How do late payments impact mortgage applications?


Pete Mugleston

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“Can I get a mortgage with late payments on my credit report” is probably the most common question and issue we come across, as pretty much everyone has missed the odd payment at least once in their lives. Unfortunately many lenders aren’t necessarily sympathetic to this and can decline obviously creditworthy applicants due to recent missed payments on their credit files, or due to the low credit score that they cause. Appealing these declines can be a laborious and stressful process and it is generally recommended to just move on to find a new lender who are actually likely to consider the application from the start.

Thankfully, getting a mortgage with late payments is possible and there are lenders happy to consider borrowers even with multiple late payments, with minimal deposit, and at competitive rates.

  • One or two late payments
  • Multiple late payments
  • Unsecured late payments
  • Mortgage late payments / Mortgage Arrears
  • Secured loan late payments

To understand how will late payments affect mortgage applications we have outlined in more detail the various different factors that are taken into consideration by different lenders, as it really depends on your individual situation to determine which lender will approve you:


What is the difference between late payments and arrears?

  • Late payments = Isolated payments missed on any type of account, that remained status 1 on your credit file, and is now up to date. Most creditors allow borrowers until the end of the calendar month before they register it as a formal missed payment on your credit file, so if your payment date is the 1st of the month and you pay it on the 21st, many creditors will consider it paid 'on time' and not report it to credit reference agencies.
  • Arrears = Payments missed that fall further behind, going unpaid for more than 1 month (showing as status 2, 3, 4, 5, 6 etc). Someone is classed as 'in arrears' when they currently owe more than their current month's payments.


Understand your credit report

If you haven’t already, obtain your credit reports for all 3 reference agencies. Don’t worry – searching and downloading your own file won’t damage your score as it is only applications for credit and searches by lenders that do this – you can search yours an unlimited number of times without impact. Read more about why we ask for all 3 credit reports here.

If you look through the credit account info at the monthly credit account records you’ll see various sections that tell you and the lenders different things about your account conduct, these are explained in more detail here.


Type of credit account for the missed payment

The type of account you have missed a payment for makes probably the biggest difference to whether you will be accepted for a mortgage or not. Missed payments on unsecured accounts are less of an issue than missed payments on secured credit.

  • Unsecured: Current account overdrafts, phone bills, credit cards, personal loans.
  • Secured: Mortgages, secured loans.

One or two missed payments a few years ago on something unsecured is not likely to prevent you from being approved with at least a few lenders, but if you have a mortgage with late payments on your credit report (including missed payments on secured loans) you are likely to find things much harder, and depending on how many and how recent they were, you may need a larger deposit to find a lender.


Number of missed payments

Having one missed payment on your file in the last 6 years is not likely to cause too much damage, although it may lower your score if more recent and mean some of the top lenders may still decline you or offer a higher rate perhaps. Having multiple missed payments can have a far bigger impact on reducing your credit score however, and you can find that the majority of high street lenders decline or offer terms based on you putting in a larger deposit.

This is an important point to remember – if you apply to your bank at say 85% LTV, and they offer you an agreement but only at 70% LTV, this indicates that your credit score with them isn’t strong enough to qualify at a higher LTV. It doesn’t mean that you can’t find another lender to consider you at 85%, despite what they might say to convince you to use them! Sure, at times this is the case, but better to exhaust all the avenues for the mortgage you want before having to compromise.

If you want to borrow a 95% mortgage with missed payments then it is certainly possible, so long as you’re not more than 3 months behind for any one account.


How recent were the missed payments

How recently your late payments were registered on your credit report makes all the difference. If you are currently late on certain payments and owe arrears, then your score and likelihood of acceptance will be far lower than payments missed months or years earlier. Anyone hoping to get a mortgage with a smaller deposit, say 5-10%, may well need to have a clean file for the last 12-24 months if applying on the high street, however there are some specialists offering decent rates with any number of late payments in the last 12 months, so long as the furthest they got behind was 3 months and are now up to date.


Other credit issues

If you have other credit issues such as defaults, CCJs, debt management plans, IVAs, bankruptcy, or repossession, then this can impact which lenders you can go to and you may find it harder to gain approval (For more info on mortgages with these issues follow the links). Thankfully there are specialist lenders out there to consider these issues also, depending on their type, number, size, and how recent they were. Typically these issues are more severe than late payments and will take precedence when a lender reviews your application, so your broker will want to search the market with these in mind.


Deposit amount

The more deposit the better. If you are applying for a 95% mortgage with 5% deposit then it is less likely you’ll be approved with multiple late payments on your credit file and a low credit score, when compared to applying with a 50% deposit, for example. As mentioned above it is possible to have multiple recent late payments and still obtain a mortgage at 95% LTV, however there’s only a small number of lenders considering these applications and you will be required to meet the other criteria they stipulate.


Late payments / Arrears Tables - What is accepted?

The tables below cover an approximation of the number of missed payments on unsecured (loans / credit cards / phone bills / current accounts etc.) and secured (mortgages / secured loans etc.), that are acceptable to some of the specialist lenders. This is a VERY rough guide, and we always recommend making an enquiry to have an expert review your credit file to establish if there's a lender out there for you to not.

REMEMBER: If you think you don't fit criteria based on the tables below, always make an enquiry so your advisor can check for you. You application may be outside of lenders policy but the specialists are often still able to get mortgages approved regardless, by building a good business case for the underwriters to review. If you do fit the criteria then make an enquiry and an advisor will be in touch!

Unsecured missed payments

LTV/Time Missed in the last 3 months Missed in the last 6 months Missed in the last 12 months Missed in the last 24 months Missed in the last 36 months Missed over 36 months ago
90-95% status 3 max status 3 max status 3 max status 3 max Any Any
85-90% status 3 max status 3 max status 3 max status 3 max Any Any
75-85% status 3 max status 3 max status 3 max Any Any Any
Under 75% Any Any Any Any any Any

Secured missed payments

LTV/Time Missed in the last 3 months Missed in the last 6 months Missed in the last 12 months Missed in the last 24 months Missed in the last 36 months Missed over 36 months ago
90-95% None None status 1 max status 1 max Any Any
85-90% None None status 1 max status 1 max Any Any
75-85% status 1 max status 1 max status 1 max Any Any Any
Under 75% Any Any Any Any Any Any


How are mortgage arrears different?

Getting a mortgage after mortgage arrears can be much more difficult than if they were just unsecured arrears, as lenders deem these to be up there with the most severe of missed / late payments. Usually when someone can't keep up with the borrowing they have taken, the behaviour is to stop paying back the accounts that will make the least impact on their day to day living, which usually follows the order of:

mobile phones > utilities > overdrafts > credit cards > loans > secured loans > mortgages

For this reason, as most people in financial difficulty continue to ensure the mortgage is paid, when missed (especially when it falls into arrears for more than one month) it can indicate a real issue in the borrowers ability to repay borrowing, and thus their overall creditworthiness in relation to a new application. One or two historical late payments on the mortgage going to status 1 on the credit file is not the end of the world (depending on how recent), however multiple late payments of status 1, or worse, status 2, 3, 4, 5, 6 etc. can really cause issues and prevent the borrower from finding new finance elsewhere.

That said, if you have a reasonable explanation as to why you have missed the payments (i.e. a life event such as redundancy, bereavement, illness etc.), then there are several lenders who are willing to consider new applications. It really depends, as mentioned above, how recent the mortgage arrears were; if you are up to date now or not; if the underlying issues are now resolved (e.g. new secure job if previously redundant); your Loan to value; and your Loan to income ratio.

Anyone who is up to date on the mortgage but has arrears on their report is likely to require minimum 15-25% deposit on a new purchase or remortgage, depending on the overall profile. To have your profile reviewed you'll need to make an enquiry and we'll pass you to one of the specialists.

Anyone who is currently behind on their mortgage is not likely to be approved for a new purchase or mortgage at all, and usually the only option would potentially be for those who are looking to consolidate debts (including the arrears) into a secured loan. To repay your mortgage arrears with a secured loan you will need sufficient equity in the property and be able to prove affordability for the new borrowing - to find out more and make an enquiry please visit our secured loans page here...


If you want to know if you can get a mortgage with late payments (or missed payments - arrears), then click below and an expert will review it all for you!

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