Mortgage application for self-employed refused, next steps?

sasha1504

Hi,

We have 7 years and about £175,000 remaining on our 25-year mortgage. We're currently on life-time tracker with Bank of Scotland 0.85% above BoE, so 6.1%. At the moment we pay £900 per month interest-only. 

I've applied via Fluent Money (got linked to them from MoneySuperMarket). 
They assessed us as: 1. Excellent credit rating, 2. Great LTV of 32%, 3. Problematic affordability.
Fluent said they should still be able to get a decent mortgage for us. 

My wife and I run a small limited company and our combined take-home earnings are £50,000 per year. We were considered as self-employed.

We were matched with Santander by Fluent for 4.5% 5-year fix for interest-only mortgage (about £600 per month). The reason we wanted to have an interest-only mortgage was to invest in stocks & shares ISA and to be able to pay the mortgage in full after 5 years or so. We submitted all requested documents via Fluent to Santander. The process took nearly 6 weeks with a lot of to-and-fros, but eventually got rejected by Santander's underwriter, who only accepted our yearly income as £37,500 due to a recent shareholder restructure (in Dec 2023, so too close to our application). So we got rejected on the grounds of low affordability and the recency of change. 

I am wondering what our next steps could be:
1. Reapply with a different mortgage broker?
2. Reapply for a repayment mortgage rather than interest-only mortgage?
3. Bring the mortgage amount down to 4 x our accepted yearly income (4 x £37,500 = £150,000), then reapply with the same or different broker? (We have an inheritance coming of about £70,000, so could use a part of it to bring the mortgage down to £150,000 and invest the rest into stocks& shares ISA, with a view of repaying the remainder in 5-10 years). 

Any advice would be much appreciated.

Alex

Hoenir

Have you considered switching on to a repayment basis?  Interest only options these days are very limited. Interest only with the use of investments as a repayment vehicle fell out of fashion many years ago. When the collapse of the Nikkei saw money lost was never ultimately recovered. Being dependent on something with a fluctuating value to meet a fixed term committment is in this case problematic. Unless the size and breath of the portfolio is more than adequate. 

sasha1504

Thank Hoenir, we shall certainly consider switching to the repayment basis if it can help us a secure a mortgage. I guess doing that plus reducing the borrowed amount should make things easier. I just ran our yearly income numbers £37,500 - £50,000 of through the MSE borrowing calculator and it looks like we can only borrow £80,000-£95,000 with high confidence (seems very little?), so might direct all £70,000 of the inheritance towards the mortgage repayment, then reapply. 

penners324

Going to a local mortgage broker would help as well.

sasha1504

penners324 said:

Going to a local mortgage broker would help as well.

Thank you. Is it because it is easier for them to find and secure a mortgage when the contact is in person vs. when it is over the phone with one of the online brokers?

amnblog

sasha1504 said:

penners324 said:

Going to a local mortgage broker would help as well.

Thank you. Is it because it is easier for them to find and secure a mortgage when the contact is in person vs. when it is over the phone with one of the online brokers?

Presumably Fluent have not dropped the case at this point?

sasha1504

amnblog said:

sasha1504 said:

penners324 said:

Going to a local mortgage broker would help as well.

Thank you. Is it because it is easier for them to find and secure a mortgage when the contact is in person vs. when it is over the phone with one of the online brokers?

Presumably Fluent have not dropped the case at this point?

All messages and docs have been wiped from the Fluent app, and their Adviser has not responded to my email in a week (where I asked if reducing the loan amount would help to secure another lender). So it looks like they dropped our case. I don't know if that's normal?