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Mortgage after repossession

Last updated on 22nd February 2024 by Martin Alexander

Getting a mortgage after repossession can be very difficult, but it is possible. Many high street lenders don’t accept applicants with adverse credit. Many assume that each lender is the same and give up on trying to get a mortgage. There are lenders that will consider applicants who have previously had a home repossessed.

This guide will explain how lenders assess mortgage applications involving repossession. You can also take specific steps to strengthen your chances of being approved for a mortgage if you’ve been repossessed.

Can I get a mortgage after repossession?

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. Because you’ve already defaulted on a previous mortgage, getting another mortgage won’t be easy.

Some lenders specialise in mortgages with bad credit and have specific products made for this very reason. Specialist lenders will still carry out an assessment, so you must meet their criteria. If you’re now in a better financial position, getting a mortgage after repossession could be possible.

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 are to give you a mortgage.

For instance, you’ll need to wait at least a year after repossession before applying for a mortgage. You’re also likely to be charged higher fees if the repossession was recent.

The table below summarises 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 and owed millions of pounds on multiple mortgages, lenders would consider this high risk. In comparison, if you owed a few thousand pounds on one property, 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 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

Getting a mortgage will be more difficult if you’re still paying off an outstanding debt. However, don’t give up hope until you’ve spoken to a specialist mortgage advisor.

Reasons why your home was repossessed

The reason why 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 and help with 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 say no. 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 to show your current financial stability. 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 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 you’re offered. In cases where repossession is recent, you’ll 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 were repossessed five to six years ago and have 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 multiple credit issues, the rates offered are likely to be high if approved. An improved credit score can allow you to choose from better rates and more lenders. You can ask an advisor whether you’re eligible for a mortgage.

About the author

Martin Alexander
Senior Mortgage Advisor

Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.