Mortgage After Defaults

If you have had financial trouble in the past, it might seem unlikely that you’ll ever get on the property ladder. But defaulting on a finance plan or loan in the past doesn’t mean a mortgage is impossible. Many lenders offer bad credit mortgages that could help you achieve your property goals. 

Getting a mortgage after defaults

Can I get a mortgage with a default?

It’s certainly possible to get a mortgage with a default on your credit record. While some lenders will immediately reject people who don’t have a clean credit report, others are more sympathetic. 

Whether you can find a suitable lender will depend on your specific situation and the details of the default. 

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

Yes, the type of default can make a considerable difference. A small default on a store card or a phone bill is usually seen as fairly minimal – but if the default was on a major loan or previous mortgage you may struggle to find a lender prepared to take you on.

As a rough guide, late payments on phone contracts and utility bills are the least serious. Defaulting on overdraft or credit card payments is of medium severity while defaulting on a secured loan or mortgage is the most serious. 

Also relevant is when the default happened, and whether you repaid the debt.

Can I get a mortgage with outstanding debt?

Some mortgage lenders are comfortable taking on people with low credit ratings. Depending on various factors, they may well offer you a mortgage if you have outstanding debt.

Approval will almost certainly depend on the size and type of the debt. Owing a certain amount on credit cards is fairly acceptable, for example. It also helps if you can demonstrate that your debt is manageable alongside the repayments on your mortgage.

How much can I borrow if I have defaults?

A lender might offer someone with a clean credit file four to five times their income as a mortgage loan. But if you have a less than perfect credit history, lenders are likely to offer you a lower total and less competitive rates. 

If you have a large cash deposit to put down towards a house, that will make lenders much more willing to accept you. Few would turn down a 25% deposit. 

A mortgage advisor can look at your specific situation and give you a good sense of how much you might be able to borrow. It’s well worth seeking advice before you start looking at potential property to buy.

How soon after a default can I get a mortgage?

A default will stay on your credit score for six years. After that point it will disappear, whether the debt was settled or not. So if your default was large and very serious, you may need to wait until it is removed from your record before buying a home. 

If you have a less serious default that happened 3-6 years ago and was settled, it probably won’t prevent your mortgage approval. In general, people with credit issues often have more success with a specialist lender, as high street lenders can have stricter approval criteria. 

With any kind of credit issue, it’s worth seeking mortgage advice. Every time you apply for a mortgage it will appear on your record – and too many applications in a short space of time can decrease your credit rating. So make sure you have a good chance of acceptance before applying.  

How can a Mortgage Broker help?

A Mortgage Broker is a financial professional who specialises in helping people find suitable mortgage deals. It’s our job to know the mortgage market inside out, and the lenders that accept people with credit issues. We will compare numerous products from across the market to recommend the best options and help you choose a suitable deal.

The most important step is to spend time getting to know you, your financial situation and your property goals. That way we can guide and support you to achieve your dreams. 

Ideal Home Loans is authorised and regulated by the Financial Conduct Authority, so you can trust us to do all the hard work for you in exploring mortgage products.