Head of Content
Mortgage Advisor & Director
Falling into arrears on a secured or unsecured debt can make it more difficult to obtain new finance, but does that mean you’ll struggle to get approved for a mortgage in the future? Read on to find out everything you need to know.
What are arrears and how do they affect mortgage applications?
If you miss one or more payments on a financial commitment and owe money as a result, you are classed as being in arrears. The ‘arrears’ is the debt that is now overdue.
When you miss a payment, it is recorded on your credit files at the end of the billing cycle, and the amount of arrears you are in will increase until you settle some or all of the debt.
Having current or historical arrears can make it more difficult to:
- Get a mortgage in the future
- Remortgage a property
- Sell your home
The good news, however, is that it is possible to do all of the above but it’s a good idea to seek professional advice before you proceed. If you are applying for a mortgage or remortgage with a history of arrears, you might need a specialist lender.
Can you get a mortgage or remortgage with a history of arrears?
Yes. It is possible to get a mortgage or remortgage with a history of arrears, but some lenders might offer you a less favourable deal, and a few will even reject you outright.
Having current or historical arrears means that mortgage lenders will class you as having ‘bad credit’ and therefore a higher risk than someone with no such issues.
This is why it is a good idea to explore your options with specialist mortgage lenders. Rather than rejecting you on the spot or automatically hiking up your rate, these lenders will take a broader view of your arrears and may be able to offer you a tailored deal.
How your arrears will be assessed
The type of mortgage or remortgage deal you qualify for will depend on:
- Whether the debt was secured: Falling into arrears on secured debts, such as a previous mortgage, is considered more severe than arrears on unsecured finance. Some types of unsecured arrears, such as missed phone payments, can be ignored.
- How recent the arrears were: The longer ago they were, the better. For secured debts, some lenders prefer you to have none in the last 2-3 years, while for unsecured it may be possible to get approved if they were in the last 4-6 months.
- How many times you have entered arrears: Most lenders place a cap on the number of times you can have fallen into arrears within a specific timeframe. For example, one in the last six months or no more than two in the last two years.
- How much the debt is for: Some lenders place a cap on the monetary amount the arrears can be for, but it can vary dramatically across the board.
Mortgage lenders’ requirements for applicants with arrears tends to be different from one provider to the next. If you don’t fit the criteria above, there’s a chance you could still have options - get in touch to speak to one of our mortgage brokers to find out what they are.
General eligibility requirements
As well as assessing the circumstances surrounding your arrears, mortgage lenders will also review how closely you fit their general eligibility criteria, which involves the following:
How much deposit or equity you have
If your arrears are severe or recent, you may need to put down extra deposit or hold more than the minimum amount of equity. While it’s usually possible to get a mortgage with 5-10% of the property’s value as a deposit, you might need at least 15-20% with arrears.
Your age
Your mortgage options begin to decrease in later life as many lenders won’t offer you finance if you will be 75 years old at any point during the term. It’s a good idea to speak to a broker if you are applying for a mortgage in later life and have a history of arrears.
Property type
Most lenders prefer applicants to be buying traditional houses made of bricks and mortar, as most properties outside of this criteria are considered ‘non-standard’ and therefore higher risk. Seek professional advice if you are buying a non-standard home and have arrears.
How to get a mortgage or remortgage with arrears
On Teito we give you everything you need to get started with your mortgage journey. You can use our free comparison service to browse the latest rates and deals for borrowers with bad credit, or book a free, no-obligation chat with one of our brokers to discuss your options.
Choose your preferred option below to get started:
Compare bad credit mortgage rates for FREE
Can you sell your house with mortgage arrears?
Yes. Although this will be a last resort for most people in this situation.
It’s fairly common for people with mortgage arrears that they are struggling to settle to sell their home. This is one way to avoid a repossession, which could end up happening if you are unable to pay the debt, and will ultimately be more detrimental to your credit reports.
Not only would selling your property prevent a repossession, the proceeds from the sale can be used to pay off the arrears and raise capital to secure your next home.
If you are planning to take out a mortgage to purchase your next property, speaking to a broker beforehand is recommended, as the arrears you fell into will be recorded on your credit files, and could restrict your options when it comes to applying with lenders.
Why choose Teito for your mortgage needs?
If you have a history of arrears, getting a mortgage or remortgage is possible, and you can get started on your journey with Teito. Here you can compare the latest rates for free and get expert advice from a broker who specialises in bad credit mortgages.
Here are just some of the reasons why people choose us for their mortgage needs:
- You can access the latest mortgage rates in seconds
- Our brokers can access exclusive deals for borrowers with bad credit
- We are 5-star rated on leading review websites
- You could secured an agreement in principle in minutes
Ready to compare the latest rates and take advantage of a free, no-obligation chat with a broker who specialises in bad credit mortgages? Get started here.
FAQs
If you are struggling with arrears on an existing mortgage, there are a few agencies that can help you to understand your options:
Be sure to contact your existing lender to let them know that you are struggling as they may be able to enter an arrangement with you that prevents a repossession.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.