What to do if buyer is refused a mortgage

When you’re selling a property, finding out your buyer’s mortgage has been refused can feel like a massive blow – especially if you’re relying on the sale to keep a property chain moving. It’s frustrating, stressful and can leave you worried about the dreaded property chain collapse, where one failed sale jeopardises everyone else’s plans.

The reality is, mortgage refusals are more common than you might think. According to Aldermore, two in three first time buyers have been rejected for a mortgage. Nearly half were turned down once, and 20% faced multiple rejections — showing just how tricky the process can be for buyers, and how easily a chain can fall apart as a result. 

But, don’t panic! Understanding why the mortgage was refused can help you figure out your next steps and keep things on track.

In this guide, we’ll explain the most common reasons for mortgage refusals, explore your options, and show how selling to a cash house buyer like The Property Buying Company can help prevent further delays, or even help repair a property chain on the brink of collapse.

Why has your buyer been refused a mortgage?

When a buyer is refused a mortgage, it can throw a serious spanner in the works of a house sale, especially if there’s a property chain involved. It’s frustrating, but understanding why it’s happened can help you figure out the next steps. 

Not all mortgage lenders play by the same rules. One lender might say no, but another might say yes. This could be down to things like results from a house survey, the type of income the buyer has, their age, or even the amount of deposit they have. 

Here are some more common reasons and what they might mean:

Poor credit history

Mortgage lenders look closely at a buyer’s credit score to decide if they’re a safe bet. If the buyer has missed payments, maxed out credit cards, or had financial trouble with CCJ’s or bankruptcy, it raises red flags. Even small things like making lots of credit applications in a short time can make lenders nervous.

Buyers might need to tidy up their finances, clear any debts and check their credit report for mistakes. If this isn’t a quick fix, a mortgage broker might help them find a lender that’s more flexible with credit scores.

Affordability issues

Lenders don’t just look at how much the buyer earns — they also look at what they spend. If their outgoings (like debts, rent, or other expenses) are too high, the lender might decide they can’t comfortably afford the mortgage.

Similarly, even after a buyer gets an initial “yes” from a lender, things can change. Losing a job, taking on new debt, or an unexpected expense can make the lender rethink their offer. If their situation is temporary, the buyer might just need a little time to get back on track. 

But, if you need to sell quickly, it would be wise for a buyer to pull out of your house sale, and look for a property within their budget. This would mean that you’d need to find a new buyer.

Employment problems

Mortgage lenders want buyers with stable incomes. If your buyer is self-employed, works on short term contracts or has recently changed jobs, it might make lenders hesitate. For instance, being in a probation period or not having enough evidence of income can cause issues.

Sometimes, a specialist lender might be more understanding of unusual work set ups, but in most cases, buyers can provide extra paperwork like tax returns or employment contracts to prove their income.

Property issues

Sometimes the problem isn’t the buyer – it’s the house itself. Certain properties can make lenders cautious, such as:

• Homes with structural problems, like damp or subsidence.

• Properties built with unusual materials, like concrete or timber frames.

• Flats with short leases (under 70 years) or expensive service charges.

• Properties in risky locations, like flood zones or above shops.

As a seller, if you can fix any obvious issues, like repairing damage or extending a lease then you should. But, if you can’t, then it may be worth finding a cash house buyer to buy your property directly from you.

What to do if your house is unmortgageable?

Finding out your home is unmortgageable is not what any seller wants to hear. This means mortgage buyers won’t be able to get a mortgage to buy your property, which can make it harder for you to sell. 

Common reasons for this include, structural issues, a short lease, or unconventional construction. But don’t worry — there are ways to move forward, like selling to a cash house buyer. Some of the most common reasons why your house might be labelled as unmortgageable include:

• Structural problems: Issues like subsidence, damp, or roof damage can scare off lenders.

• Short lease terms: If your lease has less than 70 to 80 years left, most lenders won’t touch it.

• Non standard construction: Properties built with unusual materials like concrete or timber frames can be a no go for traditional lenders.

• Planning or regulation issues: Unapproved extensions or renovations, or missing building regulation certificates, can cause problems.

Should you find a new buyer for your house?

When a property sale falls through due to mortgage issues, it can be pretty frustrating. Deciding whether to stick with your current buyer or look for a new one can be tricky. The best choice depends on your circumstances, how urgent your sale is, and what caused the deal to collapse. Here’s a breakdown to help you figure it out:

Take a look at the market

Firstly, you should take a look at how properties like yours are performing in your area. If similar homes are selling quickly, you might not have to wait long to find a new buyer. Relisting your home could get things back on track quickly.

In a sluggish market, it could take longer to find another buyer – especially if your home is in a niche category like a higher price range or unusual location. In this case, it might be worth sticking with your current buyer if there’s a chance they can sort things out.

Understand what went wrong with your buyer

If the sale fell apart because of issues on your buyer’s side, it’s important to find out if their situation can be fixed. Mortgage rejections happen for all sorts of reasons. Maybe their lender had strict criteria, or their financial situation changed. Sometimes buyers can resolve this by finding a new lender or working with a mortgage broker.

If your buyer’s finances have taken a serious hit – like losing a job or facing unexpected expenses – it might not be realistic to wait for them to sort things out. 

If your buyer is making progress, has a solid plan, and you’re not in a rush, giving them a chance might pay off. But, if their situation seems uncertain, or you’re under pressure to complete the sale, it might be time to look for someone, or something new.

Think about your position in the chain

If your sale is part of a property chain, then timing is everything. If your own purchase depends on selling your house, delays could put your next move at risk. In this case, finding a new buyer quickly might be the best option.

Sometimes, selling to a cash house buyer, or pausing your purchase (if possible) can give you more breathing room. At The Property Buying Company, we aren’t dependent on mortgages or chains, and will buy your house directly from you for cash, with minimal fuss.

Yes, we may offer slightly below market value, but we offer speed and simplicity that can often make it completely worthwhile.

What are your options when a sale falls through?

If your house sale has fallen through, and you’ve lost a buyer due to funding issues, you still have plenty of options to turn things around. One of the simplest and fastest solutions is selling to a cash buyer like The Property Buying Company, but let’s look at all your options to see what works best for you:

If you’re short on time or energy, selling to a cash house buyer like The Property Buying Company is often the simplest and fastest solution. You can skip the stress of repairs, avoid the uncertainty of waiting for mortgage approvals, and get a guaranteed sale on a timeline that suits you.

Simply put your postcode in our form below, for a free, no-obligation valuation and see how we can help you move forward, helping you to sell in as little as 7 days, all while covering your legal and selling fees.