Mortgage After Defaults

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Can I Get A Mortgage After Defaults? 

What is a Default Notice?

A Default is a notice that can be placed on your credit file when you miss a series of payments, usually around three to six, on your credit accounts. When you receive a Default on your credit account, you have fourteen days to resolve it (repay the debt), before your credit account is closed and the balance becomes due in full immediately.

What is a ‘satisfied’ default?

A Satisfied Default is a default that has been resolved, although it’s important to realise that this stays on your credit report for the same length of time as an unsatisfied default, albeit labelled differently.

Mortgage Lenders are likely to view satisfied defaults in a more positive light than unsatisfied defaults as they demonstrate an improvement in financial responsibility. 

Can I Get a Mortgage With a Default?

Specialist lenders will sometimes offer bad credit mortgages to those applicants with defaults or a lower credit score. Lenders that offer this option are usually more willing to look at when the default was registered and why you experienced debt issues, in order to form a clearer picture of your financial responsibility and the risk involved in offering you a mortgage.

Whilst bad credit mortgages do offer an option for those with defaults and similar credit issues, the interest rates will not be as competitive as they are for other applicants. There may also be higher deposit requirements.

Does the type of default make a difference with mortgage applications?

Whilst criteria will vary between lenders, it’s much more likely that applicants with unsecured debts will be able to secure a bad credit mortgage, than those with secured debts. The severity of your default will also be considered on a general scale from most to least acceptable.

This scale shows which debts are most likely to be accepted, with an increase in the seriousness of the debt and therefore reduction in chance of acceptance as you work your way down the list. 

Unsecured debts

  • Mobile phone bills
  • Home Utilities such as gas, electricity, water and internet
  • Bank account overdrafts and charges
  • Credit card debt 
  • Unsecured loans

Secured debts

  • Secured loans (such as car finance)
  • Mortgage arrears
  • IVAs and Bankruptcy – (though not secured debts, it’s unlikely lenders will accept an application from those with this level of debt issue)

This is by no means a straightforward decision for lenders, however, and we can help you decide with more confidence whether there are lenders who would accept your circumstances or not. It’s worth bearing in mind that failed mortgage applications will be further detrimental to your credit score and therefore, speaking to a qualified Mortgage Adviser before making an application, is strongly advised.

Can I get a mortgage with outstanding debt?

Whilst there may be some very niche lenders who are more sympathetic to those with serious debts, who will consider applicants with outstanding debts, you are more likely to secure a mortgage when defaults have been satisfied.

How soon after a default can I get a mortgage?

Your chance of acceptance usually increases, the longer after the default you are able to leave your mortgage application. Defaults remain on your credit file for six years whether or not they are satisfied, however those that are satisfied quickly will be looked upon more favourably by lenders.

How Much Can I Borrow If I Have a Default?

As your credit history is used by lenders to determine risk, it’s possible that you will be offered a lower multiple of your annual income if you have a history of bad credit.

Mortgages are usually offered as multiples between three and five times your annual income for a standard residential mortgage, so the lower your credit rating (and income) the lower the multiple you will have access to borrow. Below shows how this could affect your loan amount.

  • Income £30,000 – good credit rating (borrowing income x 5) = mortgage of £150,000
  • Income £30,000 – poor credit rating (borrowing income x 3) = mortgage of £90,000

How Can Fancy A Mortgage Help me to find a mortgage if I Have Defaults?

At Fancy A Mortgage, our Mortgage Brokers have an intimate knowledge of lender acceptance criteria for bad credit mortgages and can provide qualified mortgage advice to help you decide whether now is the right time to apply for a mortgage, based on your current circumstances.

High street lenders are unlikely to serve those with a poor credit history, but at Fancy A Mortgage we have access to a wide selection of those specialist lenders who will be most sympathetic to your needs.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Why Fancy a Mortgage?