What we cover in this guide
Can I get a mortgage after repossession?
If your property was repossessed, you may believe that you can never get a mortgage again. However, this is not necessarily true. There are options available, and it is possible to obtain a mortgage even after repossession.
People who have experienced repossession can still get a new mortgage. However, the number of lenders available to them will be limited. We know of specialist lenders who cater for borrowers in all kinds of adverse credit situations. These will consider applications from people who have previously had homes repossessed.
You are welcome to come in and discuss your situation with our specialist bad credit mortgage advisers. We offer initial advice for free and could even get you a no-obligation quote.
Getting a mortgage after repossession in the UK: Key Takeaways
- Keep your paperwork: Ensure you have your paperwork from when the repossession occurred. This will help validate any dates and reasons if required.
- Be honest: Ensure you provide the true situation when applying. Honesty really is the best policy in these situations.
- Maintain your credit agreements post repossession: Try to demonstrate that all has been better financially since the time of the repossession.
- Don’t overstretch yourself: Try to look at the purchase price and in turn loan size well within your affordability. You can always upsize when you have a new mortgage payment track record.
Mortgages after Repossession FAQs
- How much can I borrow if I have been repossessed?
- Do I need a larger deposit if I have been repossessed?
- What rate of interest will I be offered?
- How long do I have to wait after repossession before I can apply?
- If there is a balance remaining after a repossession, do I need to clear this in order to be considered for a mortgage?
- Do I always have to declare a repossession once it has dropped off my credit file?
Under normal conditions, you may be able to borrow up to five times your annual income. This is if you have a clean credit record and make regular, timely payments.
With every mortgage application, lenders will conduct an affordability assessment, as well as checks on your borrowing and spending. The longer ago your repossession happened, the more beneficial it will be for you. Especially if you have maintained a good credit score since then.
Generally, you might be able to borrow around three times your annual income one to three years after your repossession. Perhaps four times your income when three to six years have elapsed. Lenders are more flexible after six years. You should then be able to get deals on a par with high street rates.
Having a blemish on your financial record will likely mean needing a larger deposit for a mortgage. And the more recently your issue occurred, the larger the deposit the lender may ask for. Here, we’ll go through what you’re probably going to have to deal with when trying to get a mortgage after repossession.
Firstly, there is almost no point in applying for a new mortgage within a year of the repossession. It’s just too soon after the fact.
If you apply for a mortgage shortly after a repossession, lenders will usually require a minimum 30% deposit. This applies if the repossession occurred within one to three years. After three years, lenders become more flexible, with most asking for 20% of the property value. After six years you can expect things to return to somewhere near normal, with 10% being typical.
If the repossession happened less than three years ago, you will likely be badly hit by a very high interest rate compared to a standard loan. Lenders can be very cautious, and will charge a high rate of interest to people who they perceive as being a greater lending risk. After three years, you will probably be able to get a slightly better interest rate offered, but it is only after four years or more that the interest might get close to a competitive market rate – especially if you have been able to maintain a healthy credit history since then and have a decent-sized deposit to put down.
As ever with adverse credit events, the longer ago they happened, the less negative impact they will have on your credit score, and the opinions of lenders. However, if you had a property repossessed in the last year, then your chances of obtaining a mortgage are almost none. You will need to wait until the one-year threshold has passed, and in the meantime take steps to demonstrate your good money management and improve your credit history.
You don’t necessarily need to do this, but it will probably help your case. An outstanding balance after a repossession can affect your new mortgage application in three ways:
- It will affect your chances of being made an offer. Many lenders will simply reject an application outright if there is still debt outstanding on a previous mortgage. Also, if you are still paying off the debt and have heavy financial commitments each month, this will impact an affordability assessment when they come to work out how much you could pay for a new mortgage.
- You will be asked to put down an even larger deposit. After a repossession, you would need to fund a big deposit for a new mortgage anyway – applying with more debt still outstanding might mean this needs to be increased again.
- You will probably have to pay a higher rate of interest on the loan, simply because with more debts outstanding on top of the repossession, you will pose a greater risk to the lender.
If you do pay off the balance, make sure your credit record get updated accordingly.
Repossession, like bankruptcy, is viewed as a very serious adverse credit event, and if you are asked about it, then you must reply honestly. Just because it now falls outside of the six-year scope of a credit check, this does not mean records no longer exist, and lenders will not react well when they find out about an event you did not mention that they asked you directly about. This could put your mortgage, and therefore your home, at risk.