Many homeowners have lost their properties due to factors beyond their control. Examples include the credit crunch and changes in certain sectors due to Brexit. However, they have recovered from this and are now financially stable. This allows them to put down a deposit on a house or flat.
Mainstream lenders will typically take a very cautious approach. There are other specialist lenders who are prepared to consider applications from people with a repossession. Conditions vary from lender to lender.
Those specialising in particular bad credit niches are perhaps being able to offer the most flexibility. So, while your situation may be more difficult than most, it may not be impossible.
The details of the repossession
When it comes to the actual repossession, then a potential lender will want to know:
1. When did the repossession happen?
As with so many adverse credit events, as a general rule of thumb the longer ago it was, the better. Repossession in the past 12 months drastically reduces your chances of getting a mortgage. It is almost impossible to be offered one.
It would be beneficial to wait before applying. Focus on rebuilding your credit and saving up for a deposit. This will help you in the long run. If it happened longer than one year ago, then getting a mortgage will still be tricky but it’s not impossible.
The age of the repossession will impact the loan-to- value (LTV) ratio. The remainder will have to be paid as a deposit.
2. Why did the repossession happen?
The reason your property was repossessed is an important element. If you were the victim of fraud or were affected by a reason outside of your control, you are likely to be treated more sympathetically. You will need evidence to back up your claim. Our experts know the best way to present such information so that it helps rather than hinders your application.
3. How much money was involved?
Arguably, ‘how much’ is a less important factor than ‘how long ago’, but it does still have an impact. For example, if the repossession related to the only property on which you had a mortgage. If the amount or percentage of the loan was small, it will be seen more positively. This is likely to result in a better outcome.
It’s all about perceived risk: the lower the value and the fewer the mortgages involved, the better.
4. Who was the lender?
The reason this is a factor is that many lenders are members of banking groups owned by the same parent company. For example, HBOS (Halifax/Bank of Scotland group) comprises AA, Bank of Scotland, Birmingham Midshires, Halifax, Intelligent Finance, and Saga.
That means that while each lender has a different name, you are effectively applying to the same company. If a bank repossessed your property, you’re likely to be denied a mortgage from any within the group.
At Just Mortgage Brokers we understand the relationships between lenders. We can help you avoid making time-wasting applications that can further affect your credit record.
5. Do you still owe money to the lender?
If you still owe money to the lender who repossessed your property, then that is likely to affect your chances. It may also affect the amount you would be asked to provide as a deposit.
Paying off debt can affect the amount of money you have for a new loan. If you are still paying off debt, this could reduce the amount you can borrow. Lenders assess your ability to repay a mortgage by looking at both your income and expenses. This is known as mortgage affordability. The decision as to how much they are prepared to offer is based on this affordability assessment.
6. Are there any other adverse credit events on your record?
When people are in financial difficulties, they generally do whatever is necessary to keep a roof over their heads. This is perfectly understandable, but it also might mean that other payments were withheld in order to keep on paying the mortgage for as long as possible.
That means that as well as having had a property repossessed, there are likely to be other adverse credit events on your credit record. These might include:
People with a bad credit history are considered by lenders to be a greater risk. In turn, they are usually not able to borrow as much as those with an exemplary record.
If you were declared bankrupt as well as having the property repossessed, then that is also an issue. Most lenders will ask if you have ever been bankrupt or had a property repossessed. It is important to be honest here (they will check). That makes contacting a specialist bad credit mortgage broker even more important.
Try our bad credit mortgage calculator.
Lenders will look for evidence that you have maintained your finances in good order since the repossession. They will not want to see new adverse credit events, such as defaults or CCJs. They are likely to be more welcoming of offering credit. This is especially true if the person can prove that their difficulties were just a blip.
You cannot undo events from the past. You can however perhaps improve your credit score with some easy steps.
