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Applying for a Mortgage with Defaults on Your Credit History

Applying for a Mortgage with Defaults on Your Credit History

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Many people have a default on their credit file, and even though many high street lenders are unable to offer a mortgage to applicants with bad credit, specialist lenders are on hand to help.

The Revolution team has put together our guide to securing mortgage lending with a default. If you need any personal support or help with your mortgage requirements, give our friendly team a call on 0330 304 3040 or send us a message to info@revolutionbrokers.co.uk.

Can I Apply for a Mortgage if I Have Defaults?

You can, yes. Revolution works with a vast network of specialist lenders who can offer mortgages to applicants with satisfied default.

This process will also consider other circumstances, and lenders will come to a decision about whether they can lend to you. Competitive mortgage rates are still available to applicants with adverse credit history, provided you work with an expert bad credit broker who can direct your application to the right lenders.

What Is the Best Way to Get a Mortgage with Defaults?

The best way to work out whom to apply to for a mortgage with defaults is to work with your broker through each of the following steps.

This establishes your exact circumstances and steers your application most advantageously.

Check Your Credit Reports

If you have defaults on your credit file, it is essential to access your reports and assess them for any inaccuracies or errors, which you can dispute.

Most mortgage lenders use one of, or all of, Experian, Equifax and TransUnion, so it is wise to access your credit file from each of these leading credit referencing agencies.

Some lenders have stringent criteria when it comes to lending to applicants with defaults. Still, because each credit referencing agency is different and uses their own scoring criteria, it is worth looking into all three to ensure each is up to date and accurate.

Assess Your Credit File and Mortgage Criteria

When you have your credit reports, you should share them with your broker to save time. Our team can work with you to assess the most severe issues, resolve errors, and dispute inaccuracies.

This is a vital part of the process as it enables our bad credit team to assess whether there is one default or many, how recently these occurred, and whether there are other adverse credit issues to take into consideration.

Applying for a Mortgage After Defaults

The best way to start the application process is to work with an experienced bad credit broker who can help you choose which lenders to apply to and compile your application documentation.

Lender Eligibility Criteria for Applicants With Default Credit History

Lenders all have their own eligibility criteria and may take a very different view to lending to applications with a default.

You can apply for a mortgage up to 95% LTV through the Help to Buy scheme, even if you have a default on your file, which is a lifeline for first-time buyers with a small deposit and credit issues.

Here are indicative terms as a rough idea of what eligibility criteria often apply:

 

Max LTV ratio

Default registration

Date paid off

Other issues

Appx interest rates

Lender 1

95%

36 months ago +

36 months ago+

1-2 missed payments in last 24-months acceptable

5-5.5%

Lender 2

90%

24 months ago +

Doesn't have to be paid off

If satisfied over 12 months ago, can be more recent. May be ignored if the total value is under £300 & has since been repaid.

4%

Lender 3

85%

3 in the last 24 months

Doesn't have to be paid off

3-4 missed payments in the last 24 months may be acceptable

4-5.5%

Lender 4

80%

Zero for the last 48 months

Doesn't have to be paid off

 

3%

Lender 5

75%

Zero in the last six months, with 2 in the last 12 months

Doesn't have to be paid off

 

4%

Please note that these approximate interest rates are a very rough indication, and solely an illustration of the difference between rates in different scenarios.

What Does a Satisfied Default Mean?

When a default shows as satisfied, it means it has been paid off, and your debts brought up to date. If you can repay this quicker, you should do so as it will instantly improve your credit history.

A satisfied debt demonstrates that your finances are now in a better position than when the default was registered.

What Impact Does a Satisfied Default Have on My Mortgage Application?

Having a satisfied default on your credit file is less severe than one that is unsatisfied. It shows that the debt has since been repaid, so it usually falls into a less serious risk category.

However, some lenders are less interested in whether a default has been satisfied as they are in assessing your eligibility and affordability. The factors are around how old the default is, rather than whether it has since been satisfied.

Can The Type of Default on My Credit File Impact My Mortgage Application?

It can, yes. Defaults will always be assessed to determine how serious it is.

For example, a default on a mobile phone account isn't likely to be considered very serious. However, a default on a secured loan or mortgage will have more impact than any other type of default.

Flexibility all depends on the lenders. Some will refuse any application with any default, regardless of why or when it happened. Others will offer more flexibility and be willing to consider a wide range of defaults.

Other Credit Issues & Mortgage Eligibility

The more credit issues you have, the more difficult it is to get a mortgage.

If you have defaults as well as other problems, it is likely that you'll be offered higher fees and rates, and need a higher deposit.

In this scenario, you should always consult an independent broker to ensure you get the best deals available.

Can I Apply for a Mortgage If I Have Outstanding Debts?

Applying for a mortgage with credit issues depends on what sort of problems you have had. The less severe your debts, the easier it is to find competitive lending.

Bad credit lenders can support applications in almost any scenario, but the adverse credit issues that will come into play include, in descending order of the most severe:

  • Existing IVA
  • Discharged bankruptcy
  • Property repossession
  • Satisfied IVA
  • Debt Management Plans
  • Mortgage arrears
  • CCJs
  • Defaults
  • Late payments on unsecured accounts
  • Credit card debt
  • Low credit score

How Much Can I Apply for Mortgage For If I Have Defaults?

Most lenders will make a mortgage offer based on a multiple of your salary - but this depends on whether you meet the affordability criteria to start with. The requirements may be stricter for applicants with a default.

Specialist lenders will usually work with an underwriter to assess the risk of your application before making an offer.

Typically, applicants with clean credit can borrow up to 5 x their annual income, and sometimes even higher. If you have a default on your record, this multiple is likely to be lower, but some lenders will offer around 4 x your salary.

The more severe the defaults and the more recent they are, the less a lender is likely to be able to lend.

If you are self-employed, you will need to provide copies of accounts to demonstrate your income, usually for the last three years. Other lenders will consider self-employed applicants with a default provided they have been in business for one year.

Many mainstream lenders will require borrowers to have been in stable employment with the same employer for at least 12 months.

Which Mortgage Lenders Will Accept Applicants With a Default?

Lots of lenders will consider a mortgage application with a default, but the terms and rates offered will vary significantly between them.

Some of these lenders include mainstream banks and highstreet providers, such as:

  • Lloyds
  • RBS
  • Halifax
  • NatWest
  • Virgin Money
  • Santander
  • TBS
  • Nationwide
  • HSBC
  • Kensington

each of these lenders will have very different criteria and will assess your application differently. It is therefore essential to work with an independent broker who will know which lenders to apply to, who will offer you the best rates, and which lenders have the most attractive mortgage offers for applicants with defaults.

Revolution Brokers are not only a specialist mortgage broker, but also have years of experience in dealing with adverse credit mortgages. We are, therefore, perfectly positioned to help you find the best lending for your circumstances.

It is never wise to apply to multiple mortgage lenders because some will automatically reject your application if there is a default on your credit file.

Having hard searches leaves a mark on your credit file, and so applying to the wrong lenders could make your credit history worse.

How Long After a Default Can I Apply For a Mortgage?

It all depends on which lenders you apply to. Some specialist mortgage providers will consider applications from three months of a default being registered.

This varies significantly, and each lender will want to check how much the default was for, how many times it has happened, and how long ago the default was registered.

As an indication, these are some example lenders, and when they consider lending to an applicant with a default:

Mortgage provider

Time since default

Maximum defaults

Maximum value

Precise Mortgages

12 months

1

£1,500

Kensington Mortgages

12-24 months

N/A

£1,500

Buckinghamshire Building Society

24-36 months

N/A

£250 for a 95% LTV, for higher default value applicants must be employed, and not be a first-time buyer.

NB these rates are indicative and may change regularly. For up to date rates and information about applying for a mortgage with defaults, give the Revolution team a call.

Is It Possible To Remove a Default From My Credit File?

Defaults remain on your credit file usually for six years, and it is not possible to have these removed, even when they have been paid.

However, when this has been satisfied, this will be updated, which might make it more acceptable to more lenders.

Expert Support with Mortgage Applications with a Default

If you have a default on your credit file and need professional support with your mortgage application, the best solution is to work with an experienced broker such as the Revolution team.

Contact us today on 0330 304 3040 or send us a message to info@revolutionbrokers.co.uk and we will get the ball rolling.

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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