Help Needed: Mortgage Refusal Due to Possible Financial Oversight

fatboydaz

Hi All,

I've recently faced refusals for mortgage applications from two lenders, and both brokers I've worked with are unsure of the reasons. However, I believe I may have identified the issue, and it's likely due to an huge oversight on my part.

Here's our situation:

• My wife and I own a buy-to-let property since 2022.
• We are both employed in full-time permanent roles.
• I was self-employed for two years, up until nine months ago.

Our first broker submitted our application to TSB, which required us to provide three months of bank statements and proof of funds. After fulfilling these requests, TSB asked for additional documents (tenancy agreement, latest tax year overview, and matching tax calculation), which we provided. Despite this, the mortgage was refused without explanation. NatWest, approached subsequently, indicated they would also refuse the application without reviewing the documentation.

In confusion, we turned to a specialist broker who claimed expertise in such cases. They requested three months of bank statements and proof of deposit, which we promptly sent. The lender portal indicated satisfaction, and a house valuation report was received. Unfortunately, the mortgage was declined again without a clear reason. The broker suggested checking the National Hunter database for potential insights. My wife and I have both completed the DSAR and the response will be issued by email within the next month.

This situation has been extremely distressing for us, particularly for my wife. I feel responsible as it seems the issue lies with my financial records. Upon reviewing my tax returns, I realized I failed to declare our rental income for 2022-2023. This discrepancy is likely the root cause, and I have instructed my accountant to rectify this error immediately.

Additionally, there might be concerns about my income history. I was earning £20k while self-employed, which increased to £50k when I transitioned to a full-time role. The increase is justifiable as I took on additional responsibilities and replaced two roles. Nonetheless, this jump might have raised red flags.

Currently, we are living with our three children at my brother's home while our house is rented out. The prospect of renting a home ourselves is not appealing.

I am seeking advice on how to resolve this situation. Is there a way to correct my records and improve our chances of securing a mortgage? Any insights or suggestions would be greatly appreciated.

penners324

Checked your credit reports with the 3 agencies? Checked with CIFAS?

MWT

fatboydaz said:

Additionally, there might be concerns about my income history. I was earning £20k while self-employed, which increased to £50k when I transitioned to a full-time role. The increase is justifiable as I took on additional responsibilities and replaced two roles. Nonetheless, this jump might have raised red flags.

Was your period of self-employment associated with the same entity that is now employing you full-time?

... and do you have any ownership in that entity or family involvement?

fatboydaz said:

• My wife and I own a buy-to-let property since 2022.

Do you have a mortgage on that property and if so is it a buy-to-let mortgage or a residential mortgage with consent to let?

Where were you living before your brothers home, or have you been there since renting out your home?

fatboydaz

penners324 said:

Checked your credit reports with the 3 agencies? Checked with CIFAS?

Hi, I applied to CIFAS last night, what is the 3rd? Thanks. 

fatboydaz

MWT said:

fatboydaz said:

Additionally, there might be concerns about my income history. I was earning £20k while self-employed, which increased to £50k when I transitioned to a full-time role. The increase is justifiable as I took on additional responsibilities and replaced two roles. Nonetheless, this jump might have raised red flags.

Was your period of self-employment associated with the same entity that is now employing you full-time?

... and do you have any ownership in that entity or family involvement?

fatboydaz said:

• My wife and I own a buy-to-let property since 2022.

Do you have a mortgage on that property and if so is it a buy-to-let mortgage or a residential mortgage with consent to let?

Where were you living before your brothers home, or have you been there since renting out your home? 

Hi, yes because of my hours I would invoice them as and when I worked. I have no family involvement. When we were both happy I could work full time I signed the contract. 


We were living in that property then changed the mortgage over to a buy to let in Feb 2022 and moved out to my brothers house straight away. A tenant moved into that property in April 2023 and has been there since. He is no relation to me and has always paid on time. 

MWT

fatboydaz said:

We were living in that property then changed the mortgage over to a buy to let in Feb 2022 and moved out to my brothers house straight away. A tenant moved into that property in April 2023 and has been there since. He is no relation to me and has always paid on time. 

There may be a concern that you are using residential mortgages to acquire property which you have no real intention of living in, how long were you living in the previous property before you converted to a buy-to-let mortgage?

Is your previous property located relatively near to your proposed new purchase, or is it some distance away?

ACG

How long has the place been let out for? Should it have been on previous years self assessments? 

It should not be a deal breaker, but it might be a case of you not being able to get high street rates for a little while depending on whether or not there is anything on CIFAS etc. Did the lenders all ask for the self assessments? Were you using that as income? 

If the rental income was not being used there are plenty of lenders who would not need the self assessment. It could be the reason, but it also might not be as I would be surprised if all 3 lenders would pick up on that unless there is something on one of the fraud prevention systems. 

fatboydaz

MWT said:

fatboydaz said:

We were living in that property then changed the mortgage over to a buy to let in Feb 2022 and moved out to my brothers house straight away. A tenant moved into that property in April 2023 and has been there since. He is no relation to me and has always paid on time. 

There may be a concern that you are using residential mortgages to acquire property which you have no real intention of living in, how long were you living in the previous property before you converted to a buy-to-let mortgage?

Is your previous property located relatively near to your proposed new purchase, or is it some distance away?

We were living in that property since 2010 and it’s the only property we have ever owned. 

The previous property is about 3 miles away. 

fatboydaz

ACG said:

How long has the place been let out for? Should it have been on previous years self assessments? 

It should not be a deal breaker, but it might be a case of you not being able to get high street rates for a little while depending on whether or not there is anything on CIFAS etc. Did the lenders all ask for the self assessments? Were you using that as income? 

If the rental income was not being used there are plenty of lenders who would not need the self assessment. It could be the reason, but it also might not be as I would be surprised if all 3 lenders would pick up on that unless there is something on one of the fraud prevention systems. 

It was converted to a BTL in Feb 2022 and was let out in April 2022 and the same tenant has been in since paying his rent on time. 

It should have been on my 2022-2023 self assessment but it was not declared as an additional income. And the lender did request my individual tax return for that year which did not include that. 

When I applied with the last broker he said the lender only required 3 months bank statements, p60 for both my wife and I and also proof of deposit. Only at the last minute did they say underwriter has said no and they would not give him a reason.  

MWT

fatboydaz said:

MWT said:

fatboydaz said:

We were living in that property then changed the mortgage over to a buy to let in Feb 2022 and moved out to my brothers house straight away. A tenant moved into that property in April 2023 and has been there since. He is no relation to me and has always paid on time. 

There may be a concern that you are using residential mortgages to acquire property which you have no real intention of living in, how long were you living in the previous property before you converted to a buy-to-let mortgage?

Is your previous property located relatively near to your proposed new purchase, or is it some distance away?

We were living in that property since 2010 and it’s the only property we have ever owned. 

The previous property is about 3 miles away. 

I doubt that is the issue then, as long as it is on a proper buy-to-let mortgage now and not a residential mortgage with consent to let then it shouldn't really be a factor.

It does still seem odd that the failure to file correctly would have killed all three applications, and with no specific query about that being raised...

Are you depending on the some part of the rental income to support affordability on your new mortgage? ... or is the 'profit' on the rental property low enough that the lenders are top-slicing your earnings and reducing affordability?

ACG

MWT said:

fatboydaz said:

MWT said:

fatboydaz said:

We were living in that property then changed the mortgage over to a buy to let in Feb 2022 and moved out to my brothers house straight away. A tenant moved into that property in April 2023 and has been there since. He is no relation to me and has always paid on time. 

There may be a concern that you are using residential mortgages to acquire property which you have no real intention of living in, how long were you living in the previous property before you converted to a buy-to-let mortgage?

Is your previous property located relatively near to your proposed new purchase, or is it some distance away?

We were living in that property since 2010 and it’s the only property we have ever owned. 

The previous property is about 3 miles away. 

I doubt that is the issue then, as long as it is on a proper buy-to-let mortgage now and not a residential mortgage with consent to let then it shouldn't really be a factor.

It does still seem odd that the failure to file correctly would have killed all three applications, and with no specific query about that being raised...

Are you depending on the some part of the rental income to support affordability on your new mortgage? ... or is the 'profit' on the rental property low enough that the lenders are top-slicing your earnings and reducing affordability?

I dont think it being on consent to let or not is a major problem. I have had clients with properties on CTL for a decade and its never been an issue. 

The fact it has not been declared is a bigger issue and suggests tax evasion. But I am still not completely convinced that that is the issue.