Can I Get a Mortgage With Defaults?

Can I get a mortgage with defaults?

Yes, you can get a mortgage with defaults! But it’ll be harder compared to someone with cleaner credit. You’ll probably have to apply to a specialist lender who deals specifically with people who’ve had credit issues.  

It’s a good idea to check your credit history to see what’s on there before you apply for a mortgage. It’s also best to work with a specialist mortgage broker who can find out your options.

What counts as a default?

A default happens when your account with a creditor (a person or company you owe money to) is closed because you’ve repeatedly missed payments and an outstanding balance. For example, this could be on a credit card, mobile phone provider or utility company, rent or a mortgage. You can get a default on your credit history regardless of how much money you actually owe. For example, it’s possible to get a default for a very small amount.

And a default happens after a period of missing payments for three to six months, sometimes longer, but this very much depends upon the creditor’s own terms. You’ll usually have been sent a default notice before your account being closed – and this is essentially a request for you to repay your balance before further action is taken.

How long does a default stay on your credit file?

A default will stay visible on your credit report for six years, even if you pay it in full. After that time, a lender won’t be able to see the default when searching your credit history. That’s not a reason to hide it though - some lenders might ask if you’ve had any older credit issues. If they do, it’s best to be honest about it, even if it was longer than six years ago.

Lenders don’t like to see defaults because it’s a signal to them that you’ve struggled to repay debts in the past. And this means you’re considered a ‘high-risk’ borrower.

Your default becomes ‘satisfied’ when you finish paying off the debts you defaulted on. The sooner you can satisfy your defaults, the better. Mortgage lenders prefer satisfied defaults because it shows them you picked yourself back up after a blip in payments.

How does having a default affect my mortgage application?

Having a default on your credit file can make your mortgage application more tricky, but it’s not impossible. It’ll be easier if your default is satisfied, and you might even get a more competitive interest rate. However, you still have options even if your default isn’t satisfied.

The mortgage lenders that accept applications from people with defaults usually focus on when your default was registered, rather than the date you settled the debt.

Does the type of default make a difference with mortgage applications?

Yes, the type of default you have on your credit file will make a difference to most mortgage lenders. For example, some accounts are generally accepted as less serious than others - a mobile phone default won’t carry as much weight as defaulting on a mortgage or loan payment.

However, some mortgage lenders will treat all defaults the same. This is why finding the right lender to apply to is SO important. You’ll want to go to a lender who’ll look at your individual circumstances and get the right deal for you. A simple mistake such as applying to the wrong lender can really damage your credit score if you get turned down. It’s best to work with a mortgage broker who knows which lenders are best for applicants with defaults, and can put together a strong application for you. Get matched to a broker.

How soon after a default can I get a mortgage?

It all depends on the lender you go to. Some will offer you a mortgage pretty soon after, even from around three months. But this can change depending on how much your default was and if you’ve had any other defaults in the past.

Do defaults affect how much I can borrow?

They can do - some lenders will offer you a smaller mortgage if you have a default. In general, the way mortgage lenders calculate how much you can borrow is using something called an income multiple. Your income multiple is literally just a multiple of your income. For example, if you earn £30,000 a year, your 3x income multiple would be £90,000 and your 4x income multiple would be £120,000. 

As a general rule, the older and less severe your default, the more you’ll be likely to borrow.

Can I get a mortgage with defaults and other credit issues?

It’s possible, but it’ll make things a bit tricky. You might be asked to pay a higher interest rate or put down a bigger deposit. It’s best to work with a specialist bad credit mortgage broker who can put together a good application and find the best lender for you. Make an enquiry to find out your options.

Can I remortgage with defaults?

Yes, it’s absolutely possible to remortgage if you have a default. The remortgaging process is pretty similar to getting a mortgage the first time around, so you’ll need to pass the lender’s affordability checks and show the details of your default. 

Read more in our Guide to Remortgaging.

How can I increase my chances of getting approved for a mortgage with defaults?

Applying for a mortgage can be daunting. It can be even more stressful if you have credit issues such as defaults. The good news is: it’s definitely possible to get a mortgage with defaults. You’ll just need to make sure you’re doing as much as you can to help your application. 

Here’s six steps for getting a mortgage with defaults:

1. Check your score

   First thing’s first – you’ll need to know where you stand. It’s the only way you’ll know how to improve. For a detailed and thorough overview of everything on your credit record, you can use checkmyfile. 

   Checkmyfile shows you the information from all three credit checkers on the same report. And you can download your report for free with a 30-day trial. Once you know where you’re starting from, you’ll have a clearer vision of what you need to do to improve. 

2. Make easy changes to your credit report
   
   • There are some small factors which can affect your credit rating. Some simple things you can do:
   • Get on the electoral roll at your current address.
   • Identify any faults on your record and ask the creditor to remove them.
   • Leave some time between any credit applications.
   • Get your name on some household bills – and pay them on time.
   • Try not to move around too much – lenders like fixed addresses.
   • Pay at least the minimum balance on your credit cards each month.
   • Try not to withdraw cash from your credit card too often.
   • Don’t use too much of your credit limit – 30% is usually a good rule.

3. Get a specialist mortgage broker

   If you have poor credit, it’s a good idea to work with a specialist mortgage broker. A qualified mortgage advisor has access to the lenders who’ll look at your application and consider your unique circumstances. They can help you through the entire journey, from application right through to completion. They know the market, and will make your application look as appealing as possible to lenders. Our Mortgage Experts have seen it all and will never judge. Make an enquiry to find out your options.
   

4. Know your partner’s situation

   If you’re applying for a joint mortgage, your partner’s credit history will be viewed alongside your own. Most lenders will add your credit scores together, and you’ll need to meet their minimum score to be considered. Make sure they’re also doing everything they can to get into the routine of good habits.

5. Be honest

   It’s not a good idea to try and hide any negative credit issues. Mortgage applications are thorough, so lenders will probably find out anyway. Having an explanation ready for why you found yourself in financial difficulty, and what you’ve been doing to get out of it since then, will look a lot better to lenders. Life happens, and you’re only human – but be upfront about it.

6. Don’t panic

   It’s easy to feel overwhelmed. According to a study from the Money and Mental Health Policy Institute, people can feel ‘trapped’ by poor credit ratings. Remember, you’re not just a number on a screen, but a whole person with a unique situation and set of needs. Sorting things out might feel like a daunting task, but knowing where you stand and checking what you can do is a good place to start. 

   We only do the complex stuff at Haysto. So we completely understand the frustration. And we take mental health seriously. If you’re feeling worried about how your credit history might affect your mortgage application, get in touch with us to find out your options.