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Mortgages with Defaults

Worried About Your Chances Of Getting a Mortgage With Defaults? Here’s What You Need To Know

Are you concerned about securing a mortgage with defaults on your credit file? Or perhaps you’re wondering what defaults are and how they may impact your chances of accessing the best mortgage deals?

Defaults are one of the most common reasons for a mortgage to be declined, especially by high street lenders who will generally only approve applicants with clean credit files. Whilst defaults are often not considered as damaging as other types of adverse credit, such as bankruptcy and IVAs, if you do have defaults it’s likely that most high street banks and building societies will turn you down.

However, it is worth remembering that all lenders’ criteria differs, so there will still be lenders out there willing to consider your application. Specialist lenders such as these can be found with the assistance of an expert broker.

Here at Amber Mortgage Solutions our team of specialist mortgage advisors are experienced in successfully arranging bad credit mortgages for people with defaults and can help to find you the best deals on the market.

Speak to our friendly team of advisers today.

01702 619 221

The Different Types of Mortgage Defaults

Different defaults can mean different things for a mortgage application, as some are seen to be less severe than others.

For example, some lenders have a more relaxed view on mobile phone, utilities (gas and electric bills) or credit card defaults. Whereas mortgage, bridging loan or secured loan defaults will be taken very seriously by the majority of lenders.

Here’s what our client’s have to say!

Can I Get a Mortgage With a Default?

Despite what some people think, finding a competitive mortgage with a default (or defaults) is still possible.

It doesn’t matter if you’re looking for a buy to let mortgage with defaults, a right to buy mortgage with defaults or if you’re in search of a first time buyer mortgage with defaults – there are many mortgage lenders happy to approve applicants with all kinds of poor credit accounts on their file. With access to the whole market, our team at Amber Mortgage Solutions can help you to find them!

Typically, flexible lenders who accept severe credit issues are more likely to consider applicants with just defaults on their credit report. On the other hand, if you have defaults along with other bad credit issues, for example, CCJs, a current IVA, unsecured late payments or even just a general low credit score, you will have fewer lenders to choose from.

A quick word of warning – whilst payday loans are not strictly considered to be a form of bad credit, some lenders look at these types of loan as a red flag that you are unable to manage your finances.

Worried about your credit issues? Our years of experience and expertise mean we are able to still give you the best possible chance of securing a mortgage, regardless of your past. Contact us today for professional and non-judgemental advice.

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How Soon After a Default Should I Apply For a Mortgage?

Once you have a default, it will stay on your credit file for six years from the date of the bad credit incident. Once the six years have passed you can start to repair your credit rating – although it’s never too early to look towards improving your finances.

The general rule of thumb is this – the longer a default has been on your record, the less likely it is to affect your ability to secure a competitive mortgage deal.

What About Getting a Mortgage With Satisfied Defaults?

Whilst getting a mortgage with settled defaults may prove easier than getting a mortgage with unsatisfied defaults, it is not always essential.

Satisfying your defaults may improve your credit score but it won’t affect how long the default will be visible on your credit file, which is six years from the date of the default.

Many lenders don’t actually run a credit scoring system, instead, they are more interested in your most recent credit activity. Generally, the older a default is, the less concern it is going to cause when approving your mortgage application.

How Much Can I Borrow With Defaults On My Credit File?

When assessing how much you can borrow, a lender will be looking at several things. First they will want to take a look at your ability to afford a loan. This means they will need to take a look at your income – or incomes if it’s a joint application – as well as your regular outgoings and other credit commitments. Usually you will be asked to provide your latest bank statements for the previous three to six months.

Based on this affordability assessment, a lender will then be able to decide how much they would be willing to offer.

Typically, someone with a clean credit report and fewer financial commitments will be able to borrow more than someone with a bad credit rating and lots of financial commitments. Again, it is worth remembering that the age of the defaults on your report can affect a lender’s decision. The older the default, the greater your chances will be of borrowing a larger sum of money.

The Loan to Value (LTV) Ratio

The loan to value (LTV) is used by lenders to determine how big of a loan you can secure against the value of your property. Simply put, how big of a deposit do you need in order to get the mortgage you want?

For those with an unblemished credit report, the LTV available to them will be higher. Whereas for those with defaults and an adverse credit rating, a greater deposit will most likely be required.

For example, a borrower would generally be asked to put down a deposit of 10% of the value of the property they wish to buy, or even 5% if they are buying under the government’s Right to Buy scheme. If you have had your defaults for three years or more, this may even apply to you.

However if you have more recent defaults or defaults of significant value, then you can expect to be asked for a higher deposit.

Finding The Best Mortgage Deals With Defaults

If you’re looking for advice on how to find the best mortgage deals with defaults, Amber Mortgage Solutions are here to help. Our dedicated team have years’ of experience in finding mortgages with defaults and will search the whole of the market to ensure that you get the best deal to suit your unique circumstances.

No matter what your credit issues may be, our expert brokers can match you with the right mortgage lenders with defaults and provide expert guidance on your property ownership journey.

For friendly advice on getting a mortgage with defaults, speak with a member of our team today.

Speak to your friendly mortgage advisor

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01702 619 221

Open: Monday - Friday 8:30am - 5:30pm

How Do I Know if I Have a Bad Credit Rating?

For some, they may have no real idea they have bad credit until they are declined a mortgage by a high street lender for the first time.

However, for others it may come as less of a surprise to learn that their credit history is far from perfect. You may be receiving letters from credit card companies, are aware of missed payments or are being visited by debt collectors.

The only way to know for sure what condition your credit history is in, is to secure a copy of your credit report.


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How to Access Your Credit Report

It is now easier than ever to obtain your own credit report and see for yourself how you might fare in getting a mortgage.

Once a mortgage application is submitted, the lender will access your credit file information to assess your suitability for a loan. So, if you’re concerned about having adverse or bad credit, we would encourage you to take action sooner rather than later, and obtain a copy of your credit report. This can be done for free, from a wide range of trusted online providers.

Need help getting your credit report? Contact us today and speak with a member of our friendly team for advice.

I Have a Bad Credit Rating – How Much Can I Borrow?

When looking at how much a person can borrow, the first thing many lenders will examine is your ability to afford the loan. This means they will need to look at your income – or income(s) if it’s a joint application – as well as your regular outgoings and other credit commitments.

In addition to looking at affordability, a lot of lenders will also consider your maximum income multiple. For example, 4x or 5x your income(s), depending on the lender.

With lenders now using such diverse methods to assess the extent to which you can afford a potential loan, the best way to prepare would be to discuss your situation with one of our professional advisors.

Having experience of working with bad credit lenders, we can guide you on your next steps to getting the mortgage you need.

Quick FAQs

Have a question about mortgages with defaults?

Take a look at our extensive FAQ section for the answers to some of our most commonly asked questions, below.

A default is registered on your credit report when you have missed, or haven’t paid in full, a number of payments to the same creditor, resulting in your account to be closed.

When a default occurs you receive a default notice. This is a formal letter sent to you, to inform you that an account has gone into arrears. A creditor is legally required to send you this notice if they are regulated by the Consumer Credit Act, however receiving this letter does not mean that legal action has begun. On the other hand, if a creditor is not regulated by the Consumer Credit Act, there is no requirement for a notice to be sent.

If you do receive a default notice, you will be able to see the amount you owe and by what date you are required to pay it. If you are able to, make the payment as soon as possible. If you can pay the outstanding amount and meet the terms given in the default notice, it is possible for you to request that the default be removed from your credit report.

If you are unable to pay, get in touch with the creditor as soon as possible as they may be able to arrange for you to make smaller, regular repayments that will clear the debt.

It is important to remember that a default notice is not always sent, so we would always recommend that you stay up to date with your payments and if you do fall into arrears, always contact the creditor to organise repayment.

Satisfying a default will undoubtedly increase your chances of having your application accepted. However, the fact remains that the majority of high street lenders will turn down an application whether a default has been settled or not.

On the other hand, specialist mortgage lenders will be more concerned by the age of your default, regardless of whether it has been settled or not. For example, a default that is five years old and unsatisfied will have less of a negative effect on your mortgage application than a default that is a year old and satisfied.

Within the first twelve months of a default, most lenders will set a maximum amount of £1,500. For defaults of over a year however, the size becomes more irrelevant.

If you’re thinking of getting a mortgage with multiple defaults, generally a lender will accept two defaults of up to two years. Again, with older defaults it becomes less of a concern and tends not to matter. To summarise, defaults added to your record in the past two years (in particular, the last year), will hold the greatest sway with lenders.

How much a lender is willing to offer on a mortgage with defaults on credit file is often decided on your ability to repay this amount. Lenders will use the affordability test to assess this, looking at your income and outgoings.

If you are someone with a good credit rating and few big financial commitments, then you can expect to be able to borrow more – up to five times your income.

Alternatively, if you have a poor credit history from adverse credit events like defaults, then you may be able to borrow less and be required to put down a bigger deposit.

Contact us today! Our friendly advisors will be happy to talk you through the next steps available to you and help you on your way to getting the mortgage you need.

We’re here to help you, not judge you, so call us on 01702 619 221.