Mortgages After Defaults

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.