Getting a Mortgage With Defaults

A default is recorded on your credit files when a lender or service provider closes your account with them because you have failed to keep up with your payments.

Having defaults makes it harder to secure personal finance, but how does this affect mortgages and can you get approved for one? Read on to find out.

Can you get a mortgage with a history of defaults?

Yes. Getting a mortgage default is perfectly possible so long as you approach the right lender. Whilst most high street lenders don’t offer bad credit mortgages to those with more serious debt issues, many will consider the odd default, especially if it’s been satisfied (paid off).

When the defaults on your credit files were registered and the type of payment(s) you missed can also impact your mortgage approval. Most lenders use a spectrum of which defaults they are most to least comfortable with in their criteria.

Lending criteria for this type of bad credit

Your credit history will always be a consideration when applying for a mortgage, so as defaults are noted on your credit file, this will be one of the factors that lenders look at when assessing your application. Each Mortgage Lender has a sliding scale of debt severity and how risky they consider them to be. For example, minor issues like having missed a mobile phone payment or utility bill will be viewed as less serious than missed payments on secured finance, such as a car purchase agreement or a previous mortgage you had.

Getting a mortgage with multiple defaults or very recent defaults will be more difficult than if you only have one, or if your defaults are older. If you have defaults on your credit file that have been resolved, known as satisfied defaults, lenders are also more likely to consider your application, than if they are still outstanding.

Equally it will be easier to get a mortgage with defaults over 2 years old, as many lenders ignore them after this length of time, provided you don’t have any more recent credit issues. 

General eligibility requirements

Lenders will also consider the following factors that all mortgage applicants are assessed on:

• Deposit size - you may need more deposit with certain credit issues, however, the amount required increases with the severity of your credit issue
• Income - this will be your personal income if you’re applying for a standard residential mortgage or both your personal and business income if you’re applying for a commercial mortgage product
• Property specific criteria - the type of property, the location and its construction can all impact the lender’s perception of risk in lending to you, so some properties will be harder to secure a mortgage for than others

How to get a mortgage with defaults

The best way to achieve a successful mortgage application if you have a history of credit issues, is to take advice from a lender that specialises in bad credit (or subprime) mortgages, like ourselves. We work with a number of specialist lenders who will consider mortgages for a wide range of credit issues.

The following tips will also help:

• Try to satisfy (repay) the default if you’ve not already done so
• Minimise any other outstanding debts that you have 
• Don't take out any further credit
• Try to save a larger deposit if possible
• Take on a ‘side-hustle’ or second job to increase your income
• Consider a joint mortgage with someone else, so that income can be combined. If they have a very positive credit record, this can also help to downplay your credit issues in some cases

If you’re ready to get started on your mortgage journey, you can start comparing the latest bad credit mortgage rates below or have one of our brokers do it for you:

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Available lenders and interest rates

There are many lenders who offer a mortgage for people with defaults. Many of these will be specialist bad credit lenders, also sometimes known as subprime lenders, however, at the more minor end of the default spectrum, even high street banks may be an option. 

The rates available from bad credit lenders are typically higher than those offered by high street lenders, however, there is plenty of competition in the subprime lending market, meaning it’s still worth looking for the best deal available to you.

Will your maximum borrowing be impacted?

It’s possible that your credit score could impact the amount you could borrow with a mortgage, as many lenders will reduce the multiple of your income that they will offer in this scenario. 

Whereas a standard multiple is around 4.5 times your annual income, this may be slightly lower if you have credit issues. However, a default is less likely to impact your loan size than a more serious credit issue, such as an IVA. 

A larger deposit, or securing your mortgage with an asset, such as another property, may reduce the impact of a low credit score, however. It’s important to take advice from a specialist broker to ensure you secure the most suitable loan size for your circumstances. 

You can use our affordability calculator below to get a rough idea of your maximum borrowing based on the typical income multiples used by bad credit lenders:

Why choose Teito for your bad credit mortgage?

A Teito, we specialise in all areas of bad credit lending, including getting a mortgage when you have defaults. We can provide a rate comparison service, if you want to look at the mortgage rates available to you independently online. However, we also offer expert broker consultation, which can be particularly helpful to those with credit issues.

While comparing rates is important, it won’t be possible to see individual lender criteria at this stage. Taking advice from one of our knowledgeable mortgage advisers can help you avoid making applications with lenders that are unlikely to accept your application. As multiple failed applications can further impact your credit score, this is a good way to prevent further damage, while still securing the best rate available to you.

Ready to compare the latest mortgage rates for free and take advantage of a free, no-obligation chat with a broker who specialises in bad credit? Get started here.