Equity release mortgages can give you financial freedom in retirement to make home improvements, pay off an existing…
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.
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.
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.