Mortgages After Defaults

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Can you get a Mortgage After Defaults?

What is a Default Notice?

Everyone that has used any form of credit in the UK, whether that’s as simple as the credit extended by electricity or utility companies between each bill, has a credit file. This holds a record of your payment history for all credit agreements and a Default Notice is placed on the file if you miss a series of payments, typically between three and six in a row.

You will be given fourteen days to resolve a default (repay the debt), before the credit account is closed, and the full balance becomes immediately due.

What is a satisfied default?

Defaults on your credit file that have been resolved are known as satisfied defaults. Although satisfied, however, it will remain on your credit report for the same length of time as an unsatisfied default.

If you have satisfied defaults, Mortgage Lenders are more likely to consider your application, than if they are still outstanding.

Can I get a mortgage with a default?

It’s possible to obtain an adverse Credit Mortgage if you have defaults or similar credit issues. Lenders that offer adverse Credit Mortgages usually consider when the default was registered and why, to form a more accurate perspective of your financial responsibility.

Interest rates are not as competitive under these circumstances, however and there may be higher deposit requirements, to mitigate some of the lender’s risk.

Does the type of default make a difference with mortgage applications?

Each lender will have different criteria to satisfy and those who offer adverse credit Mortgage options are more likely to consider the type of default, however, it is much more likely that those with unsecured debts, than those with secured debts will obtain a mortgage offer.

Mortgage Lenders typically use a sliding scale of severity in terms of acceptable defaults. Those with defaults at the top of the scale are most likely to secure a mortgage, with the chances reducing as you go down the list:

  • Mobile phone bills
  • Home utilities bills, such as gas, electricity, water and internet
  • Bank account overdrafts or fees
  • Credit cards
  • Unsecured loans
  • Secured loans (car finance etc)
  • Mortgage arrears
  • Individual Voluntary Arrangements (IVAs) and Bankruptcy – (though these are not secured debts, it’s very unlikely that lenders will accept application from those with this level of debt issue)

As failed mortgage applications will also be detrimental to your credit score, and it will be difficult to locate those lenders who are most likely to accept your defaults, it’s strongly advisable to speak to qualified Mortgage Advisers such as ourselves, before making a mortgage application.

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Can I get a mortgage with outstanding debt?

It’s much more likely that you will be able to secure a mortgage once your defaults have been satisfied, however one or two lenders may be willing to consider those with serious or outstanding debt issues. In these circumstances, however, the interest rates would be reflective of the level of risk to the lender and it may be beneficial to wait until you are in better financial circumstances.

How soon after a default can I get a mortgage?

All defaults will remain on your credit file for six years, regardless of whether or not they are satisfied. The good news is that satisfied defaults are seen as resolved and the likelihood that you will be able to secure a mortgage increases as the length of time it’s been since the default was satisfied increases.

As all lenders have different criterias, there is no standard length of time after a default that you can apply, though applicants who have satisfied their defaults quickly will be looked upon more favourably.

How much can I borrow if I have a default?

A typical mortgage applicant can borrow between three and five times their annual income for a standard residential mortgage. The lower your credit rating and / or income are, the lower the amount you are likely to be offered. For example:

  • Income = £30,000 – clean credit (borrows income x five) = £150,000 loan
  • Income = £30,000 – poor credit (borrows income x three) = £90,000 loan

How can First Thought Financial help if I have defaults?

Here at First Thought Financial, we have a diverse understanding of a wide variety of lender acceptance criterias, which means that we are able to recommend Adverse Credit Mortgage Lenders that are most likely to consider your application, based on your individual circumstances.

Our professional advice can help you to decide whether now is the right time to obtain a competitive offer, or you would benefit from waiting until your credit score has improved. Our guidance will prevent further damage to your credit score from failed applications to lenders whose criteria do not match your circumstances.

As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments. Think carefully before securing any other debts against your home.

Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

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