Adverse Mortgages And Finance

There are a number of  adverse credit mortgage lenders currently, which ones you’ll fit with depends on the specific details and other wider circumstances such as deposit sources and income etc. What’s important to remember is that all lenders have varied criteria, and will accept and decline different things – the only way to ensure you are approved is to not only use a whole of market advisor, but an advisor who actually knows the whole market – often brokers will have the scope of every lender but if they don’t arrange adverse credit mortgages often then they seldom know which lenders do what. Approaching certain mortgage lenders with defaults can be an instant decline depending on when they were registered and the amount of deposit/equity you have. If you approach too many of the wrong lenders the credit searches against your name can decrease your score and harm the chances of an approval.

Defaults on a credit file are one of the most common reasons for mortgage declines with many lenders, especially on the high street where generally only clean credit applicants are approved. Because of the frequency of enquiries we receive, we successfully arrange mortgages for people with defaults every day. Thankfully, there are several mortgage lenders who are happy to approve applicants with all sorts of defaulted credit accounts on their file.

It all depends on the lenders criteria at the time of application, but generally there are several specialists who approve mortgages for people who have defaults as part of their core business. The important thing to remember is that every lender is different – some specialise in low rates and lend to the clean credit customers on the high street, some specialise in self-employed lending, some specialise in adverse credit. The market for adverse credit lending has grown massively since the credit crunch, and some lenders continue to relax their requirements as things continue to develop. Adverse mortgage applications  in 2019 are set to increase as many clients suffer job losses due to the Brexit turmoil which is still ongoing no really knows how this will pan out long term . This doesn’t mean it’s easy to get approved – there’s work to do, and typically your mortgage broker needs to know the market inside out to get your application through, so using a specialist is paramount in these uncertain times.

To establish if you can get a mortgage with defaults there are certain considerations and things you and your advisor will need to check. The following process should help point you in the right direction and work out if you are anywhere near being able to borrow or not, and if so how much you could get.

 Find out exactly what’s on your credit file.

If you want a mortgage with defaults on your credit file, this is by far and away the most important part of the process – we can’t stress that enough! Your advisor will only be able to establish which lenders will accept your application by defining your exact situation – mortgages with defaults aren’t often arranged through guesswork, they are complex and your advisor will need to make sure they are doing it right first time.Lenders have strict a policy, and if you have had defaults in the last 2 years, then there’s really no point in approaching one that doesn’t allow this – you need to find the ones that do.

Can I get a mortgage with a satisfied default?

Most people in the industry assume that repaying debts is important when it comes to being approved for new borrowing, but strangely this isn’t always the case in the mortgage world. Yes, it will almost certainly improve your ‘credit score’ if you have satisfied your defaults before you apply for a mortgage, but it is not always essential with the more flexible lenders because often they don’t actually run a credit scoring system anyway.

Mortgages with settled defaults are slightly easier to obtain, and with the adverse lenders who credit score, some will grade your application into a certain ‘tier’ of risk. Which tier you fall into will dictate which rate you’re eligible for with some lenders. Generally, the lenders that accept defaults are really only concerned with when they were registered, not the dates of settlement, so mortgages with unsatisfied defaults are just as easy to be approved for so long as the dates of registration match up.

Mortgages with defaults and other credit issues

Getting a mortgage if you have other credit issues as well defaults can make things even harder, and will impact the lenders that’ll consider you, the rate, fees, and the loan to value. Typically lenders accepting of more severe credit issues will consider the less severe, so if you just have defaults you’ll have more lenders to choose from than if you have defaults and other issues. It is usually looked at in order of risk to the following hierarchy (most severe to least):

    Current IVA

    Discharged Bankruptcy & Repossession

    Satisfied IVA

    Debt Management Plan

    Mortgage arrears

    CCJs

    Defaults

    Unsecured late payments

    General low credit score

How much can I borrow if I have defaults?

Generally the adverse credit mortgage lenders are tighter on their affordability than some of the high street lenders. If you have a clean credit profile you can borrow up to 5x income, sometimes more in certain exceptional circumstances. If you have defaults your max borrowing may be limited as the lenders who take on higher risk for the adverse like to minimise the risk elsewhere, hence why they require higher deposit / equity in the majority of cases.

If the adverse is over 3 years old it may be possible to borrow up to 4.5, maybe 5x income, but usually maximum loans sizes are around 4x income. Generally, the more severe the adverse, the higher the risk, and so the lenders accepting it will limit loan to income to a greater degree. ‘Income’ is also a changing concept. All lenders accept 100% of basic salary but some will only accept 50% of overtime, bonuses and other additional incomes. Some will demand 3 years of self-employment where others are happy to lend to those with 1 years trading. Some demand those in employment to have been in the same role for 12 months, some with the same employer for 12 months etc.

As always if you do have any mortgage issues or require advice make contact I will be happy to help. Paul  01902 213201

Until next time.

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