Can I get a Mortgage with a Default?
Yes, it is possible to get a mortgage with a default showing on your credit record. A lot depends on other contributing factors such as:
- The amount of the default.
- When it was registered.
- How big a deposit you can put down.
- Your recent borrowing behaviour.
After three to six months, your creditors will send you warning letters and then a default notice, which may only add to the stress you are already experiencing. Here, we explore how a bad credit score due to default could affect your mortgage application.
- What is a Default Notice?
- Bad Credit mortgage calculator
- How long do defaults stay on your credit file?
- How long after a default can I get a mortgage?
- How much can I borrow with a mortgage if I have a default?
- How much deposit will you need?
- Mortgage lenders that accept defaults
- Can I remortgage with defaults?
- Using a mortgage broker if you have a default
- FAQs: How a default will affect your mortgage application
Do you qualify for a mortgage with a default?
No credit checks & only takes minutes!
Fill out our quick and easy Bad Credit calculator below. We only require a few details to see how much you may be able to borrow.
What is a Default Notice?
A default notice is a formal letter or notice from a creditor or lender. They must send you this after you have missed 3-6 payments, or when you have repeatedly failed to pay the outstanding amount in full.
It is a legal requirement for this letter to be sent, but it does not indicate that legal proceedings have started.
Creditors can only send default notices in regard to debts regulated by the Consumer Credit Act. The notice will set out all information very clearly, including:
- Which agreement terms you have broken.
- The amount you owe to put the account in order.
- The date by which you should make payment.
- What consequences will follow if you fail to comply.
- The period of time you have to respond (usually 14 days).
Your Bad Credit Situation
Different bad credit situations need different mortgage solutions. We approach mortgages for your individual needs.
Loans with Bad Credit
If you’re looking to get a secured loan or bridging loan with bad credit, you may face some hurdles. We can offer you the best advice for your situation.
Mortgage Affordability
Your affordability will always be assessed when it comes to mortgages. Read our guides to help you prepare for your next steps.
- What mortgage can I get on my salary?
- What stops you from getting a mortgage
- Can I get a low income mortgage?
- What to do if you can't afford a mortgage
- What is the longest mortgage term in the UK?
- A guide to bank statements for mortgage applications
- Obtaining a Joint Borrower, Sole Proprietor Mortgage
- Try the mortgage affordability calculator
How long do defaults stay on your credit file?
A default will stay on your credit report for six years after it was registered. A ‘satisfied’ default will still stay on your report for six years [1].
After that, it falls outside the scope of the report. Watch out for debts sold on to debt collection agencies, where they may re-register the default as a new debt, so the same debt may remain on your report for longer.
You can have a default removed from your credit report by paying the amount on time after receiving the notice. If you are able to do so, we recommend you pay the outstanding balance.
The late payment will still show on your report. If you have problems paying, you should contact the creditor and ask if you can clear it in instalments.
Tip: If you do this, contact the three main credit reference agencies in the UK. Request a copy of your credit report from each agency to confirm that it has been done (Experian, TransUnion and Equifax).
Your chances of securing a mortgage will improve greatly once the default notice has been removed from your record. This is provided that you have no further adverse credit events and meet the lender’s criteria.
To unlock a competitive product, you will still need to have a good deposit amount, a well kept recent credit history, and enough income to support your mortgage payments.
What if my default is ‘satisfied’?
Sometimes, lenders prioritise the time passed since the default rather than whether it was paid off or not. Although, satisfying your default will still present you in a good light to lenders.
An experienced broker will know which lenders are best to talk to according to your circumstances. So, if you have had a default and are looking to get a mortgage, why not reach out today?
Before applying for a mortgage after having defaults, there are things you can do in order to maximise your chances of having a successful application.
- Improving your recent credit – taking steps to improve your credit is a great way to show lenders you have taken control over your finances and you are now a more responsible borrower.
- Provide a larger-than-average deposit –saving up that extra bit of deposit can actually save you money in the long run, because if you are able to put down more money, lenders will see you as less risky. On top of this, you can sometimes unlock lower interest rates, in turn saving you money in mortgage payments over the long-term.
- Consult the services of a broker – there are plenty of reasons in why using a broker can boost your chances of success. This includes:
- Knowledge of and access to suitable lenders that specialise in bad credit.
- They can suggest potential ‘weak areas’ in your application and help you fix them.
- Brokers can use their expertise to consult with lenders to ensure you obtain the most favourable deal based on your situation
How long after a default can I get a mortgage?
It might be possible within a year, depending on the nature of the default. Although, the longer you wait, the better your chances of obtaining a competitive mortgage. After six years, it becomes easier to apply for mortgages, loans, and to see bigger improvements in your credit rating.
A lender may decline a mortgage application if there are default notices on your credit report. However, defaults do not have as much of a negative impact as things like a bankruptcy or an IVA.
If you do have a recent default on your file, it is likely that high street lenders will turn you down. This does not mean all is lost though, as specialist advisors have access to lenders who specialise in bad credit applications.
These specialist lenders will take a wider approach to your circumstances and will be much more understanding of individuals with bad credit, although many of these lenders aren’t directly accessible to the general public. Instead, you will need to work with a mortgage broker who already has a relationship with them.
How much can I borrow with a mortgage if I have a default?
Lenders will consider a range of factors, including all your incomings and outgoings when deciding whether to offer you a mortgage and how much. As well as your salary, they will want to assess how much you need to budget for:
- Your household bills,
- Groceries,
- Car finance,
- Childcare,
- Commuting, etc.
Typically, they will need to look at your bank statements to get an idea on this. They will usually request statements from the last 3-6 months to get an idea of idea of your regular and more recent payments. Based on this assessment, they will then decide how much they are willing to offer.
Someone applying with good credit, paying monthly outgoings without issue, could expect to borrow up to five times their annual income. Applicants who may have endured financial issues in the past will be considered a greater risk.
Therefore, they will typically not be able to borrow as much, especially if they are carrying significant debt. Keep in mind that the more time that has passed since the bad credit issue(s), the more favourable the amount you will be able to borrow.
Are the default balances taken into consideration when calculating how much I can borrow?
A key part of the mortgage application process is the affordability assessment, when the lender will look at your current liabilities compared to your income and gauge what you will be able to pay monthly for your mortgage.
Their decision will also be influenced by the number of defaults and their age. If you have a number of defaults, as well as other current financial commitments, it’s likely they will offer you less and you will be asked to provide a larger deposit.
As ever, lenders will consider how long ago various defaults happened, what has changed since then, and take a view on the risk they are taking now.
How much deposit will you need?
Typically, most borrowers need to provide a 10% deposit when getting a mortgage for a property. However, in certain cases, you may only need to pay 5% if you meet specific requirements, such as having a good credit history.
If your defaults are over three years old, you will likely be able to access similar rates to this providing your recent credit is in a good position and your proven income is able to support the monthly payments.
However, if your defaults were over one year ago, then you will likely be asked for a 15% deposit. This may then drop to 10% if the defaults are over two years old.
Different lenders have different criteria for mortgages with a default, and the size of the default matters too. To know what options are available for your situation, speaking to an expert can be a great idea! So, why not reach out today and one of our experts can discuss your situation over a free initial consultation?
While your deposit is usually the main cost involved with getting a mortgage, there are other costs to keep in mind and budget for too.
You’ll be pleased to know that just because you have bad credit, it doesn’t mean there’s a long list of additional costs involved when setting up a mortgage. Instead, there are extra steps that you might need to take which can incur additional costs. For example, costs to improve your credit or fees charged for using the services of a specialist mortgage broker.
One additional cost that usually comes with bad credit mortgages is the cost from the interest rate you are charged. This is because you are seen as a risky borrower if you have any type of bad credit history. In response to this, a lender will increase your rate to cover themselves if you were unable to meet payments.
How severe your credit event(s) was and the time that has passed since will also play a part in the rate you are offered. For example, if you had received a default in the past year, it would carry much more weight than a few missed payments on a phone bill three years ago.
Mortgage lenders that accept defaults
When applying for a mortgage with a recent default, it’s likely you’ll need to work with a specialist lender. Specialist lenders cater to people who have experienced problems in the past and are far more flexible in their approach.
The criteria around dealing with defaults varies from lender to lender, some even accept defaults within the last 12 months.
As previously mentioned, these specialist lenders do not advertise their services to the public. Therefore, they tend to only accept mortgage applications made through trusted intermediaries like us.
If your default has been satisfied for several years and your recent credit has improved, then it’s likely you will be able to access more mainstream lenders. Getting an expert opinion on your circumstances before committing to a lender can be key, so keep this in mind before you apply.
Can I remortgage with defaults?
Yes, it is possible for you to remortgage with defaults. The process for remortgaging is very similar to that of arranging your standard mortgage. This means that the same kind of criteria will apply.
Some lenders will understand your wider circumstances and not simply judge you on your default alone. Much may depend on the exact nature of the default:
- the amount of money involved,
- the type of loan or line of credit it was in connection with,
- and sometimes, which lending company.
Remortgaging within the same company group you defaulted with, will likely result in your application being declined. It’s best to use a specialist lender for a remortgage if you have a default.
The time since the credit default happened affects how a lender sees the default. Problems that occurred in the past year are taken more seriously than those from three or four years ago.
The longer you wait after a default, the more opportunity you will have to improve your credit score. Different lenders have different criteria, and some will consider your remortgage application with a relatively recent default.
Using a mortgage broker if you have a default
Unlimited specialist mortgage brokers like us have access to the whole market and exclusive interest rates from lenders not found on the high street. You’ll be able to:
- fully consider your options,
- get personalised mortgage advice from someone who completely understands your situation,
- and even get assistance with your mortgage application.
Your best chance of finding a bad credit mortgage with defaults is to contact a specialist broker. At The Mortgage Centres, our team of specialists know the market inside out. We can turn to exactly the right providers to get the best deals for mortgages with defaults.
Get in touch today to set up your free initial consultation and get a no-obligation quote.
FAQs: How a default will affect your mortgage application
The impact a default has on your credit history will depend on the kind of credit facility you are trying to get.
But, in the case of a mortgage, a lender will also consider when the default occurred and how much for, as well as other aspects of your current situation, before deciding.
It may influence the outcome but will not prevent you outright from getting a mortgage.
The key thing to remember here is that it is the defaults in the last year or two that matter most. If the default was within the last year, lenders will generally not want to see anything over £1,500.
If the default is over a year old, lenders are less likely to worry about the amount. Lenders will usually accept two defaults within the last two years, but after that it isn’t critical.
Yes, some defaults are more severe than others. All mortgage lenders will view any defaults on secured loans or home loan payments as very serious. They will factor this into their assessment when deciding to offer you a mortgage.
Defaults on smaller amounts or things like mobile phone or mail order accounts will be viewed in a more relaxed way. Defaults on credit cards or personal loans fall into a middle ground, and leniency varies from lender to lender.
This can happen in cases where your debt has been sold on to a debt collection agency. The original creditor should have marked it as ‘satisfied’, and the debt collector should re-register the default, flagging it as ‘debt assigned’, to show what has happened to anyone checking your credit report.
Interestingly, even if it is re-assigned, the debt only stays on your report for six years from the time it was originally registered, not re-registered, after which it drops off.
References
[1] Experian, Dealing with defaults on your credit report – How long does a default stay on your credit file? (n.d.) – https://www.experian.co.uk/consumer/guides/defaults.html
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
We'll call you…
"*" indicates required fields