How Soon Can You Reapply for a Mortgage After Being Declined?
Being turned down for a mortgage can be gutting—especially when you’ve started picturing life in a new home. But unlike heartbreak from Year 9 dance rejections (we’re looking at you, Patrick Summers), this one can be remedied. If you've been declined by a bank, your next steps are crucial, and a little know-how can put you back on track faster than you think.
When Can You Reapply for a Mortgage?
If a bank has declined your mortgage application, they’ll typically require a wait period of around 3–6 months before accepting a new application. The exact timeframe depends on their internal policies, which they'll often outline when they notify you of the decline.
That said, you don’t have to wait to apply with a different lender. Each bank assesses applications differently, and you may meet another lender’s criteria even if the first said no. This is where a mortgage broker becomes invaluable—they can match you with the right lender and help you build a stronger application.
What Are Your Options After a Mortgage Decline?
The action plan following a decline will depend on why your application didn’t make the cut. The most common culprits fall into three buckets: income, deposit, or credit history.
1. If You Were Declined Due to Income
Try a Different Bank
Not all banks calculate affordability the same way. One lender may be more favourable toward your income situation than another. A mortgage broker can guide you to the most suitable bank for your profile.
Reduce Your Debts
Banks assess your ability to repay based on all your financial obligations. Even if you owe only $500 on your credit card, they’ll calculate affordability based on the card’s full limit. Reduce your credit limits and pay off smaller debts like student loans or hire purchases where possible—but make sure it doesn't eat too much into your deposit.
Ask for a Raise
It might feel awkward, but a pay rise could push your application into approval territory. If you’ve got good performance and timing on your side, it’s worth the ask.
Consider a Non-Bank Lender
Non-bank or “second-tier” lenders often accept applications that don’t meet the big banks’ income criteria. They’ll charge higher interest rates, but this may be a short-term trade-off to get on the property ladder sooner. You can always refinance to a main bank later once you meet their conditions.
Think Long-Term
If the above steps aren’t immediately viable, focus on increasing your earning potential. That might mean retraining or upskilling to boost future income, paying down debt steadily, and saving consistently.
2. If You Were Declined Due to Deposit
Try Another Lender
Some banks allocate a portion of their lending to high loan-to-value ratio (LVR) mortgages—typically those with less than a 20% deposit. These allocations change frequently, so timing is key. A broker will know which banks have capacity for low-deposit lending and when.
Check Your Eligibility for Help
First Home Grants, First Home Loans, and KiwiSaver withdrawals can all bolster your deposit. Even if you’ve previously owned a property, you might qualify if you’re in a similar position to a first home buyer financially.
Use a Non-Bank Lender Strategically
Just like with income constraints, non-bank lenders can help bridge the gap when you don’t meet standard deposit requirements. However, you’ll need to have a plan to move to a main bank as soon as your financials improve.
Boost Your Savings
If you’re eligible to use KiwiSaver, prioritise saving into it rather than a regular bank account. You’ll typically get a better return, helping your deposit grow faster.
3. If You Were Declined Due to Credit History
Check Your Credit Report
Your first step is to obtain a copy of your credit report and check for errors. Incorrect defaults or outdated information can sometimes be the root of the issue.
Fix Mistakes
If something’s wrong, start the dispute process immediately. Be prepared for a slog—it can be paperwork-heavy and slow-moving. Stay polite but firm, and keep following up. Kindness goes a long way with customer service teams.
Improve Your Score
If the report is accurate, it’s time to lift your score. This means paying every bill on time, reducing or eliminating credit cards and personal loans, and keeping financial behaviour squeaky clean for the foreseeable future.
Non-Bank May Still Be an Option
Some non-bank lenders are willing to work with applicants who have blemished credit—though you’ll pay for the risk with a higher interest rate. Again, your goal should be to refinance with a main bank within a couple of years, once your credit score has improved.
So, How Soon Can You Reapply?
If you’re applying with a new bank: right away. If you’re reapplying with the same bank: likely in 3–6 months. But the more important question is: are you applying with a stronger case? Whether the issue was income, deposit, or credit history, there are almost always steps you can take to improve your application. And with the right guidance—especially from a mortgage broker—you might be ready to go sooner than expected.
Mortgage Lab’s mission is to be the digital town square for financial decision-makers to gain knowledge about their current and future mortgage. Follow us on Facebook and LinkedIn or subscribe to our newsletter to be notified of our latest articles.