Mortgage after defaults

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Mortgage after default

One of the most common reasons customers get their mortgage applications declined is due to defaults. Getting a mortgage with a default is not impossible but you may find that many high street lenders will decline your application if you apply through them. This is generally because they only want clean credit applicants since the tightening of the regulations, post credit crunch.

With the rise in bad credit there are also more specialist lenders willing to lend to customers with bad credit histories, this is good news if you have a default in the past as it means there are more lenders for you to potentially get a mortgage offer from.

 What is a Default?

A default notice is a formal letter that must be sent after a minimum of three payments to the same creditor have been missed. Sending a formal default at this stage is a legal requirement. This does not mean that legal action has commenced and also doesn’t mean that you have a county court judgement.

Defaults can only be issued for debts that are regulated by the consumer credit act.

If you have recently received a default notice it is a good idea to respond to it as quickly as possible. The longer you leave this the bigger impact it will have on your financial history and credit score. Bringing the outstanding account up to date is important so if you can afford to do this then you should do this as soon as possible. If you can get the overdue balance satisfied within the time frame of the default notice you may be able to get this removed from your credit report which will help your mortgage application.

If you are not able to bring the account out of arrears in full then it is a good idea to get in touch with the creditor and explain your situation and arrange a payment plan. This will help to avoid getting a CCJ which will be worse and have a bigger impact on your ability to get a mortgage.

How long will a default stay on my credit file?

A default will stay on your credit file for six years. This means that for six years after the default any time you make an application for credit lenders will see this and it may affect your eligibility and you could be declined because of it.

Despite the impact a default will have on your credit score it is still possible to get a mortgage. There are many bad credit mortgage specialist lenders that are willing to lend to customers with a default on their credit score.

How soon after a default can I get a mortgage?

In general the longer ago the default was registered the better. Age of the default is a big factor in how much impact it will have on your chances of getting a successful mortgage. If your default was over 2 years ago and you have no other adverse credit events in the last six years there is more chance of you getting approved for a mortgage. After six years the default will be off your credit report and if you have a good income and no other bad credit you will be eligible for good mortgage rates.

Can I get a mortgage with a satisfied default?

Satisfying a default means paying it off and bringing the account out of arrears. This will definitely help to improve your credit report. In general the lenders that accept customers with defaults are more concerned with how long ago the default was registered. If the default was satisfied a long time ago and it is about to drop off your credit report you can wait for this to happen then there will be more options to choose from and better deals available to you.

What size deposit will I need?          

In general a borrow is required to put down at least a 10% deposit of the value of the property they want to purchase, recently more 5% deposit mortgage products have become available on the market especially since the governments help to buy and right to buy schemes. If your default is over three years old you many also only need a 5% minimum deposit.

If your default is more recent then the situation will be different and you will require a higher deposit.

12-24 Months – Its likely you will need at least a 15% deposit

24+ Months – You can expect to need at least a 10% deposit

 Getting a mortgage with adverse credit & defaults

If you have additional adverse credit along with defaults on your credit report this will make it more difficult to get a mortgage approved and it will also narrow the lenders available to you. What the other adverse credit is and when it occurred will have a big impact on the decision making process

If, in addition to one or more defaults on your credit report, you also have other adverse credit issues, then getting a mortgage will be that bit more difficult. What the other issues are, and when they occurred, will be important factors in the decision-making process.

IVA’s and Bankruptcy will have the biggest impact on your mortgage application while missed or late payments will have much less impact to the lender.

Get Expert Advice

If you have defaults or other adverse credit on your credit report then it is a good idea to speak with a specialist mortgage advisor that has access to specialist lenders that are more willing to consider applications from customers with adverse credit. Your advisor will also be able to advise you of the amount you may be able to borrow and which lenders are more likely to consider your application based on your personal circumstances.

Speak with one of our bad credit specialist advisors today and see if you can secure your mortgage. Fill in one of our enquiry forms or give us a call on 0800 368 8879. 

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