Mortgages With Missed Payments
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Getting a Mortgage If I have Missed Payments
The question of how to get a mortgage when you have missed payments on your credit records is one we get asked quite often. In fact, finding mortgages for people with a variety of adverse credit problems – from relatively minor cases to occasional severe issues – forms a significant portion of our business. While there is no definite answer to this question – it will always depend on your exact circumstances and the nature of the bad credit – we are confident that we will be able to help you in your quest for a home loan, even if you have a history of missed payments.
As with any adverse credit issue, a diligent broker and lender will look into a number of factors surrounding it, such as:
- The number of missed payments
- The date(s) that they occurred
- What the payments related to
- Are they still missed, or paid off and classed as late payments?
- Any other bad credit issues on file
In addition to this, other aspects of your circumstances will also come into play. Among these will be:
- The amount of deposit or equity you can put on the table in relation to the property value
- Recent and current financial behaviour
- Current commitments and debt to income ratio
- Proposed loan to income ratio
After taking all the above into account, the lender will have a good grasp of your affordability as well as your diligence in looking after your finances, and will be able to make an informed decision about whether or not to offer a mortgage, and for how much.
Information on Mortgages With Missed Payments
How do you get a Mortgage with Missed Payments?
If you are trying to get a mortgage with missed payments on your credit history, you are likely to find yourself facing a few obstacles on your way, if not a series of refusals, especially if you are applying to one of the mainstream lenders. The majority of high street providers stick to very strict criteria regarding who they are prepared to lend to, and even the slightest blemish on your credit report can put you outside of their conditions.
Being able to demonstrate your ability to make regular repayments, for example on other loans or lines of credit, can help you in these circumstances, and it’s true that all lenders apply slightly different criteria for applicants from one to the next. This said, making multiple applications to a number of lenders in the hope that one of them will be amenable to your situation is a course of action we would always advise against. Unless you get lucky on the first or second try, the risk of further damage to your credit record is too great, as several credit checks over a short period is certain to count against you, and you will find yourself in a worse position.
Approaching an expert mortgage broker to go over your situation and identify what lenders will be right for your circumstances is probably the best route open to you at this point. A specialist adviser will be dealing with this kind of enquiry on a routine basis, and will have the experience and insider knowledge to be able to point you in the right direction fairly quickly, without the need to waste so much of your time and energy, or cause further damage to your credit score.
It’s likely that you’ll have to look to other sources than the high street to find the mortgage you need. Why not get in touch with our team today to arrange a free, no-obligation initial consultation – if you have a copy of your credit report, we’ll be able to quickly establish the details of your missing payments and let you know what can be done to secure the mortgage you need.
What other factors do Mortgage Lenders look at If I have Missed Payments?
The missed payments resting on your credit files are just one aspect of your whole credit record and may be reduced in importance according to the circumstances around the bad credit and your position on a number of other factors. The other things a lender will look at with a prospective borrower include:
What they relate to – The nature of the loan or the type of credit you missed payments for will have an influence on a lender’s view of your case. If you failed to meet payments on a credit card or mobile bill, for example, then this will matter a lot less than missed payments on your mortgage.
Your deposit or equity amount – How much money you are able to put on the table, or show that you have already invested in property – and therefore how much you will need for a mortgage once this is set against the value of the property you are aiming to buy (known as the loan-to-value ratio or LTV) – will be a big factor. The higher the amount, the lower the risk to the lender, and the better your chances will be.
Your income and what you can afford – Lenders will look at the amount you need to borrow in relation to your income, as well as what you will be able to allocate from your household budgets for mortgage repayments each month, and make a judgement based on these figures. The less you borrow compared to your income, the better.
Other adverse credit issues – If you have other bad credit items on your record then this could paint a poor picture of your finances and cause an additional issue. On the other hand, if you have a healthy record aside from the problems with the missed payments, then this can show that you otherwise have a sound approach to your money management.
The number of missed payments – If you only have one or two missed payments, then it’s likely a lender will understand this was probably an oversight or temporary blip and not a sign of serious financial issues. Conversely, a string of missed payments, possibly leading to a default notice, will be treated as a sign you struggled to manage your budgets and meet your responsibilities.
The amount of time that has passed – If your missed payments were relatively historic, for example three or more years ago, and you can show a clean record since that time, then a lender is likely to understand that your finances are currently in a good state. If, however, they were quite recent, perhaps within the last 12 months, then it could be seen as a sign you are still experiencing financial problems and may give lenders pause for thought.
Some lenders might also take into consideration the context of the missed payments – perhaps you had recently lost your job or suffered a severe injury or illness at the time that affected your income and ability to service your borrowing. As experienced mortgage brokers, we are familiar with the approaches taken by a large number of lenders and will let you know what they will look for in advance in your particular case.
Are some Missed Payments worse than others when I apple for a Mortgage?
In the section above, we covered the variety of factors that will influence lenders when it comes to making a decision about whether to offer a mortgage or not to a prospective borrower with missed payments on their records. As mentioned, some types of borrowing or lines of credit are viewed as a lower priority than others, and a string of missed payments on some will not be as serious as missing a few payments on others.
Forms of unsecured credit, such as store cards, credit cards or personal loans, are viewed as lower priority debts, and so a missed payment relating to these will not carry the same weight as that for a secured debt. Missing payments on a secured debt, such as your mortgage or a second charge loan, is viewed much more seriously, as this usually involves more significant sums and could potentially put your home at risk. Having a single missed payment against your mortgage will be seen as far more severe than a few missed payments on your mobile bill.
To give you an idea of the hierarchy of the various forms of borrowing and credit, and the order of severity in missing a payment on them, here is a brief, general list from the most serious at the top to the least important at the bottom. We should point out that this list is not exhaustive, and priorities may change with the passing of time:
- Secured borrowing or second charge loans
- Unsecured loans or finance agreements
- Credit cards, store cards or catalogue accounts
- Bank overdrafts
- Utility bills – gas, electric, water
- Phone contracts
To find out exactly how serious an impact your missed payments will have on your mortgage application, please feel free to contact our team today.
How old do Missed Payments need to be before I can apply for a Mortgage?
There is no set-in-stone answer to this, but the general accepted rule of thumb is: the older, the better. A string of missed payments on any form of finance three or more years ago will have a lot less impact than if they occurred within the last few months, but this is where you can begin to see that the duration of time since they occurred is only half the story. The nature of the line of credit or borrowing that the missed payments related to will have a bearing on how seriously a lender views the situation, and some kinds will need more time to pass than others before their impact is lessened.
For example, missed instalments on secured loans and mortgage payments will require more time to pass than those on unsecured borrowing such as credit cards. Of course, with credit records only covering the last six years, any missed payments will fall outside the scope of a credit check after that time.
To clearly show you how the severity of one or more missed payments can change with time according to the seriousness of the debt involved, we’ve drawn up the following tables to act as a guide. Below is shown the number of instances of missed payments generally allowed by lenders within certain periods when taken against the loan-to-value ratio of the proposed mortgage, relating to both unsecured and secured loans.
Please be aware that lenders’ criteria and general priorities within the financial market will shift over time. You should contact an expert adviser to get the most up-to-date perspective on your missed payments and how long it might take for them to lose their effect.
|LTV||Missed in last 3 months||Missed in last 6 months||Missed in last 12 months||Missed in last 24 months||Missed in last 36 months||Missed over 36 months ago|
|Up to 95%||None||Maximum status 2||Maximum status 2||Maximum status 2||Any||Any|
|Up to 90%||None||Maximum status 2||Maximum status 2||Maximum status 2||Any||Any|
|85% or below||Any||Any||Any||Any||Any||Any|
|LTV||Missed in last 3 months||Missed in last 6 months||Missed in last 12 months||Missed in last 24 months||Missed in last 36 months||Missed over 36 months ago|
|Up to 95%||None||Maximum status 1||Maximum status 1||Maximum status 2||Any||Any|
|Up to 90%||None||Maximum status 1||Maximum status 1||Maximum status 2||Any||Any|
|Up to 85%||Maximum status 1||Maximum status 1||Maximum status 1||Any||Any||Any|
|75% or below||Any||Any||Any||Any||Any||Any|
Remember that the level of deposit or amount of equity you already have in an existing mortgage will have an effect on how a lender views your case. It could be that if you are able to put a lot of money on the table, and therefore reduce the loan-to-value ratio of the mortgage you’re applying for, this will counteract the negative impact of the missed payments. It will all be down to your own individual circumstances.
When do Missed Payments come off my credit file?
Credit records actually cover just the previous six-year period from the time of a check, so just like other information on your files and instances of bad credit (excepting the most severe cases), any missed payments will fall outside the scope of a check after that time. Therefore, they should no longer be an issue when lenders come to make a credit check at that point.
However, it’s worth remembering that even during the time that missed payments will remain on your credit file, lenders will be more lenient about them the more historic they are. Generally speaking, after three years you can probably expect to be offered deals at the current normal competitive rates, especially if you have been able to keep a healthy record of credit and borrowing in the intervening period.
If you have settled any missed payments in the past, then it’s worth checking that the information on your credit records is correct and has been amended accordingly. A lender will view a late payment far less severely than a missed payment with amounts still outstanding, so if you do spot an error on your credit report from any of the three main credit reference agencies, make sure to write to them immediately to get it put right. It’s in your interests to have as few missed payments on your file as possible.
Mortgage Rates If I have Missed Payments
Without a doubt, the interest rate charged on your mortgage will be one of the key factors you will be looking at when coming to make a decision on which lender and product to go for. When assessing all your options, if you have an uncomplicated credit record then you’ll have a broad range of providers to choose from, and a lot of the most favourable rates will be open to you. If you unfortunately have one or more missed payments on your files, then your choices will inevitably be reduced, and rates can potentially be a little higher.
How much higher exactly will depend on all the influencing factors around your bad credit and your current finances. With missed payments on your records, lenders will view you as a higher risk, but this could be mitigated somewhat by how much time has passed since the missed payments occurred, whether they were settled at all, how much money was involved and what they missed payments related to – missing payments on your mortgage will matter a lot more than on your phone bill. As well as a higher interest rate being offered, lenders could possibly also request a larger deposit or level of equity than average, or you may choose to supply this yourself to help secure a better deal.
It’s worth bearing in mind that the headline interest rate does not always give the whole picture on what you might be paying for the mortgage over the duration of the loan. You will often find that a product with a lower rate comes with higher costs in other areas – administration fees or early redemption charges, for example – a shorter initial deal period before the rate reverts to a certain percentage above the Bank of England base rate. Mortgages with a higher rate will sometimes include free valuations, cover your solicitor’s fees, have a longer initial period and won’t charge for switching to another deal. Which will work best for you will be down to how much you need to borrow, and for how long.
Remember that as more time passes, the effect of any missed payments on your credit rating will be reduced. You may need to endure a slightly higher interest rate for now, but two, three or four years down the line, as long as you have maintained a healthy credit history, you should be able to either renegotiate a more competitive interest rate with your current lender or remortgage for a more favourable deal elsewhere.
To find out the most favourable interest rates that could be available to you in your current circumstances, contact us today to arrange a free, no-strings initial conversation.
Mortgage Lenders If I Have Missed Payments
With missed payments on your credit records, the chances are that you will find your options for mortgage lenders becoming reduced, and you may even have already been refused by one or two of the high street providers.
How much of an issue you actually have and which lenders you will be able to approach will depend on the nature and context of the missed payments themselves – if they related to a priority debt like your mortgage and were within the last year, then you will almost certainly have a problem with most lenders. If they were on a less-important line of credit, such as a catalogue account or phone bill, and occurred a few years ago, then you might find a few mainstream lenders willing to forgive this lapse, especially if you’ve kept a clean record since.
This said, in general if your credit records feature some missed payments, it’s likely you will have to work with a specialist lender and mortgage broker to obtain the finance you need to purchase your new property. The task then becomes finding the most favourable deal amongst them to meet your needs.
Specialist lenders emerged in response to the more strict criteria of the mainstream providers in the aftermath of the credit crunch in 2008, which saw many would-be homeowners effectively shut out of the market because their credit scores were low or their files contained one or more adverse credit events that may or may not have been particularly severe, or even their own fault. Catering specifically to the needs of people who people who, for a variety of reasons, may not be able to obtain finance elsewhere, specialist lenders take a broader view of your circumstances, place more weight on your current situation and do not make decisions based solely on a numerical credit score or the existence of bad credit items on your records.
Although smaller and lesser-known than high street banks, they are still governed by the same rules and regulations as their mainstream counterparts and your mortgage, and your home, will be completely secure.
Specialist lenders do not advertise to the public and you won’t find them in any online listings or best buy charts. As they prefer to only accept mortgage applications made through a trusted intermediary, you’ll need to enlist the services of an experienced unlimited mortgage broker in order to make an application. This is actually a positive aspect to their business model, as it means the broker will have already vetted the applicant, ensuring that they are a good fit for the lender’s products and vice versa.
If you want to learn more about your options for lenders when applying for a mortgage with a history of missed payments, please get in touch with our team today and arrange a free, no-obligation initial discussion. One of our expert advisers will be able to go over your credit issues, determine exactly which lenders could work well for you and give solid guidance on the best next steps to take.
Missed Payments FAQs
- How many Missed Payments are acceptable to a Mortgage Lender?
- I have Missed a Mortgage Payment - Does It matter?
There is no specific answer to this question, as different lenders adopt differing criteria across the spectrum of the UK mortgages market, and what might be acceptable to one, might not be to another. Their attitude to missed payments will also depend on what debts they related to, with some more serious than others, and the amounts of money involved.
For the sake of this question, and as it relates to your enquiries around finance for a property, let’s look at missed payments on your mortgage instalments, which all lenders will view very negatively. Aside from the debt and the monthly payment amounts being for more significant sums of money, missing mortgage payments is usually a sign that an applicant is currently experiencing more serious financial trouble, as payments on one’s own home are usually the last things to suffer in times of crisis.
At a push, we could say that most lenders will accept maybe one, and a definite maximum of two, missed payments on general credit or loan instalments during the last two or three years, and none if within the last twelve months. After three years have passed, lenders generally become more forgiving, especially if you have had no further issues. But, as mentioned, every lender will have their own conditions, and much will depend on the amounts and exact circumstances.
If you have any missed payments on your credit record, you should try to pay them off so they become ‘late payments’ and bring your balances up to date. Lenders view late payments far less seriously than missed payments. However, if you are behind on your current mortgage payments at the time of applying for a new loan, then it is highly unlikely that any lender will grant you a mortgage
If in doubt, always assume that a missed payment on your mortgage will matter a great deal to a lender. They are in the business of providing finance for people to buy their homes, and if you are unable to meet your current payment obligations on one or more instalments, then they are likely to wonder if you will be just as unreliable with any new mortgage deal they might offer you.
This said, some lenders may be more forgiving than others. If you have simply missed a single mortgage payment for some reason in the recent past – perhaps within the last three months – then some specialist lenders may be willing to consider any mitigating circumstances around this and understand that it was a one-off slip (if this was genuinely the case) rather than the start of a trend of non-payment that will continue. If you did have a good reason for missing the payment, it’s also worth contacting the three main credit reference agencies – Equifax, Experian and TransUnion – to explain the situation. They may put a note by their entries that will be seen by any lenders making a credit check.
Paying off the missed instalment will also make a difference. If you were able to settle the overdue payment and your mortgage is back on track, then you may be in the clear (again, make sure your credit records have been updated to reflect this). If you are still in arrears on your current mortgage scheme, then it is highly unlikely that a lender will offer you a new loan.
Missing a number of mortgage payments can be extremely serious and lead to more severe consequences, including repossession of your home. If you are ever in such financial trouble that your mortgage payments are at risk, you should seek financial advice as soon as possible and contact your lender before the situation gets out of hand. They may be willing to make allowances for a certain period of time.