Mortgages with Defaults

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Mortgages with Defaults

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Gavin Burrows talks all about mortgages and defaults. 

Is it possible to get a mortgage with a default?

Yes, it is definitely possible to get a mortgage with a default, but that will vary dramatically between Mortgage Lenders and the timing of when the default is registered is very important. 

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

It can do, yes, and this will depend on the Mortgage Lender. If you have a default on a utility or a mobile phone contract, there are some lenders that can discount those types of defaults (depending on the specifics). So it certainly can make a big difference which type of agreement you’ve defaulted on.

What is a satisfied default? 

A satisfied default is when you’ve effectively paid off the amount that you owe.

Can I get a mortgage with outstanding debt? 

Absolutely, and it’s a bit of a misconception that if you’ve got loans, store cards, car finance, they go against you in your mortgage application. These expenses are always taken into consideration from an affordability perspective when you apply for a mortgage. Having debt is not necessarily a bad thing, so long as you’ve maintained your payments. Displaying good credit behaviour is actually a positive thing when applying for a mortgage. 

What if I have other credit issues as well?

Every sort of credit issue can make things more complicated. As an example, if you’re a person who’s got one default that happened four years ago, then that’s going to be easier to get a mortgage in that situation than for somebody who perhaps had a default twelve months ago, and a CCJ eighteen months ago.

The more complicated your credit problems are, the more tricky it becomes to obtain a mortgage, although there are often still mortgage options available to people, even when they have multiple defaults or multiple CCJs. If you’ve had bad credit in the past and have been turned away by a Mortgage Lender, there may well be other options that you are unaware of. Speaking to a Mortgage Broker like ourselves is always advised in this type of situation.

Brokers who have access to an independent panel of mortgage lenders are more likely to find a lender that will be able to cater for your circumstances. High street lenders are not always going to be a very straightforward route if you’ve got a very complex credit history.

How much can I borrow if I have defaults?

It varies based on the lender. Some lenders may generally cut the maximum Loan to Value rate based on any adverse credit history, to maybe 75% – 80%. Other Mortgage Lenders would offer as high as 90%-95% Loan to Value, even if you’ve got a historical default on your credit report.

It depends upon the specifics of the circumstances, for example, a default that happened two months ago would affect the application, whereas a default that happened five years ago probably won’t even be acknowledged as an issue with some lenders.

How soon after a default can I get a mortgage? 

The type of default will play a huge part in that. Some high street lenders may not consider an application at all if you’ve had a default in the last six years, but other high street lenders may be able to consider your application even if you’ve had a default over two years ago. And then there is always the option of the more specialist lenders if required.

It’s quite possible that you could get a mortgage with quite a recent default if it was a utility or mobile phone contract. However the value of the default is also very important, as some lenders may discount defaults up to a certain value. There are lots of things that will influence whether or not your default will affect your application, which is why it’s important to speak to a broker that will be able to give you the right advice based on your own individual circumstances.