Can You Get a Mortgage with a Default?
If you have defaulted on some payments, you might be worried you’ll never be able to get a mortgage. There is no cause for alarm here, as getting a mortgage with a default is more common than you might think.
Life can be unexpected at times and financial difficulties can often lead to problems with meeting financial commitments. It may be the case that you or your partner lost their job, or your business isn’t bringing in as much as usual.
There are all sorts of circumstances which cause a cashflow shortage and this often leads to missed payments. At Finance Surgery, we work with people from all walks of life and in a range of circumstances.
We can provide advice and support, no matter what your current situation may be. We work with a range of mortgage lenders to provide you a range of mortgage rates, based on your circumstances.
If you have defaults on your credit file, you can still be accepted for a mortgage. Every lender is different, and the lending criteria also varies.
Some lenders specialise in lending to customers with a poor credit history, so even if you have defaulted, you could still be accepted for a mortgage.
It can be more challenging to get a mortgage when you have a less than perfect credit history, but it is still possible.
Getting a mortgage with a default
It is important to know exactly where you stand with your credit history, before you start trying to get a mortgage. Mortgage lenders tend to want to know how many defaults you have and when they were recorded.
At Finance Surgery, we can help you find the right solution to suit your circumstances, even if you have a default. The first step is to find out what your credit score is.
There are plenty of resources you can use to do this, including Experian and Check My File. It might be worth using a few of these, so you get a full overview of your credit history.
Your adviser at Finance Surgery will be able to look over your credit history and provide you with the most suitable options to suit your circumstances.
It is important to understand what you owe and to whom you owe it and start making payments, if you don’t already have an arrangement set up. Lenders will look more favourably on you, if you are making attempts to pay anything you have defaulted on.
Defaults are one of the main reasons for mortgage applications being rejected, but there are lenders who will accept your mortgage application, even if you have defaults. These are some of the criteria to expect from mortgage rates for different lenders, if you have a default on your credit file.
· If the maximum loan to value is 95%, defaults over 3 years old are ignored. You would be declined if the defaults were in the last 3 years. You must not have any other adverse credit within the last 3 years, although late payments may be accepted. The approximate rates around 5-6%.
· When the maximum loan to value is 85%, you would be allowed 2 defaults in the last 2 years. Defaults must not amount to over £1,500 in the last 12 months. You would not be allowed any other adverse credit in the last 2 years; however, some late payments may be permitted. The approximate rates here would be 4-6%.
· At a maximum loan to value of 80%, defaults of over 2 years will be ignored, as will mobile phone defaults registered at any time. There is no other adverse credit allowed in the last 2 years, although late payments are permitted. The approximate rates are 4-5%.
· If the maximum loan to value is 75% and there are no defaults in the last 3 months, the approximate rates would be 7-11%. Other adverse credit may be considered.
The lending criteria is different for all lenders and some won’t even run a credit check. Most lenders are more concerned with the date the default was registered, rather than when it was paid back.
It is obviously better to pay back any debt you own, especially to open your options, but it won’t necessarily affect your chances of obtaining a mortgage, if the default is unsettled.
It all depends on the lender and this is what we can help with at Finance Surgery. We have experienced advisors on hand to offer you advice and ensure you get the right option to suit your own circumstances.
If you have defaults, you may be concerned about how much you can borrow. If you have defaults on your account, you can expect to borrow less than you would if you had a clean credit rating.
With a good credit record, you might expect to borrow as much as 5 times your income. This will be reduced if you have adverse credit, as you are in the higher risk category. In most cases, you be required to pay a higher deposit.
It also depends on the date it was registered. If the default occurred over 3 years ago, you may still be able to borrow 4.5-5 times your income, depending on the lender.
The amount you can borrow will also depend on other factors, such as your outgoings and other commitments. If you have other financial commitments, it will make it more challenging but it, again, depends on the lender.
If you want to find out more about how your financial commitments might affect your borrowing, we can help at Finance Surgery. Our advisors are trained and experienced in dealing with all kinds of borrowers, including those with adverse credit and will be happy to help.
Every lender has a different criterion and whether you will be accepted will depend on their criteria, your income, deposit and the length of time you have had the defaults.
There is no one size fits all with lending, the criteria will differ, which is why it is important to get a full overview of mortgage lenders and their criteria.
You may be declined by one mortgage lender but accepted by another, so it is worth looking around. It can be easy to get despondent, if you have been rejected for a mortgage due to defaults. However, we can help at Finance Surgery.
If you have defaults and are concerned about getting a mortgage, we will try to source the right lenders for you. We try to ensure you get good value for your money and the most suitable options based on your circumstances.
If you have some defaults on your account, it is important to wait until the right time to apply for a mortgage, otherwise you may be rejected straight away.
The lending criteria is always subject to change, so it is always worth seeking advice, otherwise you might not get the right option to suit your needs.
At Finance Surgery, our expert advisors work with a range of lenders to help ensure we can provide you with a range of options.
We understand that everyone has different circumstances and we aim to work with you to get you the right deal for your money.
There is no need to be concerned if your borrowing is less than perfect, we will work with you to help you secure a mortgage with the right lender based on your circumstances.