Late Payments and Mortgage Applications
Don't let late payments on your credit report get in the way of applying for your mortgage. Find out how to get the best available rate
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Here we’ll take a look at how late payments can affect your mortgage application, what to do if you’ve been declined a mortgage based on a history of late payments, and how taking specialist advice can help you secure the borrowing you need.
What is classed as a late payment?
A payment on a credit agreement is officially classed as ‘late’ when 30 days after its due date have passed. Before this point, you have a window of opportunity to settle the overdue amount before the creditor reports the issue to the credit reference agencies and it gets recorded on your records. Some lenders and creditors don’t report these issues until 60 days have passed.
If the late payment isn’t settled on time, it will be recorded on your credit reports and will remain there for seven years, which will make it more difficult to secure new finance in that time period.
How does this differ from arrears?
A late payment is recorded when you’ve still made a payment, but it’s been later than agreed. These are sometimes marked on your account with a ‘1’ next to them, to show lenders that it was paid within 1 month of the contractual payment date.
Anything that remains outstanding after this date will be classed as arrears, and you will therefore be in arrears (or in debt) from that point forward until you have repaid the outstanding amount. Getting a mortgage when you have debt can be more difficult.
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Can you get a mortgage with late payments on your credit report?
It’s perfectly possible, yes. In the grand scheme of things, late payments are the least severe form of bad credit and are therefore usually the easiest to overcome when it comes to a mortgage application.
That said, each mortgage lender will assess your credit file differently, so although one lender may be happy to approve your application, this will not necessarily be the case across the board. It’s therefore important to seek guidance from a specialist broker before you make an application
How much deposit will you need?
It is possible to get a mortgage with a deposit of 5-10% assuming there are no other risk factors involved in your application. Rates might be slightly higher than average if you only have this amount of deposit to put down.
Those who can stretch to 15-20% deposit should see the rates they’re offered begin to normalise, while 25-30% will further increase your chances of landing a good deal.
What should you do if you’ve had a late payment or know in advance you will be late?
If you know in advance that the payment is going to be late, speak to the lender or creditor immediately and explain why. If there’s a good reason, like an unexpected life event, they may offer you a grace period to pay up before the credit reference agencies are informed.
The same applies if you recently missed a payment. By providing the lender or creditor with a satisfactory explanation, you will increase your chances of being offered time to resolve the issue before it is recorded on your files.
What to do if you’ve already been declined a mortgage due to late payments
It’s advisable to seek advice from a mortgage broker. Make an enquiry with us so we can match you with a mortgage broker who specialises in securing finance for borrowers under these exact circumstances.
The broker we handpick for you will help you do the following…
- Determine when is the best time to re-apply for a mortgage: Applying straight away comes with the risk of further impacting your credit reports, but a mortgage broker can help you time your re-application to avoid this.
- Download your credit reports: You can do this by activating a free trial. Your broker will suggest ways to optimise your reports and build credit quickly so your re-application is stronger.
- Secure a better outcome than before: Your mortgage broker will do this by identifying the ideal lender for you. The brokers we work with have deep working relationships with lenders and may be able to secure you an exclusive deal.
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Does the type of late payment you have matter?
Yes. late payments will fall into one of two broad categories: secured payments and unsecured payments. Missing secured payments is generally a bigger deal.
This would include payments on debts that are secured against a property or asset. Examples include mortgages, secured loans and asset finance. If you’ve missed payments on secured debts, a mortgage lender is more likely to increase the interest rate they are willing to offer or ask you to put down a larger deposit.
This includes things like mobile phone bills, credit cards, personal loans and overdraft charges. If you miss a payment on an unsecured debt, most mortgage lenders won’t categorise you as having severe bad credit, especially if the issue occurred years ago and you are able to put down more than the minimum 5-10% deposit.
How do late payments affect your credit?
How much impact late payments have on your record, depends on the overall state of your file prior to the late payment, as well as the finer details of the circumstances, for example:
Types of late payment
Late payments on unsecured credit agreements such as credit cards, overdrafts, utilities, and phone contracts are seen as less severe by most lenders than late payments on secured debts, such as secured loans, or even worse, a late mortgage payment.
Number of late payments
On an otherwise clean credit file, 1 late payment is unlikely to have too much impact, however, the more credit issues you have, the more significant the impact of additional late payments will become.
Some lenders have a maximum number of late payments that they deem acceptable in order to be approved for a mortgage, and this is typically two within a period of 12-36 months, depending on the lender.
This often only applies to unsecured finance, however, and many lenders won’t be willing to approve a mortgage where late payments exist on secured finance agreements. Some lenders allow for a maximum of 1 late payment on secured finance agreements, and a few will look at all.
When they occurred
A late payment will stay on your record for 6 years, however, the older the issue, the less impactful it will be. If you only have late payments that are older than 2 years, some lenders would be happy to overlook them.
More recent late payments could be a problem, however, for example, some lenders won’t accept any late payments if they were made within the most recent 6 months.
Why they occurred
Some lenders will be willing to look at why your payments were delayed. If, for example, you were ill or impacted by a life event, such as a bereavement, that caused an out-of-character delay in paying your bills, they will be much happier to overlook it.
How your debt-to-income ratio might be affected
Your debt-to-income ratio might be impacted if your late payments have become arrears and you’re in the process of settling the debt. You can use our calculator below to see how your current debts fair versus your total income and how a lender may view this ratio when reviewing your application:
Debt to Income Ratio Calculator
You can use our debt-to-income (DTI) ratio calculator to work out how much of your income is going towards your fixed outgoings, expressed as a percentage. Based on that percentage, this tool will tell you whether mortgage lenders will class your DTI as low, medium or high.
Your Debt to Income Ratio is %
Good news! Most mortgage lenders will class your debt-to-income ratio as low. You’re unlikely to be declined for a mortgage based on your outgoings, but speaking to a mortgage broker before applying is still recommended as they can improve your chances of getting the best deal.
Most mortgage lenders will class your debt-to-income ratio as moderate, which means some of them might view your application with caution. Some lenders are much more strict than others when it comes to affordability and debt, so it’s important for you to find a lender who’s more lenient. You should speak to a mortgage broker before you apply to ensure you’re matched with a lender whose criteria you fit.
Most mortgage lenders will class your debt-to-income ratio as high. But that’s where we can help! With so much of your monthly income going towards debt repayments, you could struggle to get approved for a mortgage without the help of a mortgage broker. We can help you find a lender who’s more lenient on debt and affordability, and could still secure a mortgage approval.
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Which lenders will consider your application?
Only a minority of lenders will decline an applicant with late payments on the spot. These include Santander and the Bank of Ireland, but most other lenders will at least consider offering a mortgage.
Many of the lenders who cater to borrowers with a history of late payments will have caveats to the mortgage.
You’ll find some examples of this below…
- Natwest: Will base their lending decision on your overall credit score and may request extra underwriter scrutiny.
- Nationwide: Will at least consider an applicant with late payments, subject to approval from a senior underwriter.
- Kensington Mortgages: Will only lend if all of the late payments are settled at least six months before the application.
- Pepper Money: Will reject an application if the late payments were on fixed-term agreements in the last six months.
The above is merely a snapshot of the market, but the thing to bear in mind is that there is no ‘best’ lender for a borrower with late payments on their file. The right lender for you is the one who is ideally positioned to approve you for a mortgage based on a full picture of your needs and circumstances. The best way to find such a lender is with the help of a specialist bad credit mortgage broker.
What interest rates to expect
The table below provides a snapshot of the typical interest rates you can expect for a mortgage with a low credit score.
Looking for more rates and deals?
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Last updated September 2023
The rates quoted above were correct at the time of writing and are subject to change at any time at the lender’s discretion. Speaking to a mortgage broker is the best way to keep track of the rates available at any given time.
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Remortgaging with late payments
Unless the late payments were on your mortgage, it’s unlikely that you would be refused the opportunity to remortgage purely based on late payments on your credit file, so long as your credit record is otherwise clear.
Even if you’re unable to remortgage with a high street lender, there are plenty of bad credit lenders that offer remortgages. It can often improve your chances across the market if you are able to offer a more substantial deposit and/or have significant equity in your home, however.
If you’ve missed payments on your mortgage, or even worse, are in arrears, it can certainly be more tricky to secure a remortgage until you’ve resolved the issue.
Why use Online Mortgage Advisor?
If you’re concerned that a history of late payments will affect your ability to get a mortgage, get in touch with us and we can arrange for a broker to contact you with experience in helping clients in your precise circumstances.
They will be able to help you to prevent any further damage to your credit file by ensuring you only approach those lenders who will be sympathetic to your needs.
We offer a free broker matching service, meaning we can put you in touch with an expert in securing mortgages for applicants with late payments on their file.
There’s absolutely no obligation, and the first appointment with your broker is also free. Simply reach out to us on 0808 189 2301 or make an enquiry, and we’ll find the right expert for you.
Did you know… You could access 30% more of the mortgage market with a specialist Bad-Credit mortgage broker on your side.
Speak to a bad credit mortgage expert
Maximise your chance of approval with specialist advice from an expert in Bad Credit Mortgages
If a late payment has appeared on your credit file in error, or you have a reasonable explanation as to why the payment was late, it’s possible to ask for the mark to be removed from your credit file, although this will be at the discretion of the individual creditor.
Some lenders will be happy to make what’s known as a ‘goodwill adjustment’ if you can prove that your payment either wasn’t late or if you agree to sign up to pay by direct debit in the future. To find out more, this Experian post about how to remove a late payment from your credit report will help
Mortgage lenders typically look at your credit history over the last six years. Any late payments that occurred before that shouldn’t impact your application.
If you do have a late payment against your name within that time frame, expect the lender to request further information about it, but that isn’t to say they will necessarily decline you for a mortgage.
It is recommended that you pay your mortgage on time where possible, but if there are extenuating circumstances that prevent you from doing this, you will have a 30-day grace period to make the payment before your lender reports it to the credit reference agencies.
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