Getting a mortgage with defaults or late payments on your credit report

People with a history of credit problems such as defaults, arrears and late payments will often get turned down for a mortgage by  mainsteam lenders who on the whole are looking for customers with impeccable credit records.

Fortunately, having a history of defaults and late payments does not necessarily prevent you from securing a mortgage or remortgage. There are a few lenders active in this market who take a pragmatic approach, looking at each case individually to determine whether the applicant is creditworthy.

As an adverse credit mortgage specialist, we have access to all the mainstream and specialist lenders who are sympathetic to people with previous financial problems. Contact us to see if we can help you.

Defaults can mean you're turned down for a mortgage

If you have previously built up arrears on what you owe and failed to keep to an agreement on a credit card, personal loan, a utility or mobile phone bill, it will show on your credit report as a default. You may find that a mainstream mortgage lender turns down your application because of a default being listed on your credit report. Any defaults will remain listed on your credit file for a period of six years from the default date.

When an individual makes an application for a mortgage, the lender has the facility to search the person's credit files to determine what sort of risk they present. Individuals who been issued with a default notice are often turned down for a mortgage because most mainstream lenders take a negative view of such incidents, believing they indicate the borrower is higher risk.

Options for non standard borrowers

There are a plethora of reasons why a person may have a blip on their credit rating. In some cases there may be a straightforward explanation and in others it can be more complex. Whatever reason you were issued with a default, providing your finances are now in order and you are in a position to comfortably afford a mortgage, there may be options available to you.

Prior to the financial crisis which took hold in 2007/8 there were a number of lenders active in the adverse market, but lenders recoiled following the credit crunch and the options for individuals with damaged credit files all but dried up. In recent times things have improved with a small number of specialist lenders returning to the market and it's an area of lending which is expected to grow again in the next few years. When it comes to getting a mortgage, the options open to you will depend on whether you fall under the light, medium or heavy adverse classification and what amount of deposit you have available. Every lender differs and there is no one size fits all criteria. On the whole, the grimmer your scenario gets, the higher your interest rate and deposit required is going to be.

Contact us, we're a non standard mortgage specialist and can provide you with FREE initial no obligation advice.

A stagnant economy has taken its toll on borrowers credit files

During the past decade, the rising cost of living and a sluggish economy have forced many people to the edge of or over a financial cliff resulting in missed payments, defaults and CCJs, all of which will come back to haunt them should they be in a position to take on a mortgage in the future.

Example borrower profile

Below is an example of the type of people that could benefit from using a specialist lender. The example does not reflect an actual customer but is intended to demonstrate the profile of the types of individual we can assist.

Sophie is a 35 year old graphic designer from Hounslow in London. In June 2020 she and her husband Paul decided to look for a larger property as they were expecting a baby. The couple were living in a one bedroom flat which they purchased in 2016. They had a mortgage with one of the high street banks and had never missed a mortgage repayment. They found their ideal property, a two bedroom house with potential to extend. Sophie and Paul approached their bank for a mortgage assuming it would be a straightforward process, particularly as they were existing customers. However, they were shocked when the bank contacted them to say their application had been rejected because a credit card default was listed on Sophies's credit report from 2018. At the time the default occurred, Sophie and Paul were spending a lot of time in and out of hospital due to Sophie's mother being unwell.  The missed payment was a simple oversight and after the event Sophie set up a direct debit to ensure it didn't happen again. Unfortunately this single mistake came back to haunt her when she next applied for a mortgage. The couple were determined not to give up on the property and looked elsewhere for assistance. They approached us as a specialist non standard mortgage broker and we were happy to advise them of niche lenders who would look beyond a one off mistake. An application for a mortgage with a lender was accepted in early July 2020.

In November 2020 Sophie gave birth to their daughter Freya and they are all now happily settled into their new home.  

This example is intended to demonstrate the type of people we can assist. A credit card, loan or mobile phone bill default can jeopardise the chances of getting a mortgage with some lenders, but others are more inclined to look into the individual's situation.

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