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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: 17th December 2020*

If you’re worried about how to get a mortgage with a default, the good news is that you still have options. Even though some lenders (particularly high street lenders) prefer applicants with cleaner credit, there are several mortgage lenders who are happy to approve applicants with all sorts of defaulted credit accounts on their file.

In this article, we look at how you can get a mortgage with a default, which specific factors could affect your chances, and how to find the best mortgage deals.

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Can I get a mortgage with a default?

Yes, absolutely. While there are several mortgage lenders willing to loan to applicants with satisfied defaults, they will still carefully consider your application as a whole and weigh up the severity of your adverse. However, that doesn’t mean that your only options are bad rates – you just need to get in touch with the right people.

How to get a mortgage with a default

To establish if you can get a mortgage with defaults, there are certain considerations and things you and your advisor will need to check beforehand. The following process should help point you in the right direction and work out if you are anywhere near being able to borrow or not, and if so how much you could get.

Here are the steps to take…

Find out exactly what’s on your credit files

If you want a mortgage with defaults on your credit file, download your credit reports from Experian, Equifax, and Callcredit (now known as TransUnion). You’ll be able to see your score and history, as well as any factors (both good and bad). You can dispute any inaccuracies with the lenders to get them fixed, or find ways to improve your scores quickly.

Lenders can be strict when it comes to defaults, though each provider uses a different reference agency, and if you have had bad credit often the reports will look very different, as one report may look better than another.

You can download your three reports for free, then work with an advisor to see which lenders use which credit agencies.

Review reports and criteria

Once you have your reports, send them to your advisor (they will likely ask for them anyway if they know what they’re doing). If you want to review them yourself then you are looking at all the credit accounts for account type (credit card / loan / mobile phone etc.), default dates, default amounts, and any settlement dates.

You may also want to check through for other issues such as late payments, arrears, and public record information (at the bottom) for CCJs, IVAs, and bankruptcy information. Make a list of these from all three reports and have them ready for your advisor to save them time, or just give them the reports to do it themselves.

Make an application/enquiry

If you fit within a lender’s default limits and have the right amount of equity/deposit, a mortgage advisor can help you find the best deal to fit your circumstances.

Eligibility criteria

The table below covers the range of lending options at various loan-to-values (LTVs). Lending is possible up to 95% on the Help to Buy scheme even if you have defaults on your file, which could be ideal for many budding homeowners to buy with a small deposit. Those with more severe/recent defaults will likely need a greater amount of deposit/equity.

Lender Maximum Loan to value (LTV) Date default was registered Date default was paid off Other adverse credit conditions Approx. rates to expect (very rough idea at time of writing)
A 95% Over 36 months ago Over 36 months ago May consider 1 or 2 missed payments in the last 24 months. 5% to 5.5%
B 90% Over 24 months ago Do not have to be paid off Can be within 24 months if satisfied more than 12 months ago. Can be ignored if they aggregate to less than £300 and are satisfied prior to application. 4%
C 85% 3 in 24 months Do not have to be paid off May consider 3 or 4 missed payments in the last 24 months. 4% to 5.5%
D 80% 0 in 48 months Do not have to be paid off 3%
E 75% 0 in 6 months (2 in 12) Do not have to be paid off 4%

Note: The information displayed in this table is only a rough estimate. Criteria can change regularly so it is important you make an enquiry and speak to one of the experts who can provide you with specific, up to date advice.

What is a satisfied default?

A satisfied default is when you have finished paying off your defaulted debts, and the sooner you can pay it off, the better. A default (whether satisfied or not) will drop off your record after six years. Lenders prefer satisfied defaults because it shows them that, even though you previously failed to repay your debts, you’ve managed to pay it all back.

Impact on mortgage

If you have a satisfied default, you may find it easier to get a better mortgage and more competitive rates than if you have an unsatisfied one, and some lenders may even grade your application into a certain ‘tier’ of risk. Which tier you fall into could dictate what rates you’re eligible for.

However, while having a satisfied default could increase your credit rating, it’s not always essential as there are more flexible lenders who may review applications without looking at your credit score. Lenders who accept defaults tend to be more interested in when your default was registered and not the dates of settlement.

Does the type of default make a difference with mortgage applications?

Yes. Mortgage lenders will interpret defaults differently depending on the type of account it was, some are deemed more severe than others. For instance, mobile phone defaults are taken with a pinch of salt by some lenders, whereas mortgage or secured loan defaults are treated even more seriously than anything unsecured.

Some lenders see all defaults the same severity and, if you have had one, it’s a block mark regardless of the account type. However, there is a general opinion of certain account types that tend to fit a certain order of importance – see our ‘Can I get a mortgage with outstanding debt?‘ section below for more information.

Can I remortgage with defaults?

Yes, it can still be possible to remortgage with defaults on your credit file.

As with other types of mortgage applications, it will all depend on the date the default was registered, the amount and if there are any other forms of bad credit on your credit file.

It may still be possible to get competitive rates for a remortgage with defaults on your credit file.

For more information read through our, how to remortgage with bad credit guide.

Other credit issues

Getting a mortgage if you have other credit issues as well defaults can make getting your application approved harder, and you’ll likely have to pay a higher rate of interest, fees, and put more deposit down. However, an expert bad credit mortgage broker may be able to tell you how to improve your circumstances and boost your chances of getting a better deal, even if you e.g. need a mortgage with a CCJ and a default.

Can I get a mortgage with outstanding debt?

Typically, lenders accepting of more severe credit issues will consider the less severe, so if you just have defaults you’ll have more lenders to choose from than if you have defaults and other issues.

It is usually looked at in order of risk to the following hierarchy (most severe to least), the following bad credit mortgages may be available:

Note: Payday loans are not strictly considered as adverse credit, can severely harm your chances of approval.

How much can I borrow if I have defaults?

The amount you can borrow is typically a multiple of your salary (for both single and joint applicants with one bad credit applicant), but this multiple will depend on whether your application matches a lender’s affordability criteria, and they may be more restrictive if you have a default. However, some lenders will process your application with an underwriter before deciding on how much they’ll lend you.

If you have clean credit, you could borrow up to 5x income or more in certain circumstances, though this usually isn’t available for borrowers with defaults. If your default is over three years old, you could borrow around 4x income. Generally, the more severe the adverse, the higher the risk, and so the lenders accepting it will limit loan to income to a greater degree.

For self-employed workers, you may have to evidence three years’ earnings, while others are happy to lend to offer mortgages for self-employed people with 1 year’s accounts. Some demand those in employment who have been in the same role for 12 months, some with the same employer for 12 months etc.

Also, bear in mind that not all lenders will factor in overtime, bonuses and other additional incomes, though a mortgage advisor can help you find a lender who will.

Mortgage lenders who accept defaults

There are many lenders who will consider applicants with defaults, though the right lender for you will depend on well you fit their criteria, your income, size of your deposit and the nature of your default.

Some mortgage providers who may approve applicants with a default may include:

  • Natwest
  • Nationwide
  • Halifax
  • HSBC
  • RBS
  • Kensington
  • Virgin Money
  • TBS
  • Santander
  • Lloyds

What’s important to remember is that all lenders have varied criteria, and will accept and decline different things. The only way to ensure you’re approved is to not only use a whole-of-market mortgage advisor, but an advisor who actually knows the whole market.

There are many whole-of-market brokers with access to every mortgage lender, but if they don’t arrange adverse credit mortgages very often then they seldom know which lenders do what.

Approaching certain mortgage lenders with defaults can result in a mortgage being declined instantly, depending on when they were registered and the amount of deposit/equity you have. If you approach too many of the wrong lenders the mortgage credit checks against your name can decrease your score and harm the chances of approval.

For the best chance of getting your mortgage approved first time round, talk to one of the whole-of-market specialist brokers we work with. They have helped thousands of customers like you get a mortgage.

How soon after a default can I get a mortgage?

Some lenders could offer you a mortgage pretty soon after a default, even from three months. However, each lender will also consider how much your default was, the number of defaults you have, and how long ago your default was registered before they can decide how much to lend you.

See our table below for an idea of what mortgage you could get:

Lender Time since default registered Max number of defaults Max amount of defaults Max LTV available
Precise Mortgages In the last 12 months 1 £1,500 85%
Kensington Mortgages Between 12 & 24 months Not specified £1,500 85%
Buckinghamshire Building Society Between 24-36 months Not specified Up to £250 to get 95% LTV, over £250 must be employed and not a first-time buyer Up to 95%

*Mobile phone defaults are generally ignored.

Note: The information in this table is accurate as of the time of writing. Criteria can change regularly so it’s recommended that you speak with an expert broker for the most up-to-date offers.

Can you get a default removed?

Unfortunately, you can only get a default removed if it was listed in error. Otherwise, it will appear on your credit report for six years. However, there are steps you can take to reduce the amount of negative impact it has on your credit rating, such as paying it off so it’s listed as ‘paid’, which may sit better with some lenders.

Speak to an expert about getting a mortgage with a default

If you have a default and want to know what sort of mortgage you might be able to get, talk to one of the whole-of-market brokers we work with. They will be happy to answer your questions and help you understand all your options.

Call 0808 189 2301 or make an enquiry. We don’t charge a fee, there’s no obligation to go any further and we won’t leave a mark on your credit rating.

Updated: 17th December 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.