Can you get a Mortgage with a Default?

Yes, in many cases you can get a Mortgage with a Default.

Speak to a Mortgage Advisor

What is a Default

A Default is where a lender you are in a Credit Agreement with, closes your account with an outstanding balance owing.

This is usually after you have have missed 3-6 consecutive payments and the Lender doesn’t expect a reasonable attempt to be made to clear the outstanding balance.

Once the account goes from being in arrears to Default, this can have quite a big effect on your Credit Score and overall Credit worthiness.

This will often make Credit more expensive and harder to get.

Can you get a Mortgage with a Default?

Yes, it is possible.

And will usually be dependent on the following:

Deposit: The size of your deposit. The greater your deposit, the greater chance you have of being accepted for a Mortgage

Credit Profile: If the rest of your Credit Profile is strong, this gives you a greater chance of being accepted by a Lender who completes an automated Credit Check on you.

Size of the Default: Some Lenders will accept Defaults, providing they are less than a certain value.

When the Default was Registered: The older the Default is, the greater chance you will have of obtaining a Mortgage.

If the Default is older than 6 years. And there hasn’t been any Credit Problems since, you shouldn’t have a trouble obtaining a Mortgage. As your Credit Report should now be clear.

Whether the Default is Satisfied: If the Default is satisfied, it shows you have decided to sort the problem. And Mortgage Lenders see this as a huge positive.

Can you get a Mortgage with Defaults?

So we’ve established it’s possible to get a Mortgage with a Default.

But is it is possible with multiple Defaults?

Yes, it is too possible.

And the same points as above will be taken into account when Lenders assess whether you’re acceptable to them.

Multiple Defaults are a bit more complicated that one offs.

This is because the number of Lenders that will consider you will be reduced. So there will be fewer Lenders to choose from. 

Can you get a Mortgage with Unsatisfied Defaults?

Yes, it is possible.

As demonstrated by the above info-graph and the below Residential Mortgage success story.

Most Mainstream Mortgage Lenders would prefer the Default to be satisfied. But there are some Lenders which will consider you regardless.

Can you get a Mortgage with Satisfied Defaults?

Yes, absolutely. 

There are likely to be options available to most.

Having the Default satisfied in many cases will improve your chances of being accepted with a mainstream Mortgage Lender too. Meaning cheaper Mortgages in most cases.

As we’ve said above, it will mainly be dependent on when the default was registered, the size of the Default and the size of your deposit.

How to get a Mortgage with a Default?

Don’t apply for a Mortgage with the Lender/Bank you Defaulted on.

Get the rest of your finances in check. Keep out of your Overdraft, try not to gamble, don’t use short term loans or other short term finance. And try to make sure there aren’t any returned/unpaid standing orders or direct debits on your bank statements within the last 3 months.

Check and improve your Credit Report. Get on the electoral roll, make sure you are not using more than 30% of your credit limit on your Credit or Store Cards, try to keep out of your overdraft.

Be prepared to tell the Lender the reason for the Default. Saying I forgot to pay, probably isn’t going to wash with your potential new Mortgage Lender. Let them know why it happened, and why you feel confident it won’t happen again.

Residential Mortgage with Defaults Success Stories

Mr Jones (not their real name) – 3 Defaults valued between £800-£3,500. Registered between 2016-2018.

Two of the Defaults were on a payment plan, and therefore not Satisfied.

The applicant didn’t meet the automated Credit Criteria of any Mainstream Mortgage Lenders.

They had a 15% deposit, so 85% loan to value. 

One of our Specialist Mortgage Advisors were able to secure them a 2 Year Fixed Rate Mortgage at 4.19% with No Lenders Fees.

The applicants are motivated to keep up with all Credit Commitments. So that in two years time, they hope to be able to reduce the interest rate payable on their Mortgage.

Buy to Let Mortgage with Defaults Success Stories

Mr Smith (not their real name) – £9,663 Satisfied Default Registered in 2018.

Mortgage Approved October 2020.

Mr Smith, contacted one of our Advisors in 2018, after being told he wouldn’t be eligible for a Buy to Let Mortgage.

It was complex, there’s no denying that.

The Applicant had a 25% deposit, was looking to purchase a Flat which was of non-standard construction. And was a First Time Buyer.

Due to Coronavirus, Mortgage Lenders were being particularly cautious with their Lending around this time.

Our Mortgage Advisor was able to get a Mortgage Offered on the clients purchase within 3 weeks.

The Mortgage was a 2 Year Fixed Rate at 3.24%, which did come with a 2% Lender Arrangement Fee.

The Applicants were over the moon, as they never expected to be successful. And were particularly pleased with the rate.

Can you Remortgage with a Default?

Yes, this is more than possible. And there should be options available with mainstream and specialist Mortgage Lenders.

You may also be able to capital raise to take money out of your home, depending on the Loan to Value of the Mortgage against your home.

Consideration will be taken as to when when the Defaults were registered, the Defaulted amount and whether they are satisfied.

What is a Specialist Mortgage Lender

Borrowers can often get concerned at the mention of Specialist Mortgage Lenders.

But they are often not to be feared.

They are just like any other Mortgage Lender, but deal with riskier lending than often other mainstream Mortgage Lenders deal with.

They will often ask for more documentation and take a little longer in some cases to assess your Application.

But they can be a real help to you, when you do not fit the Criteria of the “High Street” Lenders.

All Specialist Mortgage Lenders are fully regulated and part of the Financial Ombudsman Service.

So you will have the same Protection dealing with Specialist Lenders, than you would Mainstream Mortgage Lenders.

Mortgage options after Defaults have cleared

The good thing about your Credit Report is, it will always recover.

After 6 years, any adverse credit including Defaults will be removed from your file.

So if you have had Defaults in the past that are more than 6 years old, you will have as much chance of obtaining a Mortgage as someone who has never had any defaults. 

What documents will the Mortgage Lender need?

When obtaining a Mortgage with a Default, the documents you will need to supply are much the same as anyone else would.

You will need to supply proof of your income:

Latest 3 Months Payslips or Latest 1-3 years worth of Accounts.

Latest 3 Months Bank Statements to show Income and Outgoings.

I.D. such as a Driving License or Passport.

You may also need to provide:

P60 or an Accountants Reference/Certificate.

Employers or Landlords Reference.

Proof of Address.

There are of course some cases where other documentation may be required.

What types of Repayment are available when you have a Default?

You will generally have the same options as those who have a good clean credit history.

The most popular repayment options you will have are:

Capital Repayment: This is the most common type of Mortgage for applicants with Defaults. 

With a Capital Repayment Mortgage you repay your Mortgage balance as well as the interest to the Mortgage Lender.

This means if you make all of your repayments on time, you’re Mortgage will be cleared at the end of the term.

Interest Only: While possible, there will be less options available on an Interest Only basis as these Mortgages are considered higher risk.

Usually, you will require a deposit of at least 25% to be accepted for Interest Only when you have Defaults. And fit the other lenders criteria on Interest Only, which does vary between Lenders.

What type of Mortgages are available when you have a Default?

You will generally have the same Mortgage options as those who have a good clean credit history.

By far the most common are:

Fixed Rate Mortgages: A Fixed Rate is when the interest rate chargeable on your Mortgage is fixed for a specified period of time.

Usually 2-5 years.

When considering Fixed rate Mortgages when you have defaults, your Mortgage Advisor should consider what Mortgages will be available to you at the end of your initial term.

If you obtain a Mortgage with a Specialist Mortgage Lender, and your Credit Report will be clear of Defaults within 2 years.

A 2 year Fixed rate is most likely to be the most suitable option, as there are likely to be cheaper options available at the end of your initial fixed term.

Tracker Rates: A Tracker rate is where the interest rate on your Mortgage goes up and down in line with the movements of another rate or index. The most common rate which is tracked, being the Bank of England Base rate.

These are less common than Fixed rates. 

What’s next?

Speak to a whole of market Mortgage Brokers which can provide you with the specialist Mortgage Advice you need.

Please complete the above contact form at the top of the page.

Or you can contact us here.

Our Mortgage Brokers

We work with a variety of Mortgage Brokers which each specialise in different Mortgage Advice areas.

When you get in touch, simply select the reason why you’re getting in touch i.e. First time buyerBad Credit, Remortgage etc. And we will match you to the Mortgage Broker which Specialises in your circumstances.

All of the Mortgage Brokers we work with are whole of market, FCA regulated, CeMap qualified and have consistently great reviews.

Get in touch for a free non-obligatory conversation with one of our Specialist Mortgage Advisors for further information on how they can help you.