Last reviewed on 25th February 2022
Getting a mortgage after repossession can be very difficult, but it is possible. Many high street lenders will often decline applications that involve adverse credit. As a result, many assume that each lender is the same and simply give up on trying to get a mortgage. There are lenders that will consider applicants that have previously had a home repossessed.
This guide will explain how lenders make their assessments on mortgage applications involving repossession. There are also certain steps you can take to strengthen your chances of being approved for a mortgage if you’ve been repossessed.
Can I get a mortgage after repossession?
Yes, getting a mortgage after repossession is possible. That being said, not all lenders will accept applicants with open arms. Repossession is one of the most severe forms of adverse credit, especially when applying for a mortgage. This is because you’ve already defaulted on a previous mortgage. As a result, it’s important to understand that mortgage approval won’t be an easy task.
There are lenders that specialise in mortgages with bad credit and have specific products made for this very reason. Specialist lenders will still carry out an assessment before lending. Depending on your circumstances, getting a mortgage after repossession could well be a possibility.
How do lenders assess applicants that have been repossessed?
Lenders typically assess mortgages after repossession on the following:
- The details of the repossession, such as the date and amount
- Your credit/financial profile since the repossession
- Your current financial position
Do your research and prepare yourself before applying for a mortgage, especially if you’ve previously had your home repossessed. Lenders will ultimately decide on whether or not they’re going to lend to you. For this reason, it’s important to understand how a lender will assess you after you’ve been repossessed.
When was your home repossessed?
The number one factor that lenders will take into consideration is the date of your repossession. This is because the more time that’s passed since your repossession, the more likely lenders are to give you a mortgage.
If you were repossessed last week for example, then you’ll need to wait at least a year before applying for a mortgage. You’re also likely to be charged higher fees if the repossession was recent.
The below table displays a brief summary of repossession timelines and the impact they’ll have on your mortgage application.
|Repossession date||Deposit required||Likelihood of mortgage|
|Less than 1 year ago||n/a||Almost impossible|
|1-2 years ago||approx 35% – 40%||Very difficult|
|2-3 years ago||approx 30% – 35%||Difficult|
|3-4 years ago||approx 15% – 20%||Possible|
|4-5 years ago||approx 10%||Very likely|
|5-6 years ago||approx 10% or less||Very likely|
|Over 6 years ago||5%||Extremely likely|
How much was your repossession debt?
The amount of debt you defaulted on is also a factor that lenders will take into consideration. For instance, if you were repossessed owing millions of pounds on multiple mortgages, then lenders would consider this high risk. In comparison, if you owed a few thousand pounds on one property, then lenders become more lenient.
Even if you’ve had a huge repossession and lost multiple properties, our advisors may still be able to help. Each lender has different criteria for when they assess applicants that have been repossessed. Mortgage advisors have the experience and knowledge to place your mortgage with the right lender.
Are you still in debt after being repossessed?
Once you’ve been repossessed, your lender will typically use an asset management company to sell the property. This is to recover any mortgage debt you owe. The property is usually sold either by private treaty or by auction. Once the property is sold, there may be a shortfall that the lender will require you to pay back.
Take a look at the example below:
- The price you paid for your property= £150,000
- Deposit = £15,000
- Mortgage amount = £135,000
- The lender sold the property for = £120,000
- Outstanding debt = £15,000
If you’ve got an outstanding debt that you’re still paying off, it makes mortgage approval even more difficult. That being said, don’t give up hope until you’ve spoken to a specialist mortgage advisor.
Reasons for why your home was repossessed
The reason your home was repossessed is also another factor that lenders will consider. For instance, you may have been a victim of fraud or faced very difficult circumstances. Nonetheless, some lenders will flat out decline you despite the reasons for your repossession.
Lenders often require evidence to support your application to help your assessment. A specialist advisor can present your application in a particular manner, improving your mortgage chances. That’s why expert mortgage advice is so important, as we know exactly who to place your mortgage with and how to present your application.
Some lenders may be part of the same banking group, therefore if you’ve been repossessed by one lender, then all other lenders in the same group are likely to decline you. This is why an advisor can be so crucial in getting your mortgage approved.
The current status of your credit file
If you’ve been repossessed, the chances are you’ll have further issues with your credit file. Additional credit problems will impact your mortgage in a different way.
Learn more about how each type of credit issue can affect your mortgage:
- Applying for a mortgage with a CCJ
- Defaults on your credit file
- How do late payments affect a mortgage?
- Can I get a mortgage after bankruptcy?
- Applying for a mortgage after an IVA
Lenders may still view you as high risk if you’ve had further issues since you’ve been repossessed. This is because, from a financial viewpoint, you’re still in financial trouble and may not be deemed suitable for a mortgage.
If you’re applying for a mortgage after repossession, lenders may require evidence that you’re now financially stable. This can be as simple as making your credit card payments on time each month. Evidence of recovery and financial stability is important for lenders to see.
Some clients we’ve spoken to have incorrectly taken payday loans to improve their credit rating. However, this is not something that we’d advise, as it can make mortgage approval difficult.
Learn more: Can I get a mortgage after using payday loans?
How much can I borrow if I’ve been repossessed?
The date of your repossession is the number one factor for assessing your mortgage and will heavily affect the mortgage rates on offer. In cases where repossession is recent, you’ll more than likely be offered high rates and require a larger deposit if accepted. You can use our bad credit calculator to check what you may be able to borrow.
If you faced repossession five to six years ago and you’ve kept a spotless credit file since, you should be eligible for some great rates. You may even qualify for 95% mortgage products. In comparison, it can become difficult to qualify for great rates if you’ve had past or present issues on your credit file in addition to your repossession.
The more credit issues you have, the higher rates you’ll have to take on if approved a mortgage that is. If you’ve had great credit since your repossession, then you should be able to choose from better rates. You can speak to an advisor to see what mortgage rates you qualify for.