Mortgages after Repossession

It’s almost certain that, if you’ve had a property repossessed, you’ll need to put down a larger deposit on any subsequent new mortgage. However, the time that has elapsed since the repossession took place will be a factor. The more recent the repossession, the bigger the deposit you will be expected to put down.

The criteria used by both specialist lenders and high street banks will vary from lender to lender and change over time. Talk to one of our mortgage experts after a repossession to get an accurate appraisal of your options in the current climate.

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:

• County Court Judgments (CCJs),
• an individual voluntary arrangement (IVA),
• debt management plan (DMP),
• missed payments or a default notice.

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.

There are several lenders on the market that you won’t find on the high street or online. These will specialise in products designed to help people in a number of bad credit situations, including repossession.

The right mortgage lenders to deal with are those specialists who understand that people are sometimes victims of circumstance. Past financial difficulties do not define your current risk level. You are not necessarily a high risk now.

These lenders will take a view of your circumstances and make assessments of your current ability to meet mortgage repayments. To them, a repossession does not brand you for life.

Your current financial standing will depend on a number of things. The main one is how long ago your financial problems happened.

Broadly speaking, those with good credit records and/or few other financial commitments can borrow more. This is in terms of both amount and percentage of property value.

If your property was repossessed within the last 12 months your chances of getting a mortgage are slim to none.

The further you get past that one-year threshold, the better your chances of acceptance become. After six years, the event will drop off your credit record and that will make things easier again.

If you have purchased since your repossession using a mortgage you may wish to remortgage in the future. Ensuring this current mortgage is kept up to date will be hugely influential in your choice of lender. The same rules will still apply. The longer period since the event the greater choice you should have.

A house repossession record will remain on your credit file for 6 years. However, do note you will still need to divulge this on an application if asked regardless of it showing. Failing to do so is a criminal offence.

The good news is that many specialist lenders will be prepared to lend to you while it’s still on your record. Stringent criteria will become more flexible as more time passes without you adding any further bad credit events to your file.

Yes, if you’re asked about a repossession, you have to declare it. The issue with a repossession is that, like bankruptcy, it’s seen as a serious adverse credit event.

In both cases, after the details have disappeared from your credit report, you may be asked if you have ever experienced them. Not being truthful puts your mortgage and new home at risk.

Repossession really is the last resort and lenders will only pursue this if all other options have been considered. It is therefore important to ensure you maintain good communication with your lender. Keep them informed of your financial situation and take on board any suggestions they may offer.

Speaking to a good specialist advisor may also help. It’s likely all avenues have been considered by your lender if a repossession order has been issued. However, a third party may be able to offer alternative ideas.

There are certain procedures your lender must take before issuing a repossession order. Speak to a help centre such as the Citizens Advice Bureau who will be able to assist with this. They can also offer help and assistance with your options now and moving forward.