Mortgage After Repossession
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Can I get a Mortgage after Repossession?
If you’ve had a property repossessed, then you might well think that you will not be able to get a mortgage ever again. However, we know that this is not always true, and depending on your circumstances, there are options available.
People who have suffered a repossession do go on to obtain new mortgages, although the choice of lenders available to you will be much reduced. We know of specialist mortgage lenders who cater for borrowers in all kinds of adverse credit situations, and who will consider applications from people who have previously had homes repossessed, so getting a competitive deal could we be possible.
You are welcome to come in and discuss your situation with our specialist bad credit mortgage advisers, who offer initial advice for free and could even get you a no-obligation quote.
Mortgages after Repossession Information
How much can I borrow if I have been Repossessed?
In normal circumstances, with a spotless credit record and a history of prompt, regular repayments, you might be able to borrow up to five times your annual income. If you have a repossession on your files, then lenders will be inclined to offer less credit, but there will be other factors they can consider. With every mortgage application, lenders will conduct an affordability assessment, as well as checks on your borrowing and spending. The older your case of repossession, the better it will be for you, especially if you have taken steps to keep a clean credit record since it occurred.
Generally, you might be able to borrow around three times your annual income one to three years after your repossession, and perhaps four times your income when three to six years have elapsed. After six years, lenders are more flexible and you should be able to get deals on a par with high street rates.
Do I need a larger deposit if I have been Repossessed?
Inevitably when you have a blemish on your financial record, it’s likely that you will need to find 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 within one to three years of a repossession, you should expect lenders to ask for a minimum 30% deposit. After three years, lenders become more flexible, with most asking for 20% of the property value, and after six years you can expect things to return to somewhere near normal, with 10% being typical.
What factors affect a lender's decision if I have been repossessed?
When the credit crunch hit, it affected a lot of people in different ways. Many homeowners lost their properties due to factors beyond their control, but are now in a solid financial position again and able to put down a deposit. Conditions vary from lender to lender, but many are willing to consider offering mortgages to those who may have had all kinds of financial difficulties in the past, including repossession.
In general, when making decisions on mortgage applications, lenders will look at three main criteria:
- The details around why the previous repossession occurred;
- How you have handled your financial affairs since it happened;
- The state of your current finances.
In the next sections, we’ll go over these one by one.
The details of the Repossession
The lender will ask the following questions about your previous repossession:
- When did it occur?
- Why did it happen?
- How much money was involved?
- Who was your lender?
- Is any money still outstanding?
- Do you have any other adverse credit events on your record?
When did the repossession occur?
Your answer to this question will impact how likely a lender is to offer you a mortgage in the first place, and will have some bearing on the level of deposit you will need to put down on your new mortgage. As ever with adverse credit events, the more time that has passed since the repossession happened, the better.
If your repossession happened within the last twelve months, then it’s pretty much certain that the lender will simply not offer you a mortgage, and you are better off spending your time on rebuilding your credit score and saving up a sizeable deposit. If it happened less recently, then you may have some options.
If it’s been between 12 and 36 months since your repossession, then we should be able to find you a mortgage deal with a specialist lender, but because they will perceive you as a higher risk, they will probably offer you a lower percentage of the value of the property, i.e. the mortgage will have a lower LTV (loan-to-value) ratio. This means you will have to find a large deposit – probably a minimum of 30%.
If it’s been more than three years since the repossession, then lenders will be a little more flexible and you should be able to borrow up to 80% of the property’s value. If your repossession happened six years ago or more, then your position will be nearly back to normal and you should be able to borrow 90% of the value of your proposed property.
Why did the repossession happen?
This information can be quite important to your application, and will affect how favourable a lender will be to your mortgage request. If your financial situation suffered due to reasons beyond your control – perhaps if you were a victim of fraud or suddenly lost your job, for example – then a lender is likely to be more sympathetic than if you had simply borrowed beyond your means or lost track.
You will need to show proof of any mitigating circumstances, but our team knows how to best present this information so that it helps your application.
How much money was involved?
The level of financial commitment might be less important than the amount of time that has passed since your repossession, but it will still have some influence on the lender’s decision. If the event was around a single mortgage and related to a lesser amount of money, relatively speaking, then a lender will look upon your application more favourably than if the repossession had been for a huge amount of money, a high percentage of the loan, or for multiple properties.
‘Perceived risk’ is the important phrase here – a lender will view your financial history as a kind of guide, and the fewer the mortgages involved and the lower the value, the better.
Who was the lender?
This is an important question, and the answer will have a direct impact on whether the lender you’re talking to will offer you a home loan. Many mortgage providers, although trading under different names, are part of the same banking group, and owned by one parent company. For example: AA, Bank of Scotland, Birmingham Midshires, Halifax, Intelligent Finance and Saga are all parts of the Halifax/Bank Of Scotland group (HBOS), so if you apply to different lenders within the group, you are actually applying to the same company. The unfortunate side-effect of this is that if you had a previous property repossessed by one member of the group, then it’s likely that any other member will turn you down automatically for a mortgage.
Fortunately, we are highly aware of all relationships and groups within the mortgage industry and so will be able to save you wasted time in mistaken applications, and also further damage to your credit score due to repeated checks being made by lenders.
Is any money still outstanding?
If you still owe money to the lender who repossessed your previous property, then this is very likely to have a detrimental effect on your chances of getting a new mortgage, as well as how much money a lender is willing to offer you.
If you are still paying off a previous loan, then you have less money available to service another mortgage. As part of their affordability assessment, when lenders look into all your income and expenditure, and consider whether you will be able to repay what you borrow before coming to a decision about offering you a mortgage and how much for.
Are there any other adverse credit events on your records?
Understandably, when people are experiencing difficult financial circumstances, they will prioritise keeping a roof over their heads and perhaps defer or default on other less-vital payments.
As someone who has had a previous property repossessed, it’s relatively likely that you will also have some other bad credit events on your files. These might include anything from missed card payments to a default notice, a County Court Judgement (CCJ), Individual Voluntary Arrangement (IVA), or a debt management plan. Lenders consider people with a troubled financial history to be a higher risk than those with a squeaky-clean record, and so may not be willing to lend as much for a home loan.
As we’ve mentioned previously, how long ago these adverse credit events occurred is also a factor. The more historical they are, the better – and if they happened more than six years ago, they will no longer show on your credit history. Lenders will ask if you have also been declared bankrupt in the past. If you have, then it’s important to answer honestly, as your chances of getting a mortgage will be zero when they find out you haven’t told the truth.
In all cases, it will be important for you to deal with a specialist bad credit mortgage adviser/broker to give yourself the best chance of success when applying for a mortgage after a repossession.
How you have handled your finances since the Repossession?
All lenders will be most interested in how you have dealt with your financial affairs in the time since your repossession. If you have kept on track with all payments – repaying loan instalments, domestic financial arrangements or credit card balances on time – then they will look at you in a far better light than if you had incurred a further adverse event like a default notice or a CCJ.
If you can demonstrate that, despite problems in the past (which may have been simply a blip due to circumstances beyond your control), you are now on an even keel, a lender will be far more likely to extend lines of credit to you again.
The state of your current finances
A number of things give indicators of your current financial standing. As ever, the main factor will be the amount of time since your financial problems – if they were more than six years ago, then most of them will have dropped off your financial record and no longer be relevant.
If you now have fewer financial commitments, a regular income and a clean credit record, then you will be able to borrow more, and with a better deal, than someone who has several financial commitments and/or a blemished credit history.
If your repossession occurred more than four years ago, and you didn’t have more financial issues at the time or since, then you could be in a relatively favourable position. You might find it possible to get a mortgage at a competitive rate, and needing only a standard deposit of 10% (or perhaps 5% in some cases), but it’s vital to talk over your circumstances with an experienced bad credit mortgage broker first.
Bad Credit Mortgage Brokers
A broker with a wealth of experience in handling mortgage applications for people who have suffered financial difficulties in the past will be able to get you a far better product, at a far better rate, than you would be able to alone by looking on the internet or trying providers on the high street.
Our specialist ‘bad credit’ team at The Mortgage Centres have helped plenty of clients secure a new, affordable mortgage after a repossession. Our knowledge of the network of bad credit mortgage lenders around the UK, unlimited access to the whole market and exclusive rates you won’t find on the high street, means we will be able to source a mortgage deal to meet your personal circumstances, no matter what your credit history.
As well as helping you find and consider your options, we also offer expert personalised mortgage advice and can also help you with the actual application, so you present all information in a way that minimises your adverse exposure.
Get in touch today to arrange a free initial consultation and a no-obligation quote. It’s our business to get you back on the road to homeownership.
Mortgages after Repossession FAQs
- 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?
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.