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Getting a Mortgage with Late Payments

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Obtaining a Mortgage with Late Payments

You probably already know that when you apply for a mortgage, the lender will conduct a check into your credit history. What you might not be aware of is the impact that certain events might have on your credit rating and the lender’s decision on whether to offer you a mortgage. If you have missed a payment, or were late in paying an installment for your credit card, loan or mortgage, then it will count against you, even if it was down to a genuine oversight. Whether it was accidental or deliberate, the records make no distinction.

How will this affect you? The credit crunch caused banks and lenders to considerably tighten up their criteria and become far more cautious about who they will lend their money to. What might seem like a minor issue for the borrower might be a major problem for a lender. If your credit files show any late or missed payments, this could have an impact on a lender’s assessment of your creditworthiness and their decision on whether to lend to you. In the following sections, we’ll explore all these aspects further.

Can I get a Mortgage with Late Payments?

You might wonder how much a string of late payments on your credit history will hamper your efforts to obtain a mortgage. The truth is, as with all types of bad credit events, a history of late payments does not necessarily mean you will be refused a mortgage, but the level of arrears, the frequency of occurrences and what they relate to could all have an impact on a lender’s view of your creditworthiness. 

Late payments across the board do not all carry the same weight. For example, payments made after the final demand on a mobile phone bill or finance on a domestic item carry comparatively less negative impact, as these debts are usually for lesser amounts and considered ‘non-priority’. However, if you consistently make late payments on your mortgage instalments, this will be viewed much more seriously – payments on your home are usually the last thing to suffer in times of financial trouble, so this could be a sign of further outstanding debts around the corner, and poor money-management in general.

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The length of time that has passed since the late payments occurred will also matter, as well as if they were settled or become missed payments. If they are quite historic (three or more years ago) and all amounts due were paid off, then this will not be too much of an issue. If they are recent (within the last twelve months), quite frequent, with sums still outstanding, then this will show you are currently struggling a little financially and the late payments will have far more impact on your chances of getting a mortgage.

The important thing to bear in mind is that any late payments on your credit file will be just one detail among many in your mortgage application. A lender, especially those with a broader view of your circumstances and a more personal approach, will make a decision based on your whole situation, not just on your history of late payments.

Mortgages with Late Payments Information

Late Payments on your Credit Report

A Late Payment technically occurs when your payment arrives after the due date has passed. This will be shown on your records by the figure ‘1’ appearing next to the entry, signifying the payment was one month late, and will be available for anyone checking your credit history to see.

You could pay a bill a few days late, or even be late by a couple of weeks, and it would not show up on your credit report. But it is not worth gambling with your credit score, especially if you plan to apply for a mortgage any time soon, and you should make an effort to ensure payments of all bills arrive on time, perhaps allowing for two or three extra days for processing (depending on your method of payment – some bank transfers are now same-day as standard). To make paying bills as easy as possible, we recommend setting up direct debits so they can be processed automatically.

Can Late Payments affect a mortgage application?

Other factors within your credit history may carry more weight, but Late Payments can and will have an influence on a lender’s decision regarding your application. Any instances of Late Payments could be viewed as indicating a poor attitude to money management, and the possibility that you might not pay your mortgage on time either. As a bigger lending risk, even if they are still willing to offer you a mortgage, they may do so at a higher rate of interest, or ask for a larger deposit.

This may seem unfair, especially if you don’t believe the Late Payment was your fault. However, the lenders don’t distinguish between accidental and deliberate late payments, and take the view that you should be aware of your bill and are responsible for getting them paid on time. Even if you perhaps did not receive a statement, the onus is on you to verify with your supplier why it wasn’t sent, not to assume they do not require payment that month.

How long do late payments affect the chances of getting a mortgage?

As with all other adverse credit events, late or missed payments will remain on your credit report for six years, after which they will simply drop off. During this time, they will still affect your chances of approval or the mortgage deal you might be able to get, but, in general, the older they are, the less weight they will carry, especially if you have been keeping up with payments promptly since.

Late Mortgage Payments

Late payments on your mortgage plan are viewed by lenders as the most serious of all. Not just because it’s their money, but because when people are in financial difficulties, their mortgage is the last thing they will let fall by the wayside. So, if mortgage payments are late, or being missed, then you know that the borrower is likely to be in deeper financial trouble.

As ever, though, if the late payments occurred three or more years ago, were made up at a later date and mortgage payments have been on track ever since, then it will be a lot less concerning than a string of late or completely missed payments over the last few months.

If you have previous missed mortgage payments on your credit record, but are now up to date on all instalments, then the chances of a lender accepting your application and the kind of deal they will offer will depend on your overall credit score and perhaps your other circumstances. If you are currently behind on payments for a mortgage, then a lender is highly unlikely to approve a fresh mortgage deal.

Whatever your current circumstances, if you need to get a mortgage with late payments on your credit report, your best first course of action is to discuss your situation with an experienced specialist mortgage adviser. At The Mortgage Centres, our team have a mission to help people own their own homes, and will be ready to help you, too.

What can I do to improve my chances of mortgage approval if I have late payments?

We’ve worked with many people to help them improve their credit rating, their prospects in the eyes of lenders and therefore their chances of approval. Here are a few steps you can take yourself:

  1. Check and update your credit reports.
    The first thing to do is to establish where you stand in terms of creditworthiness. You need to contact each of the three main UK credit reference agencies – TransUnion, Equifax and Experian – and request copies of your credit report. It’s important to go to all three, as each agency is independent and may hold slightly different information on you, or report it in different ways, and you will want to see the whole picture.When you have the reports, check that all your personal details are correct. If anything is wrong, contact the agency promptly and ask them to update your information. It’s also a good idea to register on the electoral roll (if you are not already), as this is important for identification verification, and can make a big difference to your credit score. Your local authority website will have details of how to do this, and it’s usually very straightforward.If you see missed payments on your record that were simple oversights at the time – perhaps you were moving house or switching suppliers and didn’t realise a final payment was due – get them paid off as soon as possible. They will still show on your credit records until six years have passed, but a settled late payment will look a lot better than one still outstanding.Also, if you spot late or missed payments that were due to events beyond your control – such as you losing your job if your employer went bust, or an extended period in hospital – then you should contact the agencies and ask if they can add a note to your record explaining the circumstances. It’s something they may be willing to do, and it will help lenders look at you more favourably in future applications.
  2. Build up a good credit history
    With your previous history tidied up as much as possible, you need to also make sure that your current behaviour around credit looks healthy. Make sure you pay all your bills or loan instalments on time by making notes in your diary well in advance, or setting up Direct Debits so that payments will go automatically on the dates they are due.While we would never advise people to go further into debt, using a credit card for your household spending and then making sure you pay it all off at the end of the month is another way to demonstrate responsibility when it comes to borrowing and repaying. Just make sure you do pay off the full sum and don’t build up more debt.
  3. Save up a good-sized deposit
    If your credit report shows missed or late payments, especially if they are more recent, then a mortgage lender is probably going to offer you a smaller amount of money in comparison to the value of the property. This is called the loan-to-value (LTV) ratio, and is usually expressed as a percentage.People applying for a mortgage with a good credit score will likely be offered 95% of the value of the property, whereas borrowers with a poor credit rating may be offered a mortgage on a LTV ratio as low as 70% or less.So, if you are able to provide a larger deposit, you will be increasing your chances of a lender approving your application.
  4. Get specialist advice
    With late or missed payments showing up on your credit history, high street lenders will probably decline your mortgage application. And, if you are trying repeatedly with various mainstream lenders, you could be doing yourself a lot more harm than good, as they will conduct a credit search each time you apply, and a string of checks over a short period of time can negatively impact your credit score. (Note – this does not apply to checks you make on your own records, which you can do as often as you like.)An experienced mortgage broker with in-depth knowledge of the bad credit lending market will be able to save you wasted time, effort and stress by showing you the best providers to approach and what kind of deals you might be able to get, without impacting your credit score further.

Bad Credit Mortgage Advice

The Mortgage Centres has a specialist bad credit mortgage team, who are able to help people with missed payments and other blemishes on their credit reports find affordable mortgages at competitive rates. Through our relationships with a network of specialist lenders, we have access to deals and exclusive rates that you will not find on the high street, meaning you can find out all the options that are open to you, and get the proper advice you need to consider them.

Our experienced advisers also provide personalised financial advice and can help you through the entire mortgage application process. Contact us today to set up your free initial consultation and get a no-obligation quote.

Mortgages with Late Payments FAQs

  • How many Missed/Late Payments are acceptable to a lender?
  • How old do my missed/late payments need to be before I am considered?
  • I was three days late on a payment - is this classed as a missed payment?
  • I’m currently in an arrangement with my current mortgage - can I get another mortgage?
  • Do late payments affect credit score?
  • How long do late payments affect credit score?

Missed or Late Payments on a credit report are a very serious issue to a lender and they don’t like to see any at all. When someone is in financial difficulties, then the last thing to fall by the wayside is the mortgage, so a late or missed payments there are a sign that someone is in quite serious trouble.

If you are currently in arrears with your mortgage payments, then it is highly unlikely that you will be accepted for a new mortgage. Otherwise, it depends on the level and age of the events – a couple of late payments on your credit report that occurred several years ago, and you have been on time ever since, will have far less impact than a number of late or missed payments in the past two years.

When you are making a new mortgage application, the older the instances of missed or late payment, the better. A credit report will cover all adverse credit events, including missed or late payments, that have occurred during the last six years.

If you do have missed or late payments on your file from during the last year or two, it’s possible to still get considered for a mortgage, but your options, and the terms you will be offered, will be more restricted. Lenders might only be willing to offer a low loan-to-value ratio, and usually at a higher interest rate, requiring a larger deposit. If you have been keeping up with your current mortgage payments and can put up a decent-sized deposit, then your chances of a reasonable deal will be higher.

For a mortgage, this will not usually be classed as a missed payment, but a Late Payment, as you still made it but only after the due date had passed. If it does get noted on your credit report, the number ‘1’ will be next to it, showing it was made in the first month after it was due (this will still be the case if you paid it in the same calendar month it was due).

Fortunately, if you paid three days late on a domestic bill, this might not even show up on your credit report. If you want to find out for sure what has shown up or hasn’t, you should request a copy of your credit reports from the three main UK credit reference agencies – TransUnion, Equifax and Experian – and find out for yourself.

Sadly, this is very likely to count heavily against you if you are looking to get another mortgage. If you are in an arrangement, then this means you are probably paying less per month than was originally agreed, showing that you are unlikely to be able to finance payments on a second mortgage and also leaving a bad credit event on your files for each lower payment.

We recommend taking steps to get back on track with your current mortgage and creating a better credit history before trying for a second mortgage. This said, there are some lenders who may consider an application for a second mortgage in these circumstances, but they will look very closely at your situation to evaluate your case on its merits. Our specialist bad credit mortgage advisers will be able to tell you exactly what your options are.

Yes, it’s possible that Late Payments will affect your credit score, but the level of impact they have can depend on the amounts involved and timescales of the Late Payments – the more historic they are, the better. It’s best to try to bring any Late Payments up to date as soon as possible as this should help improve your credit score.

In general, where a credit score is based on a credit search, your credit report will cover the last six years, and anything older than that will not appear. This does not mean you can hide late payments if a lender asks you about it directly. How long they affect your credit score may be down to many factors, including timescales and the number of late payments registered.

Remember, your credit score is determined in different ways by various credit agencies and lenders, who will have their own methods, so it may affect one provider’s credit score more than another, meaning one may be more willing to approve a possible mortgage or loan than another.

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