Getting a Mortgage with a Default

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Getting a Mortgage with a Default

Is it possible to get a mortgage with a Default?

Yes, it is, however, you will have to apply with a lender that is able to accommodate bad credit. However, this is not necessarily straightforward, as every lender has different criteria in terms of whether or not they will accept Defaults, and under what circumstances.

With any form of bad credit, it’s important to take advice at the outset of your mortgage journey, as it can be difficult to locate a suitable lender by yourself. Some adverse credit mortgage providers actually won’t be accessible unless you go via an intermediary.

Does the type of Default make a difference in mortgage applications?

It absolutely does, yes, as not all lenders that accept Defaults will be willing to do so if they are unsatisfied. There are also a range of other factors that lenders will consider in terms of your Default, including:

  • When it was registered – more recent Defaults can be more problematic
  • How many Defaults you have, and whether there are any other credit issues
  • What type of debt it is – which provider you failed to pay (some lenders are willing to ignore small mobile phone related Defaults due to their prevalence and low severity)
  • How much you owe – the lower the value, the less impact it will have
  • Why it happened – i.e whether you have a reasonable explanation

What is a satisfied Default?

This is when you have repaid the debt in full that led to the Default. It will not be removed from your credit file, however, there will be an ‘S’ placed alongside it, to show prospective creditors that you have resolved the issue.

Can I get a mortgage with outstanding debt?

Some lenders will only look at satisfied Defaults, however, this tends to be more prevalent with high street lenders, who have stricter criteria all around when it comes to bad credit. There are more specialist lenders that will look at a mortgage application if you have unsatisfied debts, it’s just a case of finding the right lender for your circumstances.

What if I have other credit issues as well?

Specialist bad credit lenders will consider all manner of credit issues, however, typically, the more severe the issue, the fewer lenders you’ll have available to you. There is also a compound effect, so whereas one or two credit issues may be acceptable, if you have more than that, or severe issues on top of the Default, such as a DMP (Debt Management Plan), it can be more difficult to find a willing lender.

How much can I borrow if I have Defaults?

It really depends on your overall circumstances and how the lender assesses your application. In some cases, a minor Default that occurred three years ago will have no impact on your borrowing whatsoever.

On the other hand, if you have a large Default that is unsatisfied and occurred within the last six months, even bad credit lenders will exercise more caution and may reduce the Loan to Value of your borrowing. It’s also possible that they will offer you a lower multiple of your income, with the typical loan offered at 4.5 times your income, this could reduce to 4 or even 3.5 times your income if your credit issues are severe. 

How soon after a Default can I get a mortgage?

Again, this will really depend on the lender, the severity of the Default, as well as whether or not it’s satisfied. There are lenders willing to offer you a mortgage within 12 months of a Default, however, you will have significantly more choice of lender, and potentially be able to borrow more, the longer ago it occurred. Often after 3 years, it will no longer be too much of an issue, whether or not it has been satisfied.

How can a Mortgage Broker help?

It can be slightly more difficult to get a mortgage with a Default than if you have completely clean credit, however, it is considered to be one of the less severe types of credit issue, and most lenders will look at older isolated Defaults, especially if they are satisfied. That said, the lenders with the greatest flexibility in this niche tend to be specialist bad credit brokers, which are more easily accessible through a broker.

Here at Mortgages by McAteer, we can help you with all types of bad credit applications, and ensure you find the most appropriate deal for your circumstances, no matter whether you have a single satisfied default or multiple outstanding debts.

Approved by The Openwork Partnership on 21/09/2023