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Mortgage after repossession

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Mortgage after repossession

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Last reviewed on 27th June 2023 by Martin Alexander (Mortgage Advisor)

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. Some lenders will consider applicants who have previously had a home repossessed.

This guide will explain how lenders assess mortgage applications involving repossession. There are also specific 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 essential to understand that mortgage approval won’t be an easy task.

Some lenders specialise in mortgages with bad credit and have specific products made for this very reason. Specialist lenders will make assessments before lending. Depending on your circumstances, getting a mortgage after repossession could well be a possibility.

When was your home repossessed?

The number one factor lenders will consider is the date of your repossession. This is because the more time that’s passed since your repossession, the more likely lenders will give you a mortgage.

If you were repossessed last week, for example, 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 table below displays a brief summary of repossession timelines and their impact 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 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 whether or not they’re going to lend to you. For this reason, it’s crucial to understand how a lender will assess you after you’ve been repossessed.

How much was your repossession debt?

The amount of debt you defaulted on is also a factor that lenders will consider. 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 considerable repossession and lost multiple properties, our advisors may still be able to help. Each lender has different criteria for assessing 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 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.

ask a mortgage broker

Reasons 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 challenging 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, so if one lender has repossessed you, all other lenders in the same group will likely 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 differently.

Learn more about how each type of credit issue can affect your mortgage:

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 monthly credit card payments on time. 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 can 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 excellent rates if you’ve had past or present issues on your credit file in addition to your repossession.

If you have a number of credit issues, the rates you’re offered are likely to be high if approved. If you’ve had good credit since your repossession, you should be able to choose from better rates. You can speak to an advisor to see what mortgage rates you qualify for.


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About the author

Martin Alexander
Senior Mortgage Advisor | More Articles

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.