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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 13th October 2020*

If you’re looking for a mortgage after late payments have appeared on your credit file, it may be harder to find a lender to approve your application. If you’ve already approached a lender and been declined, don’t lose heart. Depending on the severity of your circumstances, there may be lenders who will be more understanding of your situation.

If you have late payments on your credit report, chances are there will be an explanation as to how this situation occurred.

There are specialist mortgage lenders who will still consider your application, even if you have multiple late payments registered against your name or if it’s a joint application where only one applicant has bad credit (such as a partner having previous late payments). With the right help from an experienced whole-of-market broker you could find a mortgage requiring a minimal deposit at competitive rates.

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Can I get a mortgage with late payments on my credit report?

To understand how late payments might affect your mortgage application, it’s first important to understand the different factors mortgage lenders will take into consideration when assessing your eligibility and affordability. Your individual situation will determine which lender is most likely to approve of you.

All mortgage providers will assess the following areas when making their decision:

  • Your credit report
  • Type of credit account for the missed payment
  • Number of missed payments
  • How recent the missed payments were
  • Whether you have mortgage arrears on your credit report
  • Other credit issues such as CCJs
  • Deposit amount

All of the above form an integral part of your mortgage application. If you haven’t already done so, you should search and download your credit report from all three reference agencies.

Credit checks for a mortgage by lenders can have a negative effect if there are a lot of searches against your file in a short period of time, but you can search your file an unlimited number of times without impacting your report.

To learn more about how to interpret and understand the information see our article about understanding your credit report.

A specialist broker, like those we work with, will be able to talk you through your application and help you understand how lenders will view your information when they assess how much of a risk lending to you might pose.

The brokers we work with, are experts on how to help you get a mortgage with bad credit.

They know the lenders who will approve mortgages for borrowers with various adverse credit on their file.

The experts we work with will be happy to help and advise you if you have:

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

What’s the difference between late payments and arrears?

Late payments are isolated payments missed on any type of account that remain status 1 on your credit file but have been paid. Missed mortgage payments are arrears that fall further behind. If they continue to go unpaid for more than one month they show up on your credit report showing a status of two, three, four, five, six etc.

Someone is classed as being “in arrears” when they owe more than the payment for the current month.

How easy is getting a mortgage with late payments?

Late payments on your credit file will affect how easy it will be to find a lender willing to accept your mortgage application. Finding a mortgage broker who specialises in helping customers get borrowing when they have bad credit against their name will help speed up the process.

The right specialist broker will be able to assess your credit situation and view your application before approaching mortgage providers. With all the information laid out clearly, they will be able to pinpoint which lenders are most likely to approve your application.

The brokers we work with will work to get you the right mortgage, saving you time and hassle and helping you avoid collecting too many potentially damaging searches against your credit file. You might have to consider a subprime mortgage.

Can I get a mortgage with two late payments?

More than one missed payment on your file will reduce your credit score. This will impact the number of lenders willing to approve your application. Depending on how recently you missed your payments, it may still be possible to secure lending. With a good deposit, you should be able to find a mortgage lender willing to approve your loan.

If you have one missed payment on your file in the last six years it isn’t likely to cause too much damage. If it’s a more recent lapse, some of the better-known lenders may decline your application or perhaps offer you a higher rate, to offset the risk they perceive in lending to you.

What should I do if I receive a late payment letter?

Don’t panic. Receiving a late payment letter can be worrying, but take a beat and start by prioritising your debts so you can make a plan to deal with them. The most important thing to keep in mind is that you should always tackle a late payment letter head-on, ignoring it will only make things worse.

Ignoring a late payment letter could result in:

  • Damaging your credit score more, which will directly impact your ability to borrow in the future
  • Lead to late payment charges and associated fees which will increase your debts further

It may help to know that legal action should be a last resort for a company chasing your debt. Again, this doesn’t mean you should stuff late payment letters away in a drawer and forget about them.

There are different late payment letters you could receive. They will be accompanied by information from the Financial Conduct Authority (FCA) telling you what the letter means and where you can get advice.

There are three different types of letter you could receive:

  1. Letters saying you have missed a payment
  2. A letter giving seven days’ notice of court action
  3. A letter informing you that you’re in arrears or default

If you receive any type of late payment letter, the best course of action is to speak to the company, or companies, you owe money to. Alternatively, you should speak to a debt advice agency who will be able to give you free, impartial advice.

Can I reclaim late payment charges?

If you’ve been charged for late credit card payments, missed card payments or for going over your agreed credit limit, you may be able to reclaim some of the charges. This is particularly true if you’re struggling with debt. In certain circumstances, the rules may allow you to reclaim charges going back several years.

What is considered late on a mortgage payment?

Most lenders will deem your mortgage payment late within one week and 15 days after the payment was due. Many lenders will also add a late fee to the payment you failed to make. That said, most creditors allow borrowers until the end of the calendar month before registering it as a formal missed payment on your credit file.

If your payment date falls on 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. If you fail to make the payment in time, your lender could report the incident to all three major credit reference agencies. If this happens, it will affect your credit report.

Should you know in advance that you’re going to struggle to meet your mortgage payment, contact your lender at the earliest possible time so you can work together to find a solution.

Is there a grace period for a late mortgage payment?

Most mortgage payments are due on the first of the month so that a grace period of 15 days can be applied automatically. As long as you pay your mortgage 15 days after it was due, you shouldn’t be penalised.

It’s thought that mortgage lenders accommodate a 15-day, penalty-free grace period so that it fits in with various different payday schedules. However, just because there is a natural grace period, don’t rely on it as making your payments late on a regular basis should be avoided at all costs.

Should you know in advance that you’re unable to make a mortgage payment, contact your lender so you can work together to find a suitable solution.

What penalty or charge will I get for late mortgage payments?

Some lenders will charge a fee if you make a late mortgage payment or your account is in arrears. How much you will be charged will depend on your lender as every provider will have different rules and charging structures.

Failure to maintain your mortgage payments could result in your home being repossessed.

How will late mortgage payments affect my credit score?

If everything else detailed in your credit report is good, one late payment shouldn’t count against you too badly. How a company will interpret your late payment will depend on the kind of account the late payment was for, when the late payment occurred and what kind of lending you are now requesting.

Credit scores are designed to show how reliable you are with credit and have a direct impact on how easy you’ll find it to borrow money. Many companies will take late payments into account when deciding whether to lend to you because, if you’ve previously struggled to pay a bill, it could indicate financial difficulties.

Seeking to rectify the error quickly gives you the best chance of avoiding a mark against you on your credit file. Paying a bill a few weeks late may not be the end of the world, but make sure you call or send an email to report that you have made the overdue payment so it is clear.

Doing this may also help you to avoid a mark on your credit report because days can count, the sooner you can reassure the company your payment has been made, the more likely they are to avoid reporting it on your credit file.

How easy is getting a mortgage with late mortgage payments?

The more recent your late payments are, the harder you may find it to get a mortgage application approved. If you’re currently late on certain payments and owe arrears, then your credit score and likelihood of acceptance will be significantly lower than for payments you may have missed months or years in the past.

If you were hoping to get a mortgage with a deposit of between 5% and 10%, you’re more likely to succeed if you’ve had a clean credit file for the last 12-24 months.

An experienced mortgage broker, like those we work with, may be able to help you find a decent rate through more specialist brokers. A whole-of-market broker who is expert at arranging bad credit mortgages will know those lenders more likely to accommodate your borrowing needs.

Can I refinance my mortgage with late payments on my file?

If your missed payments weren’t recent events, you should be able to find a lender who will agree to your remortgage. The kind of late payments registered against your name will impact the way your file is viewed by any lender reviewing your application.

Many high-street lenders aren’t set up to help customers with late payments on their credit file. Using a whole-of-market mortgage broker who specialises in helping customers in similar situations could help you save time and hassle.

A good deposit and a willingness to accept higher rates will help you get the right deal, although if you’re refinancing the higher rates you may be charged may make refinancing less viable.

Getting a remortgage with mortgage arrears on your credit file can be tricky. This is especially true if there are other bad credit issues at play because providers deem mortgage arrears as one of or the most severe type of late or missed payment.

How do mortgage arrears impact new mortgage applications?

Following mortgage arrears, getting a mortgage can be much more difficult as lenders deem arrears on your mortgage to be amongst the most severe kind of missed or late payment. When a borrower can’t keep up with payments, the usual behaviour is to stop paying back the accounts that will make the least impact on their daily living.

Since most people in financial difficulty continue to ensure the mortgage is paid, when missed it can indicate a serious issue in the borrower’s ability to repay (especially when it falls into arrears for more than one month). This will severely impact a borrower’s overall creditworthiness.

Starting with the first to fall away, payments usually lapse in the following order:

  • Mobile phones
  • Utilities
  • Overdrafts
  • Credit cards
  • Loans
  • Secured loans
  • Mortgages

Depending on how recently the missed payments occurred, one or two historical late payments on your mortgage going to status one on your credit file isn’t the end of the world. Multiple late payments of status one, or worse, can cause multiple issues and prevent you from finding new finance elsewhere.

However, if you have a reasonable explanation as to why you have missed the payments, such as redundancy, prolonged illness or bereavement, there are several lenders who are willing to consider new applications.

When a lender is assessing your mortgage application, the way they assess you will depend on:

  • How recent the mortgage arrears were
  • Whether you are now up to date
  • If the underlying issues are now resolved (eg. new job if previously redundant)
  • The size of your deposit
  • Whether you have any other credit issues against your name

If you are up to date on the mortgage but have arrears on your credit report you’re likely to require a minimum deposit of between 15-25% on a new purchase or remortgage application, depending on your overall credit profile.

Anyone who is currently behind on their mortgage payments isn’t likely to be approved for a new purchase or mortgage at all. In these cases, the only option would be 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.

It can also help your cause if there are no other forms of adverse credit against your name. Although there are mortgage lenders who are willing to consider applicants with multiple credit problems, you will stand a better chance of approval if late payments are your only issue. Also keep in mind that it’s usually more difficult to get a mortgage if you’ve used a payday loan.

The mortgage brokers we work with specialise in helping customers with late payments and mortgage arrears on their credit file. If you would like to speak to someone about whether you could get a mortgage or refinance an existing mortgage, get in touch and we’ll introduce you to a broker experienced in helping customers in similar circumstances.

Can I get help if I know my mortgage payment will be late?

If you’re struggling financially and know you’re going to miss making your mortgage repayment the first thing you should do is contact your lender. It’s in their interest to help find a suitable solution.

Depending on your circumstances, your lender may suggest:

  • Temporary payment arrangements
  • Lengthening the term of your mortgage
  • Temporarily switching to interest-only repayments

In the unlikely event that your lender isn’t helpful, there are government schemes which may be of use, although you may be required to be already claiming income-related Employment and Support Allowance, Income Support or Universal Credit to qualify. It’s always worth checking to see if you’re entitled to benefits to help boost your income in order to meet your mortgage repayments.

If your debt problems are running out of control and you’re anxious about being able to meet your debt repayments there are several charity advice services offering free, impartial advice too.

Speak to an expert

If you have late payments on your credit file and want to know how this could impact your ability to find a mortgage with competitive rates, get in touch and speak to one of the expert brokers we work with.

All the experts we are whole-of-market mortgage brokers with access to every lender across the UK. They will use their knowledge, expertise and specialist tools to ensure you get access to those lenders most likely to approve your application, saving you time, hassle and, potentially, money.

Call 0808 189 2301 or make an enquiry for a free, no-obligation chat and we’ll match you with a broker with experience of helping other customers in similar circumstances.

Updated: 13th October 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.