document
• Reduce or close an unused credit limit
• Correct a credit report error
• Wait until a clear time requirement is met
• Change the property or loan amount
• Use a lender whose policy better fits the file
• Do nothing yet because another application would not be responsible

Before spending more money or lodging another application, check whether the proposed fix addresses the reason for the decline.

Waiting only helps when the failed rule is time based. If the problem was a low valuation, the way overtime was assessed or an unused card limit, 2 years may change nothing.

Payment updates the listing to show it has been paid. The default can still remain on the report for the applicable 5 year period.

The useful questions are its date, amount, type, status and how the next lender's policy treats it.

A clear explanation can help where policy allows judgement. It cannot turn an ineligible application into a standard policy fit.

Check whether the lender has discretion before spending a week defending a rule it cannot change.

A low rate is irrelevant if the lender cannot use the income, accept the deposit source or lend against the property.

Find the viable options first. Then compare rate, fees, features and total cost.

The next lender may see the earlier enquiry even though the decline itself is not ordinarily listed on your credit report.

I want the application to explain the complete position accurately. Hiding a liability or recent application can create a new problem instead of fixing the original one.

Send me the assessment you already have. I check the income, debts, expenses, credit report, deposit, property and the lender rule that stopped it. Then I compare suitable lenders before recommending another application.

Start with the decline email, the lender's name and any contract deadline. You do not need a complete new application just to ask us where to start. We can then tell you which payslips, statements or credit-report details we need to review the problem.

About the examples: Arjun’s figures were borrowing estimates, not loan approvals. The nurse, credit-card, business-income and valuation calculations illustrate assumed scenarios; lenders do not all use the same rules. James’s example concerns late-payment reporting caused by a $10 monthly fee, not a default. Sarah’s example describes the lender’s postcode rules at the time, not its rules today. The video may refer to earlier policies; use the written guide and current lender requirements. Client examples describe individual situations and are not promises of approval. Names and identifying details have been changed.