Author's Avatar
Author: Carl Shave - CEO and co-founder
Last updated: 06 Dec 2024

Getting a mortgage with a default

Occasional missed payments are not necessarily a cause for concern. Not paying on time or not paying enough for several months can lead to a default notice from the creditor(s).

Seeking expert help can overcome obstacles when you apply for a mortgage. This can make it possible to get a mortgage sooner than you think.

Do you qualify?

NO CREDIT CHECKS!

What is a default?

A default occurs when you have missed, or haven’t paid in full, several payments to the same creditor. The creditor closes your account to prevent further borrowing and adds a mark to your credit report. In turn, this will negatively impact your credit rating.

A default notice is a formal letter sent to you if debt is regulated by the Consumer Credit Act. Sending the letter is a legal requirement, it doesn’t mean that legal action has begun.

The creditor does not have to send a notice if the debt is not regulated by the Consumer Credit Act. However, it will still affect your credit report.

An introduction to Bad Credit Mortgages

Bad Credit Topics

Whether it be late payments, defaults or CCJs, we’re here to help you secure a mortgage.

What happens if I get a default notice?

If you get a default notice the creditor can:

  • Demand the full outstanding balance (not just the overdue amount).
  • Pass the debt to a collection agency.
  • Start court action.
  • Start proceedings to repossess assets that form part of the agreement (a car or property).

If you can afford to bring the account up to date, you should. If you can pay the late balance on time, you can request to remove the default from your credit report.

You can check your credit report with any of the three main credit reference agencies, Experian, Equifax or TransUnion.

If you are unable to pay your debt, reach out to the person you owe money to. Try to come to an agreement on a repayment plan for the amount you owe.

If you have deliberately withheld payment because of a dispute, make sure the creditor’s accounts department are aware. It is better to get in touch with them at this stage than if they commence legal proceedings against you.

A default will last 6 years on your credit file from the date of registration[1]A collection agency may add another default to your credit file if they buy your debt. This happens when the collection agency takes over the debt, resulting in two defaults on your report.

The collection agency will re-register the first default as “satisfied” and then register a new default as “debt assigned”. This tells anyone checking your report what has happened.

The expiration date remains the same. It stays on your report for 6 years from the first entry, and then both entries should be deleted.

If a default has been registered correctly this will remain on your credit file for 6 years. This is even if you have paid it off in full. However, if it has been registered in error you can request its removal.

To do so you will need to contact the company that has registered the default or the credit reference agencies where it is recorded. Ensure you have evidence to hand that you can provide where required. Items such as proof of payment, bank statements, identification and proof of address.

If they agency is satisfied with this evidence, they will then remove the default from your credit file.

Can I get a mortgage with a default?

Defaults on your credit file are a common reason for mortgage rejections. However, they are less harmful than other types of bad credit issues such as IVAs or bankruptcies. In turn, this does mean it is definitely possible to get a mortgage with one on your credit file.

Typically, a mortgage application will be automatically turned down by high street banks and building societies if they see a recent default. But, there are many specialist lenders that are still willing to consider a mortgage application for people with adverse credit and defaults.

A bad credit mortgage with a default will not be as competitively priced as if your credit record were clean. You will also usually need the assistance of an experienced bad credit mortgage broker to find the very best deal.

There is no set time that lenders require to have passed in order for you to get a mortgage. Instead, there are a number of factors they will look at to get an overall picture of your financial situation, not just your credit history.

Of course, the more time that has passed, the better it will look to lenders. However, this doesn’t mean that you can’t get a mortgage within a year of a default being registered.

Typically, the more recent a default is, let’s say within the past 2 years, the less chance of success you will have with mainstream and high street lenders. Instead, you will need to need to utilise more niche, specialist bad credit lenders who take a much broader approach to your circumstances.

If your default has been removed from your credit file after the 6-year period, your lending options will be much more open, providing your recent credit has been kept clean. This means that its likely mainstream lenders will be much more accepting, and you wont always need to rely on specialist lenders.

If you have satisfied your default, it can show lenders that you have taken control of your finances, which looks good to them and will work in your favour. Although, lenders don’t always just focus on if the default has been satisfied. They also like enough time to have passed since the default was registered, as mentioned above.

How much deposit will I need?

In the UK a minimum deposit that most lenders usually require is between 5% and 10%, providing you have a good credit history to back it up. However, as we know, defaults will affect your credit score, in turn they will also likely affect your deposit requirements.

A good rule to apply is the more recent a default, the more likely your deposit requirements will need to increase. For example, if you have had a registered default in the past year, you may need a deposit of 20%.

However, if 6 years have passed and the default has been removed from your credit file, then you may be able to provide a lenders minimum requirement.

You should always keep in mind that your perceived risk plays a big part and that there will be numerous factors a lender will look at. This includes things such as your income and more recent credit. Therefore, everyone’s requirements will be slightly different, even if they have both had a default from the same amount of time.

To get an accurate idea of how much you may need to put down, why not reach out today and discuss your situation with one of our expert advisors?

How much deposit will you need?

How to maximise your chances of mortgage success

Approaching lenders after suffering credit issues in the past can come off daunting, as you may be unsure if you will be rejected instantly.

However, don’t worry – we have put together some steps that can help you present yourself in the best light to any lender and maximise your chances of being accepted.

Repairing your recent credit will demonstrate to lenders that you are better able to manage your finances in recent times, compared to your past. In turn, this can lead lenders to perceive you as a smaller risk, which can significantly help you case when applying.

It can also prevent lenders from imposing certain conditions like higher interest rates or deposit requirements.

Why not check out our full in-depth guide on how to improve your credit score in preparation for a mortgage.

Using a mortgage broker can prove invaluable when it comes to applying for a mortgage with bad credit. Not only will they be able to analyse your situation and make recommendations surrounding your application, they also have access to specialist mortgage lenders.

These lenders don’t always make themselves accessible to the general public, instead they only work with intermediaries.

Therefore, by consulting a broker’s services you can significantly open up your mortgage options and increase your chances of success.

As discussed above, a larger deposit reduces the lender’s risk, which can make the lender more willing to approve a mortgage, even with a default on your record.

For example, if the minimum deposit requirement is 10% of the property’s value, try and aim for 15% instead.

This will not only make your application more attractive, but it can also allow you to access more competitive products with lower rates. These lower rate products can actually save you in the long run, as you won’t be paying as much in interest over the mortgage term.

During their affordability assessment, a lender will look at all of your expenses, including any debts you have. Therefore, lowering your debt-to-income ratio by paying off existing debts can make you more appealing to lenders.

The less financial commitment you have to other debt, the more capacity you’ll have for mortgage repayments. Which will not only make you more attractive to lenders, but can also allow you to borrow more in some circumstances.

Finding a lender who accepts applicants with defaults

As discussed, the result will depend on the time that has passed since the default and what steps you have taken to improve your situation.

The more recent a default, the more chance a mainstream or high street lender won’t be willing to offer you a mortgage. However, there are specialist lenders available in the market who specifically cater to those with bad credit.

Some specialist lenders who we have access to and have worked with include:

  • Precise
  • Pepper Money
  • Aldermore
  • Kent Reliance

Can I remortgage with a default?

It is possible to remortgage your property with defaults on your credit record, as with a standard mortgage. A lot will depend on:

  • The size of the previous default
  • The length of time since the default occurred
  • Whether it was for mortgage payments or for another loan
  • Whether it was settled

Default notices in the past 18 months are important, and having other marks on your credit record could make things harder.

Your actions since the default(s) to rebuild your credit score will also be considered. This includes:

  • Regularly repaid credit card bills
  • Mortgage payments being paid on time
  • Not falling behind on any other outgoings for an extended period

Some lenders are more flexible than others about defaults on your credit history. If you’re unsure if you are in the position to remortgage after a default, then reach out today.

One of our expert bad credit specialists will be on hand to discuss your needs over a free initial consultation.

Organise your free consultation

Share useful information

Mortgages with a Default FAQs

If you fall into arrears on an account, the lender will close it and a default will be registered. As well as the missed payments showing on your credit report, the default will also show.

A default notice will set out how much you owe and when you need to pay it. If you can pay, you should do so when you receive the notice.

You can request to remove the negative mark from your credit history if you pay the amount you owe on time. However, the late payments will remain on file.

Contact your creditor if you are unable to make a payment. It’s possible you will be able to arrange to make smaller regular payments to clear the debt.

If you can’t pay, talk to your creditor and make repayment arrangements. Also, check your credit report for any problems.

If you see the same default twice on your credit report, it means the debt was sold to a collection agency. If this happens, then the first default should be marked as “satisfied”. The debt collector will re-register the default, but it should be flagged as “debt assigned”. Anyone checking your report will then understand that your debt has been sold on.

The default on your credit report will stay for 6 years from the first entry, even if it is entered again. After that, both entries should be removed.

If a lender is willing to offer a mortgage, how much they offer will depend on your ability to repay. A mortgage affordability assessment looks at your income versus your outgoings.

If you have good credit, you can usually borrow up to five times your income. Lenders will always take your affordability into consideration.

If you have bad credit, like defaults, and other financial commitments, you will probably be able to borrow less money. You might also be expected to put down a bigger deposit.

Often, it depends on when the default occurred and how much risk the lender thinks they are taking.

Try our mortgage affordability calculator

Why choose Just Mortgage Brokers for your Bad Credit Mortgage?

  • This is our speciality – it’s what we do
  • Direct access to lenders underwriters enabling us to discuss your situation in detail
  • Exclusive deals available
  • Broker only bad credit lenders available to us giving you greater choice
  • Unlimited mortgage broker – giving a wide range of lenders at our disposal
  • Great customer reviews
Author's Avatar

Carl Shave

CEO and co-founder

About the author

Carl Shave has been involved in the mortgage & finance industry since leaving education and is one of the co-founders of Just Mortgage Brokers. He has written guest posts and provided journalist comments for companies such as The Times, FT Adviser, Mortgage Strategy, Mortgage Solutions and others, demonstrating his extensive industry knowledge.   Qualifications   Certificate in Mortgage Advice and Practice (CEMAP)   Year Attained: 2001   FCA Profile

Working With Leading Brands and Many More!

bluestone-400x200-1
aldermore
precise-mortgages-new
Kensington.jpg-200x200-1
pepper-split-mortgages-new

Contact us

Request a call back from our team by entering your details below and we’ll be in touch soon.

Alternatively phone us on 01473 356 284.

All required fields are marked with an asterisk (*).

Contact us

Consent(Required)
This field is for validation purposes and should be left unchanged.