Money mistakes that could hurt your mortgage application

There are lots of reasons to consider buying your own home, particularly if you’ve spent a few years in rentals. No matter how great a rented property seems when you first move in, niggling issues often arise and can even cause problems between the landlord and yourself.

In addition to this, if you sit down and work out how much you actually pay out in rent on a monthly basis, you begin to realise that you are spending a significant amount of money to effectively line someone elses pockets, and if you are not simultaneously saving towards a house deposit, you are not getting any closer to owning your own home. So it makes sense to buy a home with a mortgage as soon as you are realistically able to do so.

Applying for mortgages

Your next step, naturally, will be to go ahead and apply for a mortgage, but what happens if your application is rejected? Some applicants face numerous rejections, yet their earnings seem more than sufficient to qualify for mortgage offers. If you’re worried this could be your situation, read on to discover some of the financial mistakes that could result in refusals to grant mortgages.

Financial problems that may hurt your mortgage application

Mortgage applicants are rejected for a variety of reasons, some of the most common include:

Poor credit history

Renting your home is never cheap, and if you’ve had to scrimp and save along the way, it’s quite likely you’ve racked up a few late payments. Even when these debts are settled, they’re still noted on your credit score. This tends to be lower, as a result.

You may not have any CCJs or defaults on file, but any missed and late payments to creditors can work against you.

Check your credit score before making your mortgage application, this service is free if you contact all the credit score agencies directly. There are ways you can build your score back up, so it’s useful to find out where you stand.

Too many debts

Your mortgage lender will take a look at all your outstanding debts, and high levels of debt can cause an automatic rejection.

Poor management of current bank account

Your current account is an indicator of your ability to manage your money and budget for all regular payments. Just like the way you could have built up a poor credit record, if you dip into a negative balance or go over agreed borrowing limits, mortgage lenders may reject your application.

Again, issues of this nature can be rectified if you put a strict budgeting regime in place prior to making any applications for mortgages.

Access to high levels of credit

It may seem bizarre, but another reason you could be turned down for a mortgage, or offered mortgages at sky-high rates, is because you’ve got too much credit! If you own several credit cards, with large available credit limits, you may want to think about closing some down.

Lenders can get the jitters in this sort of situation due to worries that you could be under intense financial pressure if you accessed all available credit in one go.

Joint applicants have similar issues

If you’re applying for a joint mortgage, all the above money mistakes could affect your co-applicants status, too. It is important that all applicants are upfront about their finances and any possible issues at the outset. You need to get together with all joint applicants, and go through all your accounts and credit records with a fine tooth comb before contemplating making any kind of mortgage application.

Some final issues that can cause lenders to reject any mortgage applications include:

Self-employment or contract employment, most lenders are ideally seeking applicants in permanent, verifiable jobs and so will require further proof of earning from self-employed workers.
Payday loans or short term loans can also be a problem for mortgage applicants. Even if you’ve paid any previous loans off in full, they can still show on your credit file for up to six years and lenders may slap higher interest rates on mortgages as a result.
– Errors by the lender may not immediately spring to mind, but if you feel you’re unfairly rejected for a mortgage this could be due to administration mistakes on the part of the bank/lender.

Basically, mortgage lenders will often work to demographic guidelines, and if your application doesn’t fit their criteria you could be in for rejections all the way on this.

What you should be doing to get your mortgage approved

Now you’ve absorbed all the information in this post, you need to get your finances in shape so that they appear in the best possible light. You can see just how critical maintaining a good credit record and banking history actually is, and spending a few months sorting out problems will pay dividends in the end.

Is it a good idea to repay your student loan early?

For many of us, student debt is at the back of our minds. That’s until that yearly statement comes through the door, with plenty of 0’s to get even the most stoic ex-student feeling the money anxiety.

So, when it comes to deciphering that annual statement, is it worth paying off your loan early? Or is keeping your debt ticking over the best option? While a student loan is, indeed, a form of debt, that doesn’t necessarily mean it needs to be paid off as quickly as possible.

Read on to find out more about your student loan, including whether it’s a good idea to start making additional payments to bring down that debt today.

Which student loan do you have?

The first step to paying off your student debt is knowing exactly what type of loan you currently have. In the UK, there are currently two specific types of loans – which will differ depending on exactly when you went to university:

Plan 1

For students in England or Wales that attended an undergraduate course before the 1st of September 2012, Plan 1 will apply for their debt. If you happen to live in Northern Ireland or Scotland, the same applies, but the date is after the 1st of September 1998.

Plan 2

For students in England or Wales that attended an undergraduate course after the 1st of September 2012, Plan 2 will apply for their debt. All Northern Ireland and Scotland students remain on Plan 1.

Regardless of which plan your student debt falls under, you’ll be expected to start repaying your loan from the 6th of April in the year you graduate. But before you start to panic, there are a few stipulations to that – and the exact requirements differ depending on which ‘plan’ you fall under.

Plan 1 repayments

For ex-students under Plan 1 earning over £19,390 (as of April 2020), you’ll be required to pay back 9% of your earnings above this specific amount.

Plan 2 repayments

For ex-students under Plan 2 earning over £25,725, you’ll be required to pay back 9% of your earnings above this specific amount.

See more on this at

So for whichever plan you happen to be under, if you’re earning under the threshold, you won’t be paying your loan back at all currently. This works similarly to how your tax code functions – income over a certain earning threshold is taxed, much as income over a certain earning threshold is charged for your student loan. Much like taxes, this amount is deducted straight from your earnings if you’re employed—so no need to hand over the cash yourself each month or keep up with the maths.

So, should you repay your student loan early?

Now you’ve got a stronger understanding of how, exactly, student loans work – is it worth paying them off early?

Honestly, it depends on several factors. If you have a high income, no debt and you’re not planning on introducing any debt in the future, then paying off that full student loan balance could be a weight off your shoulders. But for most of us, overpayment isn’t worth it.

Unlike a traditional loan, a student loan doesn’t have a high rate of interest that makes paying it off a challenge. Instead, your student loan interest is in line with either the Bank of England base rate (for Plan 1, plus 1%) or the UK Retail Price Index (for Plan 2, plus 3%). So realistically, paying off your loan regularly is your best bet – and you won’t be losing out on much if you do.

It’s also worth noting that your student loan isn’t indefinite. If you graduated from university before the academic year of 2005/2006, your loan will be cleared from you at the age of 65 – even if you’ve never paid a penny. For graduates who completed their course after 2006, your loan will be cleared after 25 years from your graduation year. After 2012, and it’ll be cleared in 30 years.

For some, the idea of having debt can be a tough one. Money is a huge source of stress for many people, but your student loan shouldn’t factor into that worry. There’s no such thing as late or missed payments if you’re employed. Even if you’re self-employed, the process of keeping up-to-date on your student loan payments is easy, as part of paying your taxes.

What should I do instead?

If you want to get in better financial shape, we’d suggest that you probably shouldn’t overpay on your student loan. Instead, focus on more immediate debts or income to get your bank balance looking as healthy as possible. Other loans, credit cards and even mortgages have a far higher rate of interest, so paying those down is a far better use of your hard-earned cash.

If you’re not in debt currently, building a savings pot is the next step. Whether you’re saving for your first home, an emergency fund or even a second property, having cash is far better for you than credit. So let your student loans tick over and start focusing on the smaller picture. Paying off student finance early might seem like it’s a worthwhile thing to do, but in the long-term, there are far better ways to invest your money into your future.