Can You Get a Mortgage With a Default?

A default on your credit file doesn’t have to be a roadblock to getting a mortgage. We could help you clear this path and make your dream move to a new home possible. 

Our team of mortgage experts arranges mortgages for people with defaults all the time. Read on to find out how we could make your mortgage possible when others can’t. 

What is a default?

A default happens when your account with a creditor or lender is closed because you’ve repeatedly missed payments. You can get a default for any amount owed—it could be a few pounds or a few thousand—on any type of credit account with a bank, utility bills, or your mortgage. 

Creditors will usually look to register a default after you’ve missed payments for three to six months, depending on the initial terms agreed upon when you opened the account and all other attempts to reclaim the money have failed. 

A default notice is sent as a final notification before your account is closed and is basically your last chance to repay the outstanding balance before further action is taken. 

How long does a default stay on your credit file?

A default stays on your credit file for six years from when it was first issued, regardless of whether it’s been satisfied (meaning the outstanding debt has been repaid) or unsatisfied. Once the default’s removed, it can’t be re-registered even if the money owed hasn’t been paid back. 

This doesn’t mean you have to wait six years before you can apply for a mortgage. Specialist lenders will still consider applicants with credit defaults - satisfied or unsatisfied. 

In fact, there’s nothing stopping you from applying for a mortgage as soon as you receive a default. But, the longer your default has been recorded, the better chance you have of getting the mortgage you need. 

Can you get a mortgage with a default?

Yes, it’s possible. Defaults are a common reason for declining a mortgage application, particularly by high-street lenders. But they aren’t the most severe form of bad credit you can have, and a number of specialist mortgage lenders will accept applicants with defaults. 

Most high-street lenders have stricter guidelines and, as a result, are more likely to decline a mortgage application with defaults automatically. However, a specialist lender will take a more considered view, looking at each application on a case-by-case basis before deciding. 

For defaults, this will involve looking in more detail at the following factors:

• When the default was first registered

• Whether the default is satisfied or unsatisfied

• How much the default debt was for

• The type of default

• How many defaults you have

• Why the default occurred

If you have a default registered on your Credit Report, rather than trying to apply directly with a mortgage lender, it’s wiser first to seek the help of a mortgage broker with the proper knowledge in this area. 

Make an enquiry, and one of our Mortgage Experts will contact you to better understand your situation and help determine which mortgage lenders could be best placed to help. 

Are some defaults more severe than others? 

Some mortgage lenders will simply take a blanket view that all types of defaults are bad. But most will look in more detail at the type of credit you’ve defaulted on, when it happened, and the amount of debt involved. 

So, for example, a mortgage default registered in the last six months with an unpaid debt running into thousands of pounds would be seen as more severe than a default for a mobile phone bill from three years ago of less than, say, £300.  

This is exactly why speaking to a mortgage broker first is such a smart move. They would know how each lender assesses applicants with different types of defaults, saving you a lot of time by recommending those lenders more open to helping with your situation. 

How can a default affect your chances of getting a mortgage?

Your chances of getting a mortgage with a default will largely depend on when it was registered, the size of the debt, how many you have, and whether it’s satisfied or unsatisfied. This information is important because it will determine the number of mortgage lenders available to you. 

For example, more mortgage lenders will accept a default for less than £200 registered over three years ago than one for over £1,000 received in the last six months. 

Every mortgage lender will assess each of these factors against their eligibility criteria. Here’s how they could affect your application:

• When the default was first registered. Most specialist mortgage lenders can potentially ignore any satisfied default registered over three years ago, even though it will still show on your credit file if it's less than six years old. Some can even consider certain defaults registered in the last three months. The older your default is, the better your chance of getting a mortgage. 

• Whether the default is satisfied or unsatisfied. A satisfied default will attract more mortgage lenders than one that’s unsatisfied (meaning the debt has not been fully repaid). Some mortgage lenders will still consider applicants with unsatisfied defaults, usually depending on their value and age. 

• How much the default debt was for. Most high street lenders will place a maximum value on all defaults, and anything over that amount will be declined. Specialist lenders tend to be more open-minded and rarely place an absolute maximum value on a default over two years old. They can also potentially ignore certain defaults (mobile phone bills, for example) below a certain amount, typically £200-£300. 

• The type of default. Mortgage lenders deem some defaults more acceptable than others. Defaults for mobile phone bills and mail-order accounts are usually low-value, and in some cases, lenders will ignore them completely. However, an applicant with a mortgage or car finance default is seen as being more of a risk as they’d typically be much higher value. For more severe defaults, the age and whether it was satisfied will be considerations for lenders. 

• How many defaults you have. Having multiple defaults registered on your credit file can make it more difficult to get a mortgage, particularly with a high-street lender. Most specialist lenders will accept more than one default on an application, depending on the age and value. 

• Why the default occurred. Because specialist lenders consider applications on a case-by-case basis rather than a high street lender’s ‘computer says no’ approach, they will take into account any special circumstances that may have caused the default, such as a brief period of unemployment or a change of address that meant you didn’t receive any notification that you owed this money.  

How much can you borrow with a default?

Mortgage lenders use a multiple of your salary when calculating how much you can borrow for a mortgage, usually up to 4.5 times your annual income. With a default, a lender could lower your loan-to-value (LTV) limit to cover any additional risk. 

For example, someone with a perfect credit score and an annual income of £40,000 could potentially borrow up to £180,000 (4.5 x 40,000). Let’s say this same applicant wants to buy a house worth £200,000, but they now have a default. A lender could place a maximum loan-to-value limit of 80% as a condition of their mortgage offer. This means they can only borrow £160,000. 

How much deposit do you need? 

If your default is over three years old, it’s possible to get a mortgage with a deposit of 5% to 10% if the rest of your application is strong. Less than three years old, and the deposit will likely need to be between 10% and 15%.

Mortgage lenders that accept defaults

Several specialist mortgage lenders will accept applicants with defaults registered on their credit file. These include (but aren’t limited to) Aldermore, Mansfield Building Society, Pepper Money, Bluestone Mortgages and Precise Mortgages. 

The table below gives you an idea of what these lenders will accept when reviewing mortgage applications with defaults.* 

*The above information was sourced from Criteria Brain and was correct at the time of writing. All mortgage lenders' eligibility criteria can be subject to change at any time at the lender’s discretion

How to improve your chances of getting a mortgage with a default

If you currently have a default registered on your Credit Report and want to apply for a mortgage, there’s a few things you can do to give yourself a better chance:

• Check your credit Reports. Even if you already know you have a default registered against you, it’s a good idea to download your credit reports to find out when it was first recorded and if all the information held on file is correct. 

• Repay the money owed on the default. A satisfied default will be looked at more favourably, so if you can repay the amount owed, you should do so before applying for a mortgage. You don’t ‘have’ to do this, but you’ll have a better chance of getting the mortgage you need if you do. 

• Repair your credit score. This is important regardless of whether your default is satisfied or not. Make sure you’re registered on the electoral roll* and all other financial commitments are being paid on time. Keep checking your credit record to see if your score is improving. You should also avoid applying for any other forms of credit unless absolutely necessary.

• Speak to a mortgage broker. An experienced broker will know exactly who to apply to and how to get your mortgage approved, saving you a lot of time and unnecessary hassle.