Can I get a Mortgage with a Default?
Yes, it is possible to get a mortgage with a default showing on your credit record. A lot depends on other contributing factors such as:
- the amount of the default,
- when it was registered,
- how big a deposit you can put down,
- your recent borrowing behaviour.
Do you qualify for a mortgage with a default?
No credit checks & only takes minutes!
After three to six months, your creditors will send you warning letters and then a default notice, which will only add to the stress you are already experiencing. Here, we explore how a bad credit score due to default could affect your mortgage application.
What is a Default Notice?
A default notice is a formal letter or notice from a creditor or lender. They must send you this after you have missed 3-6 payments, or when you have repeatedly failed to pay the outstanding amount in full. It is a legal requirement for this letter to be sent, but it does not indicate that legal proceedings have started.
Creditors can only send default notices in regard to debts regulated by the Consumer Credit Act. The notice will set out all information very clearly, including:
- Which agreement terms you have broken.
- The amount you owe to put the account in order.
- The date by which you should make payment.
- What consequences will follow if you fail to comply.
- The period of time you have to respond (usually 14 days).
Fill out our quick and easy Bad Credit calculator below. We only require a few details to see how much you may be able to borrow.
NO CREDIT CHECKS!
Different bad credit situations need different mortgage solutions. We approach mortgages for your individual needs.
If you’re looking to get a secured loan or bridging loan with bad credit, you may face some hurdles. We can offer you the best advice for your situation.
Your affordability will always be assessed when it comes to mortgages. Read our guides to help you prepare for your next steps.
- What mortgage can I get on my salary?
- What stops you from getting a mortgage
- Can I get a low income mortgage?
- What to do if you can't afford a mortgage
- What is the longest mortgage term in the UK?
- A guide to bank statements for mortgage applications
- Obtaining a Joint Borrower, Sole Proprietor Mortgage
- Try the mortgage affordability calculator
How long does a default stay on my credit file?
A default will stay on your credit report for six years after it was registered. A ‘satisfied’ default will still stay on your report for six years.
After that, it falls outside the scope of the report. Watch out for debts sold on to debt collection agencies where they may re-register the default as a new debt, so the same debt may remain on your report for longer.
How to get a default removed?
You can have a default removed from your credit report by paying the amount on time after receiving the notice. If you are able to do so, we recommend you pay the outstanding balance.
The late payment will still show on your report. If you have problems paying, you should contact the creditor and ask if you can clear it in instalments.
Tip: If you do this, contact the three main credit reference agencies in the UK. Request a copy of your credit report from each agency to confirm that it has been done. (Experian, TransUnion and Equifax.)
How long after a default can I get a mortgage?
It might be possible within a year, depending on the nature of the default. The longer you wait, the better your chance of obtaining a competitive mortgage. After six years, it becomes easier to apply for mortgages, loans, and improve your credit rating.
A lender may decline a mortgage application if there are default notices on your credit report. However, defaults do not have as much of a negative impact as bankruptcy or IVAs. Mortgage arrears and CCJs affect things to a lesser extent, while late payments on unsecured debts has the least impact.
Payday loans are seen as a sign that you cannot manage your household finances effectively.
If you do have a default on your file, it is likely that high street lenders will turn you down. This does not mean all is lost, as specialist advisers we have access to all the specialist lenders in the market.
Getting a mortgage once the default has been removed
Your chances of securing a mortgage will improve greatly once the default notice has been removed from your record. This is provided that you have no further adverse credit events and meet the lender’s criteria.
What if my default is ‘satisfied’?
Sometimes, lenders prioritise the time since the default rather than whether it was paid off or not. An experienced broker will know which lenders are best to talk to according to your circumstances.
It is possible to still get a mortgage before the default comes off your file. Lenders consider two factors before a default: your ability to repay the loan and the loan-to-value (LTV) ratio.
Lenders are more interested in your recent financial activity than historical problems. Even if your record shows a default notice, getting a mortgage with a default over years old may still be possible.
How much can I borrow with a default?
Lenders will consider all your incomings and outgoings when deciding whether to offer you a mortgage and how much. As well as your salary, they will want to assess how much you need to budget for:
- your household bills,
- groceries,
- car finance,
- childcare,
- commuting, etc.
Typically, they will need to look at your bank statements to get the big picture on this. They will request statements from the last 3-6 months to get an idea of idea of your regular payments. Based on this assessment, they will then decide how much they are willing to offer.
Someone applying with good credit, paying monthly outgoings without issue, could expect to borrow up to five times their annual income. Applicants who may have endured financial issues in the past will be considered a greater risk.
They will typically not be able to borrow as much, especially if they are carrying significant debt. The longer ago bad credit issues occurred, the more favourable the amount you will be able to borrow.
Are the default balances taken into consideration when calculating how much I can borrow?
A key part of the mortgage application process is the affordability assessment, when the lender will look at your current liabilities compared to your income and gauge what you will be able to pay monthly for your mortgage.
Their decision will also be influenced by the number of defaults and their age. If you have a number of defaults, as well as other current financial commitments, it’s likely they will offer you less and you will be asked to provide a larger deposit.
As ever, lenders will consider how long ago various defaults happened, what has changed since then, and take a view on the risk they are taking now.
How much deposit will I need if I have a default on my file?
Typically, most borrowers need to pay a 10% deposit when getting a mortgage for a property. However, in certain cases, you may only need to pay 5% if you meet specific requirements. One such requirement is purchasing through the government’s Right to Buy scheme. This may also apply to you if your defaults are over three years old.
However, if your defaults were over one year ago, then you will likely be asked for a 15% deposit. This might drop to 10% if the defaults are over two years old.
Different lenders have different criteria for mortgages with a default, the size of the default matters too. To know what options are available for your situation, it’s best to consult with one of our expert advisers.
Can I remortgage with defaults?
Yes, it is possible for you to remortgage with defaults. The process for getting a remortgage is very similar to that for arranging your standard mortgage. This means that the same kind of criteria will apply.
Some lenders will understand your wider circumstances and not simply judge you on your default alone. Much may depend on the exact nature of the default:
- the amount of money involved,
- the type of loan or line of credit it was in connection with,
- and sometimes, which lending company.
Remortgaging within the same company group you defaulted with, will likely result in your application being declined. It’s best to use a specialist lender for a remortgage if you have a default.
The time since the credit default happened affects how a lender sees the default. Problems that occurred in the past year are taken more seriously than those from three or four years ago.
The longer you wait after a default, the more opportunity you will have to improve your credit score. Different lenders have different criteria, and some will consider your remortgage application with a relatively recent default.
Mortgage lenders that accept defaults
When applying for a mortgage with defaults, it’s likely you’ll need to work with a specialist lender. Specialist lenders cater to people who have experienced problems in the past and are far more flexible in their approach.
The criteria around dealing with defaults varies from lender to lender, some even accept defaults within the last 12 months.
Specialist lenders do not advertise their services to the public. They tend to only accept mortgage applications made through trusted intermediaries like us.
Mortgage brokers for defaults
Unlimited specialist mortgage brokers like us have access to the whole market and exclusive interest rates from lenders not found on the high street. You’ll be able to:
- fully consider your options,
- get personalised mortgage advice from someone who completely understands your situation,
- and even get assistance with your mortgage application.
Your best chance of finding a bad credit mortgage with defaults is to contact a specialist broker. At The Mortgage Centres, our team of specialists know the market inside out. We can turn to exactly the right providers to get the best deals for mortgages with defaults.
Get in touch today to set up your free initial consultation and get a no-obligation quote.
Mortgages with Defaults FAQs
- How bad is a default on your credit history?
- What is the maximum size default allowable?
- Are some defaults more severe than others?
- Why has the same default been registered on my account twice?
The impact a default on your credit history can have will depend on the kind of credit facility you are trying to get. But, in the case of a mortgage, a lender will also consider when the default occurred and how much for, as well as other aspects of your current situation, before deciding. It may influence the outcome but will not prevent you outright from getting a mortgage.
The key thing to remember here is that it is the defaults in the last year or two that matter most. If the default was within the last year, lenders will generally not want to see anything over £1,500. If the default is over a year old, lenders are less likely to worry about the amount. Lenders will usually accept two defaults within the last two years, but after that it isn’t critical.
Yes, some defaults are more severe than others. All mortgage lenders will view any defaults on secured loans or home loan payments as very serious. They will factor this into their assessment when deciding to offer you a mortgage.
Defaults on lesser amounts or things like mobile phone or mail order accounts will be viewed in a more relaxed way. Defaults on credit cards or personal loans fall into a middle ground, and leniency varies from lender to lender.
When a default is on your report, it may impact your ability to get other forms of credit or a mortgage. However, it is still possible to obtain a mortgage even if you have defaults on your credit file.
This can happen in cases where your debt has been sold on to a debt collection agency. The original creditor should have marked it as ‘satisfied’, and the debt collector should re-register the default, flagging it as ‘debt assigned’, to show what has happened to anyone checking your credit report. Interestingly, even if it is re-assigned, the debt only stays on your report for six years from the time it was originally registered, not re-registered, after which it drops off.
"*" indicates required fields