Last Updated on 25th October 2020
Getting a mortgage after late payments on your credit report can seem like an uphill struggle. A lot of people can miss the odd payment in their lives and sometimes it’s not done intentionally. Getting a mortgage after late payments isn’t quite as difficult as you may think. A mortgage after late payments is quite a common scenario.
Some lenders will have strict regulations in place where they will decline a great applicant, simply because of a recent missed payment. Going on to then appeal the decision, as the missed payment was a simple error, can be further frustrating and time-consuming. Delays in your mortgage offer can even result in estate agents accepting a different offer on a property.
We like to make things simple, no matter how bad you think your financial situation is. There are lenders more than willing to consider a mortgage after late payments. Going to the right lender in the first instance can save you time, money and can secure you the perfect home.
If you wish to start your application now, you can fill in our quick enquiry form to get things started. If you still aren’t sure, feel free to browse our expert information below.
Are late payments the same as arrears?
Late payments and arrears are two separate sets of circumstances and not to be taken the same.
A late payment is where you have a single late payment. This payment may have been missed and then paid late. More importantly, the payment has now been made. If your payment was due on the 1st and then paid on the 10th, creditors usually won’t register this as a missed payment, as payments have been made before your next payment is due.
Arrears are where payments fall behind consecutively. For example, your due date is the first of each month and you have missed the last three months. This would mean that you’re now three months in arrears. Arrears are likely to be registered on your credit file and could affect your credit rating further.
Check your credit report!
We’ve said it before and we’ll say it again, check your credit report! If you’ve had late payments or any other type of financial issue that may be registered on your credit report, it’s vital to see this information. It’s also a myth that searching your credit score will leave a footprint and degrade your credit score, this simply isn’t true. A small footprint can be left when applications for credit are made and searches are carried out on your credit file.
By checking your credit file, you’ll not only see your credit score, but you’ll be able to see the exact dates and amounts of charges (if any) along with how you’ve conducted your credit. Your credit reports are the things that lenders will look at when applying for a mortgage. So it’s worth getting a head start and also clearing up any errors that may be in your credit file.
Why types of late payments matter?
The type of late payment probably has the biggest influence when lenders assess your mortgage application. If you’ve missed a payment date, it will fall into one of two categories, unsecured or secured.
Unsecured late payments
Unsecured missed payments would include things such as phone bills, credit cards, personal loans, account overdrafts, etc. In other words, they’re things that aren’t secured against anything. The companies in question are relying on you and your credit management in order to keep up with your payments. If you have missed payments that fall into this category, lenders can tend to be more lenient. Although it can still affect your application, there are still lenders who may see past this and offer you the same products as everybody else.
Secured late payments
Secured missed payments would include things such as mortgages and secured loans. This is when the debt is secured against something, such as a property or an asset. For instance, when you take a mortgage out, the lender secures this debt against your property. In the case payments aren’t met, lenders are able to take the house back as collateral.
If you have missed payments that fit into the unsecured category, lenders tend to be less lenient. This is especially the case when missed payments are more recent and very frequent. Although lenders may still lend, you’ll perhaps require a higher deposit than usual in order to secure a mortgage after late payments.
How recent were your missed payments?
Perhaps one of the most influential things in your assessment regarding missed payments is when they occurred. If you’ve fallen behind and are now in arrears, then your chances of approval will be far lower than if your payments were missed a few years ago. This becomes more apparent with smaller deposits. Most lenders will require a clean file for at least one year. This is because lenders will see you as a higher risk when compared to someone who hasn’t missed any payments.
Even if you’ve recently missed payments but are now up to date and no longer in arrears, you should still be able to get a great mortgage product. If you’re still unsure, you can always speak to an expert advisor.
How many missed payments have you had?
Lenders will also assess the number of missed payments you’ve encountered. Having one missed payment a few years ago isn’t likely to affect your mortgage application in any major way. However, it may still knock your credit score slightly meaning you may not have access to every lender or at least their best products.
If you’ve had multiple missed payments and they’re quite recent, then it becomes increasingly difficult to obtain a mortgage. That being said, you may still qualify with a specialist lender.
In all cases for mortgages, the higher deposit you have the better. This is because lenders tend to offer great rates on mortgages where you have a lower LTV. Approval isn’t as difficult when large deposits are involved, as the lender is taking on less risk.
This becomes further evident when you’ve missed payments and have a lower than average credit score. If you have a 10% deposit and missed payments as opposed to a 40% deposit and missed payments, you’re more likely to be approved having a 40% deposit.
When your credit score isn’t quite high enough for lender approval, they may offer you a lower mortgage amount. You may apply for an 85% LTV but the lender may only offer you a mortgage at 70% LTV. This shows that the lender is willing to lend to you, but at their specific LTV and not what you’ve requested. This doesn’t mean every lender will do the same and if this does happen, there’s nothing stopping you from exploring avenues with another lender.
Our expert mortgage advisors secure mortgages for all sorts of issues involving missed payments. Even if you only have a 5% deposit and have recently missed payments, it may still be possible to get a mortgage.
Missed payments and bad credit
Lenders can be restricted when applying for a mortgage after late payments. Having other credit issues will restrict lenders further. The key thing here is, it all depends on what other bad credit issues you have. It may be a CCJ, debt management plan, bankruptcy, defaults, IVAs or even repossession. Some bad credit will be considered more severe by lenders, so it’s really important to be honest in your application as the last thing you want is to be declined.
Missed payments are considered the least serious of bad credit issues. Depending on what other credit issues you have, you may require a specialist lender. Don’t let this put you off, as specialist lenders who specialise in bad credit mortgages, approve mortgages on a daily basis and are designed for adverse credit borrowers.
I need a mortgage after late payments, what should I do?
If you require a mortgage after late payments, then definitely speak to an advisor. Going to a lender at random can severely disrupt your chances of a mortgage. With standard strict protocols, every lender will have varied criteria. It’s key to go to the right lender that suits your credit file and the LTV you have in mind.