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Mortgage with a default

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Mortgage with a default

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Last reviewed on 23rd March 2022

If you’re thinking about applying for a mortgage with a default on your credit report, you risk being declined. This is even more apparent with high street lenders as the majority require clean credit reports. That doesn’t mean to say that getting a mortgage with a default isn’t possible. There are mortgage lenders that consider applicants with defaults.

Our expert mortgage advisors regularly work with specialist lenders. Specialist lenders are more likely to approve mortgages with defaults and other credit issues. This doesn’t mean to say you’ll need a specialist lender, but they are more suited to those with credit issues.

Can I get a mortgage with a default?

We’re often asked if getting a mortgage with a default is possible. The simple answer is yes, a mortgage is possible with the right lender. Furthermore, getting the right mortgage advice is just as crucial.

High street lenders typically decline mortgages that involve credit problems. As a result, lenders that specialise in adverse credit are often recommended. That being said, it may still be possible to get a mortgage with a high street lender, even with a default.

Specialist lenders also aren’t guaranteed to approve you and could also decline you for having a default. This is why getting the correct mortgage advice can improve your mortgage chances quite considerably. Having an expert on your side is crucial in securing that all-important mortgage. Doing so can also keep your current credit file intact.

Will the type of default I have matter?

The type of default you have will make a difference in your mortgage application. Defaults aren’t treated the same, with some lenders more suited to a certain type of default than others.

A default on a phone bill compared to defaults on a secured loan are completely different in terms of severity. Some lenders will recognise the difference and assess accordingly. In comparison, other lenders may see all defaults as the same and could refuse to lend altogether.

Many lenders have approved mortgages whether the default was for a phone bill or for a secured loan. The key here is going to the right lender that’s best suited to your circumstances. This is why it’s crucial to get the right advice before approaching a lender instead of leaving it to chance.

Can I get a mortgage with a satisfied default?

Satisfying a default won’t have a huge effect on your mortgage application, but it can help. Many borrowers assume they’ll have to satisfy past debts in order to be approved, but this simply isn’t true.

Satisfying past debts such as defaults will improve your credit file as it shows that you’ve taken some financial control. As a result, this will increase the number of lenders who’d be prepared to lend to you, but this isn’t always necessary.

What if I’ve not satisfied my defaults?

There are lenders who would still consider giving you a mortgage, whether or not your defaults are satisfied. This is useful to know, especially if you need a mortgage immediately and haven’t yet satisfied your default. It’s surprising the number of people we speak to, who would have applied a lot sooner had they known this.

Satisfying a default can provide value to some lenders, but what the majority of lenders are interested in is the date the default was registered. Recent defaults will pose more issues than past defaults and historic credit problems.

How long will a default stay on my credit file?

Defaults will stay on credit files for six years of the date they were registered. This doesn’t mean to say that you’ll need to wait six years before applying for a mortgage. It’s still possible to get a mortgage within six years of having a default registered.

How to get a mortgage with a default

Lenders each have their own criteria to assess mortgage applications. That’s why it’s important to understand your lender’s criteria before applying. This is an area where an expert would be so pivotal. Based on your circumstances, an experienced advisor would know where to place your mortgage and how.

The first thing our advisors would do is to go through your information, such as how much you’re looking to borrow, deposit amounts and so on. Once this is all understood, we can then make a start on checking what products you may qualify for.

Investigate your credit file

Knowing what your credit file contains is extremely important, especially when applying for a mortgage with a default. This is because your credit file will show you the exact details surrounding your defaults and any other credit issues.

Mortgage advisors will also check your credit file as it guides us on which lenders you may or may not be suitable for. Your credit file will also show the dates and amounts of your defaults, which have an impact on your mortgage chances.

Each lender has its own criteria when assessing a mortgage. If for example, Barclays doesn’t accept borrowers with defaults in the past three years whereas Natwest does, our advisors would approach Natwest. This is quite a basic example as lenders will have more than one specific check. That’s why it’s necessary to prepare and approach the right lender based on your situation.

An advisor with experience in this field will match your criteria to the best-suited lender. This is done with the aim of meeting a lender’s requirements and getting your mortgage through to offer.

Speak to an expert mortgage advisor

If you need a mortgage with a default, our advisors are on hand to help. It’s very important to get your application right the first time. Being declined can further minimise your chances of being approved and delay any offers you’ve made on a property.

As this is a specialist area, seek specialist advice. Going straight to a high street lender would more than likely result in you being declined. Always be honest about your credit issues with your advisor as lenders will pick up on any irregularities.

ask a mortgage broker

I have a default with further credit issues

The more issues you have on your credit file will increase the difficulty of getting a mortgage. Light credit issues in addition to defaults, such as a CCJ or being in a debt management plan shouldn’t make getting a mortgage impossible.

It’s important to remember that mortgages are possible even with severe credit issues such as bankruptcy, IVAs and repossession. That said, lenders may increase rates and fees in comparison to how severe your credit file is.

Our advisors specialise in all types of adverse credit and have done for many years. If you have multiple credit issues then you’ll more than likely need a specialist advisor.

How much can I borrow if I have defaults?

If you have a completely clean credit file and no defaults, lenders may lend between three and five times your income as an industry average. Once you add defaults to your application, maximum borrowing becomes a lot harder. This is because borrowers with defaults are seen as a higher risk when compared to borrowers with a clean credit file.

If lenders approve maximum mortgage amounts, then they’ll usually try and minimise their risk. One way of minimising risk is by charging premium rates and fees. If your default happened a long time ago, four years for example, then you may still be able to get a maximum mortgage amount with some pretty good rates.

How can my income help me get a mortgage with a default?

Lenders will assess your maximum borrowing capacity based on your income. It’s important to note that income itself is an area that lenders assess differently. As an example, Halifax may consider bonuses whereas HSBC may not.

If you’re self-employed, Santander may only need one year of accounts whereas Lloyds Bank may request three years. With yet another variable to consider, it’s clear to see why mortgage advisors can be so important.

Lenders won’t just assess your income, they’ll also assess your outgoings and other financial commitments you have. There isn’t one simple answer to how much you can borrow as it all depends on your overall financial profile.

If you want a more informed answer, you can make an enquiry. Our specialist advisors can then go through the amounts you’re likely to be approved in greater detail.

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About the author

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.