Can I get a Mortgage with Defaults?
I know of 2 lenders that will lend up to 95% of a property’s value if the defaults were registered over 36 months ago and 4 more that will lend up to 90%.
With the majority of the other adverse credit lenders, any defaults registered over 2 years ago can be ignored up to 85% loan to value and do not have to be repaid. If they were registered over 36 months ago, you could borrow up to 95%.
I see more defaults registered on client’s credit file than any other adverse credit data. Lenders are obligated to inform you if you have missed payments on an agreement and to give you time to bring the payments up to date.
Unfortunately, some are too quick of the mark and before you know it, a default has been registered on your credit file and once on there, it is very difficult to have them removed. Assuming the company you owe money to agrees to remove it, you then have to wait until they inform the credit agencies to update their systems. And then the agencies have to update their systems!
Because of this, the lenders I deal with have a wide range of products to cater for the odd default right up to unlimited after 1 year and anything in between.
Top tip – always have an open account with a credit reference agency when arranging a mortgage especially the ones that warn you if an entry is added to your file. Why?
You are applying for a mortgage, you sign up for the one month’s free credit report with one of the three agencies (Equifax, Experian & Callcredit) and then you cancel the monthly subscription fee once the free trial is over because you want to save money.
Here are the prices once the free trial comes to an end;
- Equifax – report & score = £14.95
- Experian – report & score = £14.99
- Callcredit – report & score £8.99
(Prices correct as of 28.11.2018)
Then, an adverse entry is added to your file and guess what – you did not know about it because you cancelled the subscription last week and nobody told you!
Having carried out a credit search when a lender receives your mortgage application, most lenders would not carry out another credit search before issuing a mortgage offer. But what if the time between mortgage offer and completion is say 4, 5 or 6 months ahead, or your personal situation changes, you can be pretty sure they will carry out another search, and bingo – what do they find? The adverse entry you knew nothing about and they decline your mortgage.
Think for a moment – what if that had happened between Exchange and Completion? If you are not sure of the implications of that, call me!
Now, if you had maintained an open account, you would have been made aware of entries added to your file and could have done something about it. Once you have completed on the purchase and moved in, then cancel the subscription.
There are free reports offered by Equifax (Clearscore) and CallCredit (Noddle) but I recommend Check My File as they provide data from the three credit reference agencies used by lenders – Equifax, Experian & Call Credit – so it is a good place to start to get an overview of your credit history. It maybe that once I have identified a lender, we get copies of your credit file directly from the agency the lender uses to make absolutely sure your credit history is OK for that particular lender.
So the important thing to remember when looking at your credit file is the date they were registered and the amount. When they were cleared is important to some lenders as they will not lend unless they have been paid off before making a mortgage application but as you can see below, I have a lender that will allow 5 defaults in the past 2 years for any monetary amount. The majority of the lenders I deal with do not expect defaults to be cleared so save your money for a deposit.
How much can I expect to borrow?
- 95% if the defaults were registered over 3 years ago
- 90% if the defaults were registered over 2 years ago
- 85% with unlimited defaults if they were all registered over 2 years ago
- 85% if you have no more than 5 defaults in the last 2 years.
- 75% with unlimited defaults after 1 year
It is very important that you obtain a copy of your credit file to see when the defaults were registered and showing the actual monetary value they were for. Click the following link that will take you to a company called Check My File to down load a copy of your credit file.
Right to Buy and Shared Ownership purchasers should go to the relevant page as the criteria for defaults, CCJ’s and arrears is not the same. Any defaults, CCJ’s or arrears are ignored after 1 year.
If you’re looking for Help to Buy (H2B) Mortgage advice with defaults, I can help. Find out more on Help to Buy Mortgages with defaults.
For more information on how I can help you, please call me on: 01494 526400 or complete my online enquiry form.