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Mortgage broker

Michal Kaplon

os.Stefana Batorego 80

60-687 Poznan

Strona www stworzona w kreatorze WebWave.

21 common reasons for a bank refusing a mortgage loan - Part I

18 września 2020

    Even the best people are denied a mortgage. Getting a mortgage depends on a very large number of parameters that must play in parallel. The analysis on the basis of which the bank issues a decision consists of three basic parts: financial-personal, legal and real estate analysis. Each of them requires separate verification and each of them requires separate approval. It is not possible to grant a loan if 2/3 of the analysis plays and 1/3 is flawed. It happens, not so rarely, that the application looks flawless at first glance, but during the analysis a detail that does not comply with the rules of a given bank is “caught”. As a result, the applicant is faced with a refusal to grant a mortgage. You can then try to convince the bank to grant a loan for the so-called. derogation. However, everything depends on the value and strength of this parameter. In today's post "Mortgage Refusal? 20 reasons for negative decisions "you will learn:

 

  1. Problems you may encounter with your income.
  2. What could be wrong with my property that the bank would reject?

  3. How a personal situation can negatively affect your chances of getting a mortgage.

  4. Loans taken and their negative impact on obtaining a loan.

 

 

1. Mortgage and business activity

 

  According to the banks, economic activity is a less stable and less reliable source of income than a full-time job. As a result, banks have greater demands on entrepreneurs. Very often mortgage refusals are related to obtaining income from running a business. One of the main reasons for negative decisions is the period of operation. The minimum period for new operations is 12 months, and some banks require up to 24 months. If the entrepreneur conducts business on the basis of cooperation with the former employer, it is possible to try after 6/9 months depending on the bank. Another very often misunderstood motive for a negative decision is income - net income, i.e. what is left purely after deducting costs, taxes, and insurance premiums. Many entrepreneurs make cardinal mistakes when they plan to take out a mortgage. The most common of them are artificial costs, the lack of records of all revenues on which they pay tax, the purchase of goods, so that the profit comes out only in the inventory statement, leases with large own payments, high limits in turnover accounts, etc. A special case are activities settled by a lump sum. Some entrepreneurs choose this method of settlement due to less formalities. Only revenues are recorded without costs. For this reason, due to their inability to accurately calculate net income, banks only accept a certain percentage of income as income. Depending on the bank and the type of lump sum, it is between 15% and 40% of the income. It may or may not be in tune with reality. It was detrimental to some of my clients, but what should I do? An interesting case is the inability to accept activities conducted outside Poland. No bank (except Deutsche Bank, which accepts business activities from Germany) will do this.

 

2. Fixed-term contract and mortgage loan

 

  Banks have their requirements for the duration of the contract backwards and forwards. Failure to meet the boundary conditions may result in the refusal to grant a mortgage. Detailed information on the requirements will be found in next blog post  about a fixed-term contract and a mortgage. If you do not meet them, you can save yourself by trying to apply the derogation, e.g. by providing a certificate of employment, a promise of employment, an annex to the contract. Thanks to the above documents, it is possible to convince the analyst to bend the credit policy.

 

3. Obtaining income from high-risk industries

 

  Some employment sectors are rated worse than others. Some are characterized by high risk, payment gridlocks, and high bankruptcy rates. If you work or operate in the construction, tourism, gastronomy, transport, financial intermediation. Sectors, some banks may, in principle, refuse to grant you a loan. Of course, this usually doesn't apply to corporate employees, but rather to smaller companies. This is due to the credibility and stability of running a business. The case of a person employed in a large logistics and transport company, eg Raben, is considered differently than a self-employed driver. The solution may be a larger own contribution, unemployment insurance (a rare case) or a surety.

 



 

 

Thank you for reading. Part II coming very soon!!