Last reviewed on 27th August 2023 by Martin Alexander (Mortgage Advisor)
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.
Mortgage approval with late payments isn’t quite as difficult as you may think. Late payments aren’t considered to be a severe credit issue, especially if it’s only happened once or twice. That said, recent problems can be a cause for concern.
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 and money and help you secure the home you want.
You can make an enquiry to get things started. If you still aren’t sure, feel free to browse our expert information below.
- What should I do if I’ve had a late payment?
- Are late payments the same as arrears?
- Should I check my credit report?
- Does the type of late payment I have matter?
- How recent were your missed payments?
- How many missed payments have you had?
- How much deposit will I need?
- Missed payments and bad credit
- I need a mortgage after late payments, what should I do?
What should I do if I’ve had a late payment?
If you’ve made a late payment or missed several payments, don’t apply for a mortgage until you’ve checked your credit score. You should also make your payments before applying. If you apply for a mortgage with missed payments on your credit file, you may struggle.
Don’t panic, with the right advice, missed payments can be rectified. Once you’ve made your payments, ensure you have evidence of having made that payment. This is so that you can show lenders if they pick it up during your mortgage assessment. It’s always advised to minimise as much outstanding debt as you can before applying for a mortgage, even if it is a small payment such as a phone bill.
Are late payments the same as arrears?
Late payments and arrears are two separate sets of circumstances and are 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 but you’ve missed the last three months. This would mean that you’re now three months in arrears. Arrears are likely to be registered as defaults on your credit file and could affect your credit rating further.
Read more: How to get a mortgage with defaults
Should I check my 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, check to see what’s on there.
It’s also a myth that checking your credit report will leave a footprint and degrade your credit score, this simply isn’t true. A small footprint can be left when credit applications are made and searches are carried out on your credit file by lenders.
By checking your credit file, you’ll not only see your credit score, but you’ll be able to see the dates and values of each missed payment. Furthermore, your credit file will show you how you’ve conducted your credit over the past six years.
Lenders will carry out a credit check on you as part of your mortgage assessment, so it’s worth getting a head start. Doing so also gives you a chance to rectify any errors that may be on your credit file. You can contact your credit referencing agency to query anything you believe may be incorrect.
What might I find on my credit file?
There are typically four types of records that can be found on a credit file that involves missed payments.
Credit referencing agencies usually record the following:
- Late payments if you pay a bill after the due date has passed
- Missed payments where you’ve failed to pay a bill
- A default may be registered if you’ve built arrears
- County Court Judgements (CCJs) can also be registered if your missed payments have been outstanding for a number of months
If your creditors have registered defaults or CCJs against you, you would have had previous notification of this. This is because with a default you’re given 14 days to respond. If you have a CCJ, you would have received details of the judgement, involving a date for the court hearing.
Does the type of late payment I have matter?
The type of late payment you have has the biggest influence on your mortgage application. If you’ve missed a payment, it will fall into one of two categories, unsecured or secured.
Unsecured late payments
Unsecured missed payments include phone bills, credit cards, personal loans and account overdrafts. In other words, they’re not 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’ve missed payments that fall into this category, lenders tend to be more lenient. Although it can still affect your application, some lenders may see past this and offer you the same products as everybody else. Nonetheless, it’s crucial you apply with a mortgage lender that accepts late payments.
Secured late payments
Secured missed payments would include 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 the debt against your property. If payments aren’t made, lenders are able to take the house back as collateral.
If you’ve missed payments that fall into the unsecured category, lenders tend to be less lenient. This is especially true 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 get 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 credit 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 deal. 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 missed one 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 deals.
If you’ve had multiple missed payments which are quite recent, then it becomes increasingly difficult to obtain a mortgage. That being said, you may still qualify with a specialist lender.
How much deposit will I need?
In all mortgage cases, the higher the deposit you have the better. This is because lenders tend to offer great rates on mortgages where you have a lower loan-to-value (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 with 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% mortgage but the lender may only offer you a mortgage at 70% LTV.
This shows that the lender is willing to lend to you at their specific LTV but 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. That being said, it all depends on what other credit issues you have.
It’s possible to get a mortgage with the following credit issues:
- County court judgements (CCJs)
- After an IVA
- Home repossession
- Debt Relief Order (DRO)
- Defaults on your credit file
- Debt Management Plan (DMP)
Some credit problems will be considered more severe by lenders, so it’s really important you’re honest in your application as the last thing you want is to be declined.
Missed payments are considered the least serious of credit problems. Depending on what other credit issues you have, you may require a specialist lender.
Don’t let this put you off, specialist lenders focus solely on mortgages with bad credit. As a result, they’ll approve mortgages on a daily basis and are designed for borrowers with adverse credit.
I need a mortgage after late payments, what should I do?
If you require a mortgage with late payments, then definitely speak to an advisor. Going to a lender at random can severely disrupt your mortgage chances. Each lender will have varied criteria so it’s very difficult for applicants to decide on the lenders that are suitable.
It’s crucial to go to the right lender that suits your credit file and the loan-to-value you have in mind.
About the author
Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.