Mortgages After Defaults

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Getting A Mortgage After Defaults 

You should try and pay a default as soon as you receive it to avoid a default and the account that you owe money to from closing. Once a default is on your file it will stay there for six years from when the default was issued. There are still mortgage options for you, but they may be harder to find.

Can I get a mortgage with a default?

You can still get a mortgage if you have a default on your credit report and there will still be mortgage options available out there for you, they just might be harder to find. Most lenders will prefer it if you have a clean credit file with a good credit score but there are specialist lenders out there who approve applicants with defaulted credit accounts against their name.

You should be prepared to pay a higher mortgage interest rate and you should consider offering the lenders a larger deposit. The lender is taking a risk by allowing you to take out a long-term loan with them especially as you have been unreliable with borrowing in the past.

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

The nature of the default will make a difference to the application. For instance, if you have a default for a mobile phone bill then this is not too serious. However, if you have a default for a larger overdraft, credit card, or larger loan then you will be considered higher risk. There are two types of defaults – debt service defaults and technical defaults.

Debt service defaults

These defaults are issued when you have missed a scheduled payment on interest, principal, or both. This is the most common type of default.

Technical default

Technical defaults happen when you break the terms of a loan agreement in another way than missing the regular payments. Lenders tend to outline the fact that breaking the terms of the agreements will lead to technical defaults.

Mortgage lenders will of course look into what the default is there for whether it be for a mobile phone contract or a secured loan and what type it is will make a difference. If it is a small loan or a smaller account, then it is not as serious as a larger secured loan. They will assess the default and then assess whether you are too high risk of a borrower or not.

What is a satisfied default?

A satisfied default is a way to describe a default or CCJ that has been issued but fully paid off with no attempts needed to reclaim money owed. Once you have paid what you owe then the account will be closed with no further issues.

It can be easier to find a mortgage and even have more options if you have a satisfied default. If you haven’t settled your default, then there will still be options out there for you and if you are approaching a specialist lender, they tend to look more into the default than your credit score. 

For instance, they will look at when the default was issued and what it is for – they already know that your score is bad so having it settled may not make a difference if you find the right lender.

How soon after a default can I get a mortgage? 

You can find lenders out there who will accept you onto a mortgage as soon as three months after it has been issued. Every lender’s criteria is different and it is more important to find the right one. You can take the stress out of the search by seeking mortgage advice from a Mortgage Broker.

How much can I borrow if I have a default?

You need to make sure you have budgeted correctly and that you can afford the repayments on the mortgage you are applying for. There would be nothing worse than damaging your credit rating further by missing mortgage payments. 

The amount that you earn will come into account here when assessing how much the lender will allow you to borrow. If you have a specialist lender who understands your default and is willing to lend to you then you could potentially access up to four times your annual salary.

If your adverse credit is over three years old then you can expect more of a chance of borrowing up to four to five times your annual income – but this is dependent on what lender you approach and their criteria.

You should prepare a larger deposit when you are planning on approaching a lender if you can as this will maximise your chances of being accepted by them as a borrower. If you have a good credit score then you will have more options too although this is unlikely to be the case with a default.

How can a Better Financial Services Mortgage Broker help if I have a default?

Defaults do not look good to lenders and you will need to search to find a specialist lender who is willing to accept you onto a mortgage. A mortgage adviser can look past the high street lenders and help to find a specialist lender who will be more flexible when it comes to your credit history.

When you apply for a mortgage you will want to have everything in place to heighten your chances of hearing a yes. This is where Better Financial Services can help, we can help prepare your application with you and let you know everything you can do before approaching a lender to get closer to your new property.

Better Financial Services are authorised and regulated by the financial conduct authority meaning they are qualified to give the mortgage advice you need. We have access to the independent mortgage market too meaning we can access mortgage products and rates that banks cannot offer.

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Think carefully before securing other debts against your home.

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