Last Updated on 14th September 2020
It’s very common for lenders to decline borrowers that apply for a mortgage with a default. This is even more apparent with high street lenders as the majority require squeaky clean credit reports.
That doesn’t mean to say that getting a mortgage with a default isn’t possible. Our expert mortgage advisors regularly work with specialist lenders. Specialist lenders are more likely to approve a mortgage with defaults and other 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, it is possible with the right lender.
As there are different types of mortgages and lending requirements, there are of course different types of lenders that specialise in particular areas of finance. In this case, a high street lender would more than likely decline a mortgage, whereas a lender that specialises in adverse credit would be ideal. That being said, it’s not as simple as going to a specialist adverse credit lender and getting a mortgage approved. Your chances would still be slim, especially if you haven’t prepared for your mortgage assessment.
Expert mortgage advisors that specialise in securing mortgages for borrowers with credit issues such as defaults, generally have the expertise and experience to increase your chances of being approved greatly. Having someone on your side that knows the mortgage market is vital in securing that all-important mortgage approval.
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 with them. 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 and ask general questions such as how much you’re looking to borrow, deposit amounts and so on. Once this is all understood, advisors 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 that lenders will also look for. This is paramount for a mortgage advisor, as your credit file can show exactly which lenders you may or may not be suitable for. Websites such as Check My File allow users to check all four major credit reports in one place.
It’s important to remember that every lender has varied criteria when assessing a mortgage. If for example ‘lender a’ doesn’t accept borrowers with defaults in the past 3 years whereas ‘lender b’ does, our advisors would approach ‘lender b’. This is quite a basic example as lenders will have more than just this 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 ticking every single box in their assessment 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.
Mortgage with a satisfied default
Satisfying a default won’t make a huge impact on your quest to get a mortgage. 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 would increase the number of lenders who’d be prepared to lend to you, but this isn’t always necessary.
There are lenders who would perhaps 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. Our expertise would ensure the right lender is matched to your criteria. This greatly increases your chances of being approved a mortgage.
Types of defaults and their effects on mortgages
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. On the other hand, other lenders may see all defaults the same and could refuse to lend altogether.
Nonetheless, many lenders have approved mortgages whether the default was on a phone bill or a secured loan. The key here is going to the right lender that’s best suited to you. The difference between an average mortgage advisor and a great advisor is great advisors simply know which lenders to go to and don’t leave it to chance.
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 adverse credit issues in addition to defaults, such as CCJs, late payments or being in a debt management plan shouldn’t make getting a mortgage impossible. That being said, a mortgage is still possible even with severe credit issues such as bankruptcy, IVAs and even repossession. 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.
Lenders will assess your maximum borrowing capacity based on your income. It’s important to explain that income itself is an area that lenders assess differently. For instance ‘lender a’ may consider bonuses whereas ‘lender b’ may not. If you’re self-employed, ‘lender a’ may only need one year of accounts whereas ‘lender b’ 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 may have. There isn’t one simple answer to how much you can borrow as it all depends on the above. 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.