Our experts discuss when a bank can refuse to give out a mortgage, and what you have to do next, if the applications are declined.
Reasons for refusing
The bank will refuse when the client does not fulfill the requirements of the bank like loan to value or debt to income, says Martin Faessen, mortgage advisor WeCare Mortgages.
Robin Christiani, mortgage advisor, describes four important factors:
1) LTV (loan to value)
2) DTI (Debt to Income)
3) Repayment risk
4) Type of property which is purchased.
For example, application will be denied, if:
- the own funds are insufficient,
- declared income is insufficient,
- there are many existing loans,
- there is an issue with the registration of the property.
Nuria Fernandez Munne, mortgage assistant Mortgage Direct SL, also mentions, when someone applies for a mortgage in Spain, the bank will assess their application according to their criteria. They’ll look at information on their credit report and affordability check form. This helps to decide if they are likely to meet the repayments.
Additionally, the banks calculate around one-third of the applicant’s net monthly income. It has to be enough to cover their existing debts including any rent you might pay plus the new Spanish mortgage. In other words, the DTI (debt to income ratio) needs to be maximum 35%.
If the bank has found something that didn’t meet their criteria when they did a full search of their information, the application can be declined.
Quick scan
Mortgage assistants usually carry out a Mortgage Quick Scan before summiting the application to the bank.
This way we know quickly what the possibilities of success are. For this reason we have a track record of 90% success rate. After doing the test we present the application to different collaborating bank and always try to present our clients with at least 3 offers, says Robin Christiani.
What to do, if you get denied?
Nuria Fernandez Munne says, declines very rarely happen with mortgage brokers. If there is a difficult profile, advisor explains in advance to the client the mortgage may get declined but it’s worth a try. Also the bank can change their criteria during the process but this doesn’t happen often either.
In any case it is useful to know why a mortgage has been declined in order to have a higher success when approaching other lenders.