Mortgage With Defaults

Can I Get a Mortgage With a Default?

When it comes to managing your budget and your monthly bills, missing a payment here and there is not the end of the world – although it is certainly not something we would recommend. The real problems are likely to start when you miss a series of payments, or fail to pay the full amount due over a number of months – usually anything from three to six. At this point you risk being sent a default notice from the creditor(s) in question, which only adds to the stress you are no doubt already under.

What is a Default Notice?

You might be wondering, what is a fault – actually a default – notice. A default notice is a formal letter that must be sent after three to six payments to the same creditor have been missed or have not been paid in full, putting the account in arrears. Sending a formal default at this stage is a legal requirement, but it is not an indication that legal action has commenced.

Default notices can only be issued for debts regulated by the Consumer Credit Act. The notice will set out the situation very clearly and will typically include information about:

The agreement terms you have broken
How much you need to pay to put the account in order
The date this payment should be made by
The consequences if you fail to comply with the request
How long you have to respond to the notice (usually 14 days)

There are immediate consequences associated with a default notice. The creditor can:

Demand the outstanding balance (not just the overdue amount) be paid in full
Pass the debt to a collection agency
Start court action
Start proceedings to repossess any assets that form part of the agreement (for example, a car or a property)

Should you receive a default notice, then it is vital that you respond to it. You might feel like stuffing the letter into a drawer and forgetting about it, but that is only likely to make things worse.

If you can afford to bring the account up to date, then you should do that. If you are able to repay the overdue balance within the timeframe set out in the default notice, you can ask to have the default removed from your credit report. (If you fall into this category, then get a copy of your credit report from the three main credit reference agencies – Experian, Callcredit and Equifax -to make sure it has been removed.)

If you are not able to clear the arrears, get in touch with the creditor and see if you can come to an agreement about how to pay off the balance, or – if you have deliberately withheld payment due to a dispute – make sure their accounts department are aware of the situation.

It is far better to get in touch with them at this stage than to try to pull the situation back out of the fire if they commence legal proceedings against you. If you can avoid having a County Court Judgment (CCJ) registered against your name, then you should.

Mortgage With a Default

Defaults on a credit file are one of the most common reasons for mortgages to be declined but, generally speaking, they are not as damaging as certain other types of adverse credit events, such as Individual Voluntary Arrangements (IVAs) or bankruptcies, for example.

Having said that, the likelihood is that if you have a default on your credit file, your mortgage application will be automatically turned down by the high street banks and building societies. However, as all lenders’ criteria are different, one size certainly does not fit all, and with a specialist broker’s knowledge of the market, a deal with a mainstream lender may still be available. Alternatively, there are still plenty of specialist lenders out there that are willing to consider an application for a bad credit mortgage with defaults.

That does not mean a bad credit mortgage with a default will necessarily be as competitively priced as if your credit record were clean, and you will usually need the assistance of an experienced bad credit mortgage broker to find the very best deal.

There is also still plenty of work that can be done to repair your credit rating. Please refer to our repair your credit rating page for simple tips on what actions to take.

Getting a Mortgage Once the Default Has Been Removed

Once the default has been removed from your record, then providing there are no more adverse credit events and you meet the lender’s criteria, your chances of getting a mortgage improve massively.

It is also possible, however, to obtain a mortgage while there is still a default – or defaults – on your credit record. There are a number of specialist bad credit mortgage lenders out there that will consider your mortgage application even with a default present, and when using a broker such as IMC Mortgage Brokers, with our extensive knowledge of the market, it may even be possible to obtain your finance from a mainstream provider.

Whatever your credit status, there are arguably two main elements to be considered when it comes to a lender deciding what offer they should make to you. They are affordability and the loan-to-value (LTV) ratio i.e. the size of the deposit or amount of equity needed.

How Much Can I Borrow with a Default?

To assess mortgage affordability – in other words, your ability to repay what you borrow – lenders look at your income and your outgoings. As well as typically wanting to know how much your bills cost, they will also want to know how else you spend your money – for example, how much you spend on groceries, childcare where applicable, and so on. To assess this they will look at your bank statements. Usually, you will be asked to provide statements for the previous three months, although in some cases they may ask to see statements for up to six months.

The lender will decide how much they are prepared to offer based on their affordability assessment. (This may be more or less than you would ideally like to borrow.)

Someone with an unblemished credit record who is comfortably paying their bills and other living expenses each month might expect to be able to borrow up to five times the amount of their income.

Anyone with adverse credit events recorded on their record will be considered a greater risk, especially if they are also carrying substantial debt, and so will usually be unable to borrow as much. Again, the age of the adverse event has a bearing on the decision, and the longer ago it happened, the better your chances of borrowing a greater amount.

As a general rule of thumb, those with exemplary credit records can borrow more than those with adverse events on their credit record; and those with few other financial commitments can borrow more than those with heavy financial commitments.

Getting a Mortgage With Defaults

If, in addition to one or more defaults on your credit report, you also have other adverse credit issues, then getting a mortgage will be that bit more difficult. What the other issues are, and when they occurred, will be important factors in the decision-making process.

Considering some of the adverse credit events you might have on your record, IVA and bankruptcy will have the greatest impact, whereas late payments on unsecured debts is likely to have the least. Mortgage arrears and CCJs sit somewhere in the middle.

A word to the wise – always try to avoid taking out payday loans, as they are judged to be a warning sign that you cannot manage your finances month to month.

Can I Remortgage With Defaults?

Depending on your particular circumstances, it should still be possible to remortgage your property with defaults on your credit record, as it is with a standard mortgage. Much will depend on the size of the previous default, the length of time since the default occurred, whether it was for mortgage payments or for another loan, and whether it was settled. Default notices within the last 18 months will matter most, and if you also have other black marks on your credit record, this might make the process more difficult.

As with other types of adverse credit events, much will depend on your current ability to repay the remortgage, and also what you have done since the default(s) to put your finances on a firmer footing and rebuild your credit score. If, for example, you have shown you are able to competently take care of your finances by regularly repaying credit card bills, keeping up with mortgage payments and not falling behind on any other outgoings for an extended period of time, this will greatly help your case.

Some lenders are more flexible than others when it comes to defaults on your credit history, and there are a number of specialist lenders who will cater to applicants with a bad credit record. However, these lenders only consider applications made via a professional mortgage broker such as ourselves. A quick chat with our advisers at IMC Mortgage Brokers will reveal which providers have products that could meet your needs, and what steps you will need to take next.

MORTGAGE LENDERS THAT ACCEPT DEFAULTS

When looking for a mortgage with defaults showing on your credit history, you might find yourself hitting a brick wall with the options you are able to source yourself. High street lenders are typically cautious where defaults are showing on an applicant’s credit report, and will tend to decline your application. However, some specialist providers have products geared for people in your circumstances and could be willing to offer you a mortgage after taking a wider view of your current financial situation.

It would be impossible to give a list here of lenders that accept applicants with default notices on their record, but it would likely be a number of specialist lenders whose names and products you will not normally find advertised on the high street or online. These lenders typically don’t take applications directly from people looking for a mortgage, and tend to only work through trusted professional mortgage brokers such as ourselves. Their criteria around dealing with defaults will vary from one lender to the next, and some may even accept defaults within the last twelve months.

As unlimited specialist bad credit mortgage brokers, we have access to over 12,000 mortgage products from more than 90 lenders, and can speak to anyone when it comes to looking for the right lender and product to meet your mortgage needs. With our insights and knowledge into current deals, as well as great relationships with both the high street and specialist lenders, we can offer you the best chance of securing a mortgage with a default on your record.

Bad credit mortgage broker

Your best chance of finding a bad credit mortgage with defaults is to contact a specialist broker. At IMC Mortgage Brokers, we have a team of specialist brokers who understand the market inside out and know exactly where to turn to find the best deals on bad credit mortgages with defaults. With unlimited access to the market and exclusive rates that are not available on the high street, we can help you fully consider your options. We can also help you with your mortgage application and provide personalised mortgage advice.

Get in touch today for free initial advice and no-obligation quotes from our team of experienced bad credit brokers.

- Do I need to satisfy my defaults before I can have a mortgage?
Generally speaking, satisfying a default will boost your chances of being accepted for credit. However, when it comes to mortgage applications, the high street lenders most likely won’t make an offer whether a default is settled or not. In the case of a specialist mortgage lender, they are likely to be more concerned with the date of the default than whether it was settled. It is your recent credit history that carries the most weight.

Defaults stay on your credit record for six years, and the older they are, the less impact they will have. If a default is (say) four or five years old and unsatisfied it will have a less detrimental effect than if it’s a year old, whether satisfied or not.
- What is the maximum size default allowable?
If the default is over a year old, the size generally doesn’t matter. Within twelve months, lenders will commonly set a maximum amount of £1,500.

With regard to the number of defaults lenders will accept, up to two years it’s commonly two; after that, again, it generally doesn’t matter.

So, if you have any defaults on your record, it is those within the last two years – and in particular the last year – that have the biggest impact.
- How do I pay off my default?
If you fall into arrears on an account, the lender will at some stage close it and a default will be registered against your credit record. As well as the missed payments showing on your credit report, the default will also show.

You may receive a default notice, which will set out how much you owe and when you need to pay it by. If you can pay, do so at this stage.

If you can clear the outstanding amount within the terms of the default notice, you can request that the default be removed from your credit record. (The late payments will remain.)

If you can’t pay, get in touch with the creditor. It’s possible you will be able to arrange to make smaller regular payments to clear the debt.

It’s possible no default notice will be sent, so it’s up to you to keep on top of things. If you do fall into arrears, speak to the creditor to organise repayment and check your credit report for any defaults that may be registered.
- What is a default?
A default occurs when you have missed – or haven’t paid in full – a number of payments to the same creditor, meaning your account is closed.

A default notice is a formal letter sent out when an account is in arrears. If the debt is regulated by the Consumer Credit Act, then sending the letter is a legal requirement, but it doesn’t mean that legal action has begun. If the debt isn’t regulated by the Consumer Credit Act, then there is no requirement for the creditor to send a notice.

Either way, if you fall into arrears and your account is closed, a default will be registered on your credit report.
- Why has the same default been registered on my report twice?
If the same default shows twice on your credit report, it is an indication that the debt has been sold on to a debt collection agency. If this happens, then the first default should be marked as “satisfied”. The debt collector will re-register the default, but it should be flagged as “debt assigned”. This tells anyone checking your report what has happened.

Even though the default is entered on your credit report a second time, the date it expires will not change; it stays on your report for six years from the initial entry, at which point both the entries should be removed.
- Do you take the default balances into consideration when calculating how much I can borrow?
If a lender is willing to offer a mortgage, then how much they will offer depends on your ability to repay. This is assessed using the affordability test, which will involve them looking at your income versus outgoings.

Generally speaking, if you have a good credit history, little or no debt and no problem paying the bills, you can expect to potentially be able to borrow up to five times your income.

If you have adverse credit events, such as defaults, and especially if you also have other financial commitments, you will likely be able to borrow less. You might also be expected to put down a bigger deposit.

As is so often the case, a lot of this comes down to how long ago the default happened, and therefore the risk the lender believes they are taking.
- Can I get a mortgage with a default?
It may be possible to get a mortgage with a default, but many contributing factors will be taken into consideration such as the amount of the default and the date the default was registered. Other factors including the amount of deposit or equity can also have a relevance to if you can get a mortgage and who with.
- Are there any mortgage lenders who accept defaults?
Many lenders have criteria that allow for defaults dependant on numerous factors and circumstances. These could include, but are not limited to the date of the default and how much it was for, together with the overall circumstances of the applicant.
- How bad is a default on your credit history?
This will be determined by what it is you are looking at in respect of its impact. In regard to a loan or mortgage, it is likely to have an influence but will not necessarily stop you being approved. The date and amount of the default will be taken into consideration as will all other aspects of your situation.
- How long does a default stay on my credit file?
A default will remain on your credit file six years from the registered date. However, in certain circumstances, the debt may be sold on to a collection agency that could add a subsequent default to your file at the point they took over the debt.

Generally speaking, satisfying a default will boost your chances of being accepted for credit. However, when it comes to mortgage applications, the high street lenders most likely won’t make an offer whether a default is settled or not. In the case of a specialist mortgage lender, they are likely to be more concerned with the date of the default than whether it was settled. It is your recent credit history that carries the most weight.

Defaults stay on your credit record for six years, and the older they are, the less impact they will have. If a default is (say) four or five years old and unsatisfied it will have a less detrimental effect than if it’s a year old, whether satisfied or not.

If the default is over a year old, the size generally doesn’t matter. Within twelve months, lenders will commonly set a maximum amount of £1,500.

With regard to the number of defaults lenders will accept, up to two years it’s commonly two; after that, again, it generally doesn’t matter.

So, if you have any defaults on your record, it is those within the last two years – and in particular the last year – that have the biggest impact.

If you fall into arrears on an account, the lender will at some stage close it and a default will be registered against your credit record. As well as the missed payments showing on your credit report, the default will also show.

You may receive a default notice, which will set out how much you owe and when you need to pay it by. If you can pay, do so at this stage.

If you can clear the outstanding amount within the terms of the default notice, you can request that the default be removed from your credit record. (The late payments will remain.)

If you can’t pay, get in touch with the creditor. It’s possible you will be able to arrange to make smaller regular payments to clear the debt.

It’s possible no default notice will be sent, so it’s up to you to keep on top of things. If you do fall into arrears, speak to the creditor to organise repayment and check your credit report for any defaults that may be registered.

A default occurs when you have missed – or haven’t paid in full – a number of payments to the same creditor, meaning your account is closed.

A default notice is a formal letter sent out when an account is in arrears. If the debt is regulated by the Consumer Credit Act, then sending the letter is a legal requirement, but it doesn’t mean that legal action has begun. If the debt isn’t regulated by the Consumer Credit Act, then there is no requirement for the creditor to send a notice.

Either way, if you fall into arrears and your account is closed, a default will be registered on your credit report.

If the same default shows twice on your credit report, it is an indication that the debt has been sold on to a debt collection agency. If this happens, then the first default should be marked as “satisfied”. The debt collector will re-register the default, but it should be flagged as “debt assigned”. This tells anyone checking your report what has happened.

Even though the default is entered on your credit report a second time, the date it expires will not change; it stays on your report for six years from the initial entry, at which point both the entries should be removed.

If a lender is willing to offer a mortgage, then how much they will offer depends on your ability to repay. This is assessed using the affordability test, which will involve them looking at your income versus outgoings.

Generally speaking, if you have a good credit history, little or no debt and no problem paying the bills, you can expect to potentially be able to borrow up to five times your income.

If you have adverse credit events, such as defaults, and especially if you also have other financial commitments, you will likely be able to borrow less. You might also be expected to put down a bigger deposit.

As is so often the case, a lot of this comes down to how long ago the default happened, and therefore the risk the lender believes they are taking.

It may be possible to get a mortgage with a default, but many contributing factors will be taken into consideration such as the amount of the default and the date the default was registered. Other factors including the amount of deposit or equity can also have a relevance to if you can get a mortgage and who with.

Many lenders have criteria that allow for defaults dependant on numerous factors and circumstances. These could include, but are not limited to the date of the default and how much it was for, together with the overall circumstances of the applicant.

This will be determined by what it is you are looking at in respect of its impact. In regard to a loan or mortgage, it is likely to have an influence but will not necessarily stop you being approved. The date and amount of the default will be taken into consideration as will all other aspects of your situation.

A default will remain on your credit file six years from the registered date. However, in certain circumstances, the debt may be sold on to a collection agency that could add a subsequent default to your file at the point they took over the debt.