Mortgage After Default

Can I still get a mortgage with a default?

Yes, you can. If you’re listening to this and you’ve got a default and you’re concerned about getting a mortgage, try not to worry. Various lenders, including some high street banks, do accept defaults. You can probably get a mortgage with more than one default. So the short answer is yes.

How old does a default have to be to get a mortgage?

Every lender will have their own criteria and their attitude to the risk so the answer will be different depending on the lender you’re looking at. 

Typically, the older the default is, the better. If it’s more historic, the lenders may take the view that this happened at a different stage of your life. Hopefully you can evidence that you’ve been keeping up with payments since then, in which case you’re more likely to get a better deal. 

Some lenders are willing to consider an application as long as the default was registered more than six months ago. Others might insist on three years, or require no defaults in the last six years. 

The more recent it is, the more limited your options will be, but these depend on lots of other things which we’ll go into.

Can I get a mortgage with multiple defaults?

Yes, you can get a mortgage with more than one default. What often happens is that defaults have occurred due to a specific event – a loss of a job perhaps, where someone no longer has the income to pay back their credit cards, phone bill or a loan. This can happen over a period of time and if you can’t afford to pay, those things can stack up. 

The lenders want to understand the reason for the multiple defaults, and if it was a one-off situation we can often get you a mortgage. 

What is a satisfied default?

It’s a default that’s been paid off, which means the status on your credit report has changed from defaulted to satisfied. Some lenders will only consider an application for a mortgage if you’ve managed to pay off all outstanding debt and satisfied any default statuses.

A satisfied default is a good indication that you’re doing something to rectify your position and it looks good to the lender that you’re taking that action. It’s generally seen in a good light.

Can I get a mortgage with outstanding debt?

If you’ve not been able to satisfy your defaults or other debts, it’s a little bit more difficult. The more historic it is, the more chance you’ve got of getting a mortgage. It will depend on the amount of debt and the timing, but with some lenders it’s generally not a problem.

What if I have other credit issues as well?

At this point it becomes a bit more tricky. If you’ve got a default but you’ve also had a historic track record of late payments, defaults in the past, a County Court Judgement (CCJ) or an Individual Voluntary Agreement (IVA) then that makes things even more restricted and more difficult to get a mortgage. 

Again, though, it depends on the details. If you’ve got a history of missed payments and other credit problems that will rule out most of the high street lenders. They’re happy to allow one-off issues or more historic credit events. But it does depend on how old the data is.

If it’s a CCJ registered over six years ago then actually won’t be on your credit report any more. A lot of lenders may not even ask that question. 

There are more specialist lenders that are more lenient with credit issues, and this is something that a mortgage broker can help you navigate. These are not lenders you’ll have  heard of, so it’s even more important to get guidance and advice. 

Some specialist lenders will consider lending to borrowers with a default plus multiple other things. They all have their own criteria and their own range of products with different rates. The rate you get won’t just depend on how much you’re putting down as a deposit and the property price, it is also based on how severe and how recent your credit challenges are. 

A specialist lender might offer their cheapest rate to someone that has not defaulted in the last two years. But they might also lend to someone that has defaulted and had three missed payments in the last six months. They might require that these need to be satisfied, and offer a higher rate with a bigger deposit. 

It can get complicated, so this is where you need to speak with a broker that understands that area of the market. We will make sure you’re not wasting your time with the wrong lenders. There are potentially options out there and if you’re not quite ready we can guide you and help you put a plan in place for when you are ready.

How much can I borrow if I have defaults?

There’s no set formula – it’s similar to how much you can borrow in general, with or without defaults. Big factors are your employment, your income, your current debts and if you have any defaults outstanding. These could all affect or impact your borrowing in future and how much you can borrow. 

Every bank differs in how much they can offer. There’s so many different variables to how much you can borrow. Seeking advice is even more important if you’ve got a default as this could bring down your borrowing. We’ll explore your options based on your specific situation.

What else should we consider when looking for a mortgage after a default?

The reason for your default is so important. If you’ve had a life event such as a separation or an illness that’s kept you off work, lenders can be quite understanding. These are common things. We often see divorces where legal fees have taken over, or where a client is caring for someone and care fees start to add up. 

Another example could be that you’re disputing something and it’s therefore still in default status – but you don’t believe you should be paying it. Most people don’t get into debt for the sake of it. 

We need to understand the reasons because while some lenders will give a flat ‘No’ if you don’t meet their criteria, other lenders are a bit more flexible. They will take the time to understand the details and take a more risk-based approach to their decision. 

In a nutshell, a mortgage broker with experience in dealing with bad credit issues can be invaluable. We understand the eligibility criteria of different lenders and can guide you on how to improve your credit score and increase your chances of being approved for a mortgage in the future, if you’re not quite ready for one now.

Approved by The Openwork Partnership on 04.04.2024