Mortgage Declined Due to Unpaid Fees or Charges on Your Bank Account

A mortgage declined due to unpaid fees can be confusing, especially when the amounts involved seem small. In practice, lenders are rarely concerned about the size of the fee itself. What matters is what unpaid charges signal about how an account is being managed right now.

This guide explains why unpaid bank fees cause mortgage declines, how lenders interpret them, and what needs to change before applying again.

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What counts as unpaid fees or charges?

Unpaid fees are charges applied by your bank that were not settled immediately and appear as outstanding or repeated entries on your statements.

Common examples include:

• Unpaid overdraft fees
• Returned item charges
• Monthly account fees taken while overdrawn
• Failed payment charges

Even when these fees are later cleared, their presence on recent statements can still be an issue.

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Why do lenders care about unpaid bank charges?

Lenders use bank statements to assess current financial behaviour, not just income and credit history.

Unpaid fees can indicate:

• Accounts running too close to zero
• Little margin for error each month
• Reactive rather than planned money management

From a lender’s perspective, if small charges cannot be absorbed, larger commitments like a mortgage may be at risk during pressure.

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Why recent charges matter more than older ones

Most lenders place the greatest emphasis on the most recent three months of statements.

Unpaid or repeated charges during this period are often viewed as:

• Evidence of ongoing cash flow strain
• A sign that finances are not yet settled
• A reason to pause or decline an application

Older issues that are no longer repeating tend to carry far less weight.

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Is this the same as bad credit?

No.
A mortgage declined due to unpaid fees is usually not about your credit score.

Key distinctions:

• Bank charges appear on statements, not credit files
• Credit scores can still be strong
• The concern is day-to-day account conduct

This is why applicants with good credit are sometimes declined unexpectedly.

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Common reasons unpaid fees appear

Understanding the cause is important before reapplying.

Low monthly buffers

Accounts that end each month close to zero are more likely to incur fees.

Frequent overdraft use

Charges often arise when overdraft limits are reached or exceeded.

Payment timing issues

Fees can be triggered when bills leave before income arrives.

Account complexity

Multiple small transactions, transfers, or subscriptions increase the chance of charges.

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What should you change before reapplying?

1. Clear all outstanding charges

Before considering another application, ensure:

• All fees are fully paid
• No charges remain pending
• Statements show resolution rather than repetition

This alone is not enough, but it is essential.

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2. Create consistent surplus

Lenders want to see money left over after bills.

This demonstrates:

• Control
• Resilience
• Ability to absorb unexpected costs

Even a modest surplus can materially improve how statements are viewed.

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3. Reduce fee triggers

Practical steps include:

• Cancelling unused subscriptions
• Reducing overdraft reliance
• Aligning bills closer to payday

Fewer triggers usually mean fewer charges.

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4. Maintain clean statements for a period

Most lenders expect to see:

• No unpaid fees
• No repeated charges
• Stable end-of-month balances

Three months is often the minimum. Six months can significantly improve lender choice if fees were frequent.

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5. Avoid quick reapplications

Applying again without improved statements usually leads to the same result.

Lenders rarely overlook very recent evidence of account pressure.

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Should unpaid fees be explained to a lender?

Yes — but explanations only help when supported by improved behaviour.

Explanations may include:

• Temporary income gaps
• One-off admin errors
• Short-term life disruptions

What matters most is proving the issue is resolved and no longer recurring.

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Do all lenders treat unpaid fees the same way?

No.
Lender tolerance varies depending on:

• How recent the fees are
• How frequently they appear
• Whether underwriting is automated or manual

Understanding these differences can prevent unnecessary declines.

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What if your bank has already declined you?

A single decline does not mean all lenders will say no.
However, submitting another application before statements improve usually results in a repeat outcome.

You can learn more about statement assessment in our guide on what mortgage lenders look for on bank statements.

Professional advice can help determine when you are realistically ready to apply again.

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Key takeaways

• Unpaid bank fees are a common reason for short-term mortgage declines
• Lenders focus on recent statements, not small amounts
• The issue is cash flow behaviour, not credit score
• Three to six months of clean statements is often required
• Change matters more than explanation

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This guide provides general information only. Personalised mortgage advice should always come from a regulated mortgage adviser.