Can I get a mortgage with late payments?
Yes, it’s entirely possible to get a mortgage after a string of late payments. Although, it will always likely be more difficult to do so compared to if you had a clean credit history.
The level of arrears, frequency of occurrences, and what they relate to all have an impact on a lender’s view of your creditworthiness. As at the end of the day, a lender wants to minimise their risk of lending.
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How late payments affect your mortgage application
As mentioned above, lenders will look at the type of late payment, how many times they occurred and when they occurred. This is to help them establish how much of a risk you are to lend to.
Not all late payments across the board carry the same weight. For example, a late payment on a phone bill or finance on a domestic item carry less negative impact. These debts are usually for lesser amounts, therefore are considered ‘non-priority’.
However, if you consistently make late payments on your mortgage, this will be viewed much more seriously. Payments on your home are usually the last thing to suffer in times of financial trouble. So, for a lender, this could be a sign of further outstanding debts or poor money-management.
The length of time that has passed since the late payments occurred will also matter, as well as if they were settled or not. If they are historic (three or more years ago) and all amounts due were paid off, then this will not be too much of an issue. Like with any bad credit event, late payments are cleared from your file after six years.
If they are recent (within the last 12 months), quite frequent, or with sums still outstanding, then this will show you are currently struggling financially. Therefore, it 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 application. Any lender will decide based on your whole situation, not just on your history of late payments.
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Using a bad credit mortgage broker
The Mortgage Centres has a specialist bad credit mortgage team, who are able to help people with missed payments.
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. This means that you can find out all the options that are open to you and get the proper advice you need to consider them.
Our experienced advisors 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.
How to get a mortgage with late payments
We have helped many people with late payments on their credit file get a mortgage. So, how can you prepare to ensure you put yourself in the best position for success.
Well, here are a few steps you can take yourself:
You’ll first need to contact each of the three main UK credit reference agencies –TransUnion, Equifax and Experian. From here you can request copies of your credit report. Each agency reports on you differently, so it’s important to go to all three.
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 be registered on the electoral roll, as this is important for identification verification, and can make a big difference to your credit score.
If you see missed payments on your record that were simple oversights at the time, 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, then you should contact the agencies. You can ask them if they can add a note to your record explaining the circumstances.
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. Setting up direct debits is a great idea to maintain this.
While we would never advise people to go further into debt, using a credit card can help to improve your credit. You can use one for your household spending, but just make sure you pay off the full sum and don’t build up more debt.
If you have bad credit, 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 poor credit borrowers may be offered a mortgage on an 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.
With late or missed payments showing up on your credit history, high-street lenders will probably decline your mortgage application.
An experienced mortgage broker with in-depth knowledge of the bad credit lending market will be able to save you wasted time. They can show you the best providers to approach and what kind of deals you might be able to get.
If you’re thinking of getting a mortgage, but you have bad credit, get in touch today!
Mortgages with Late Payments FAQs
When you are making a new mortgage application, the older the instances of missed or late payment, the better.
Any bad credit issue from the last six years a lender will be able to see. After six years any credit issue will be removed from your file.
There isn’t a set amount of time that lenders state, instead you will be looked at on a case-by-case basis.
For a mortgage, this will not usually be classed as a missed payment, but a late payment.
This is because 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. This shows it was made in the first month after it was due.
Fortunately, if you paid three days late on a domestic bill, this might not even show up on your credit report.
Your credit scores is based on any credit events from the last six years. Late payments may affect your score, depending on factors like timescales and the number of late payments.
Remember, different credit agencies and lenders may have different methods for determining credit scores.
Being in a mortgage arrangement where you are paying less than initially agreed can negatively affect your chances of getting a second mortgage.
It is recommended to improve your credit history before applying for a second mortgage. Some lenders may still consider your application, but they will closely evaluate your situation.
The truth is that lenders don’t have a maximum amount they impose.
Instead, it depends on the level and age of the events. A couple of late payments on your credit report that occurred several years ago will have far less impact than a number of late or missed payments in the past two years.
Phil Scott
Director
About the author
Phil has worked in the financial services industry since 1992, having started with a large insurance company. He went self employed in 1996 as an Independent Financial Adviser before setting up his first company, Needham Market Home Financial in 1999.
After four years, he decided to concentrate solely on mortgages and related insurances, and The Mortgage Centres was born. Since then, Phil has been influential in the opening of several new offices as the business continues to grow.
Qualifications
Financial Planning Certificate: 1,2 & 3
Year Attained: 1992
Certificate in Mortgage Advice and Practice (CEMAP)
Year Attained: 2001
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