Who doesn’t want the perfect home in the heart of the UK? Especially if you have been dreaming of moving for months or years. But one’s heart truly sinks when the dreaded obstacle of “default” comes up. For many in the UK, this is the reality. With the financial past under a scrutinizing microscope, getting a mortgage with defaults feels like an uphill battle. 

Securing a mortgage with defaults involves complexities, but shedding light on them helps you navigate the tricky process. 

What are Defaults?

Failing to meet any payments for a credit agreement is considered to be a “default.” This could be a loan, credit card, or simply utility bills. They are only registered in the UK after missing three to six payments in a row.

Not only does your credit score take a hit, but defaults unfortunately make it more difficult to access credit in the future as they reflect a breach of trust. 

How Long Does a Default Stay on My Credit Report?

While all that sounds daunting, the good news is that the stain on your credit doesn’t stay there forever. The bad news is that even if you have settled the debt, it will remain recorded for six years from the day it was added. 

While the default doesn’t magically disappear after you have paid it off, it will be marked as satisfied, which helps improve your credit score over time. 

Can I Get a Mortgage with a Default?

A default can be a hiccup in securing a mortgage, but not the full stop. Mortgage lenders in the UK will look at defaults in different ways. The type of default, what money you owe, how long it has been, and whether the debt has been settled will all be analysed and be major factors behind the final decision. 

It is true that you are more likely to face outright rejection from mainstream lenders if you have a recent or unsatisfied default. Lucky for you, some lenders are more flexible and lenient. They specialise in working with such clients and assess the overall financial situation. Your one mistake can be overlooked if you have a stable income source, are able to pay a good-sized deposit, etc. 

What Affects My Chances?

Not all defaults are the same. There are some defaults you can get away with, where some may cause more problems than we want. Here are some things lenders would consider that can tip the scales either way.

• Size of the Default:

Lenders can turn a blind eye to smaller defaults. Like a £200 phone bill from two years ago? Not that big of a deal. However, a recent £10,000 personal loan default? That may steal the spotlight from any other factor. 

• How Recent the Default Is:

When it comes to securing a mortgage, waiting it out a little can be very wise. This is because a default from six months ago can be negatively impactful whereas one from four years ago may not hold the same weight. 

• Type of Default:

This is a significant factor as lenders aren’t too wary of missed utility bills but what is truly a nightmare for them would be essential payments such as mortgages or loans. Lenders are the most concerned about mortgage arrears. 

• Whether the Default Is Satisfied:

While a satisfied default remains in your report, it is much worse to have an unsatisfied debt. A satisfied mark shows that while mistakes can happen, you are capable of fixing them, making default mortgage lenders look upon your application more favorably. 

• Deposit Size:

Now here’s something a bit more in your control. Offering to pay a large deposit can increase your approval chances significantly, as lenders may see it as less risky. However, that does not mean agreeing with unreasonable or unaffordable terms. 

There is no guarantee that you will be getting a mortgage with a default but many Brits have managed to secure it.

What are the Available Options?

When it comes to defaults and mortgages, there are a few options to explore. Here are some routes to consider in your ‘getting a mortgage with a default’ journey.

• Specialist lenders are more understanding when dealing with individuals with a history of poor credit. While they may charge higher interest rates, they provide an escape from financial difficulties. As your credit score improves over time, you may have the opportunity to remortgage at better rates in the future.
• Repair your credit. You cannot remove the stain of defaults before six years but what you can do is improve in other areas. Try to pay off outstanding debts, be on time for future payments, and try to maintain a stable income. Make sure to get your credit report checked to keep all information updated. 
• You may consider offering a (possible) larger deposit. This is to provide your lender with some reassurance. Consider it as an amendment for previous mistakes.

Conclusion

Securing a mortgage with defaults is no easy task in the UK, but it’s a challenge worth taking. All you need is the right preparation, a suitable lender, and to be open to different deposit options. Defaults may stay on your credit report for six years but you can diminish its impact by making good financial decisions in the meantime. Remember that one mistake does not have to be the obstacle between you and homeownership.

The first step is to assess your financial situation and speak to a specialist broker. They will help you understand defaults and mortgages more in-depth. Professional help acts as the best guidance and your matchmaker to the perfect lender for your circumstances!

When you are ready to take the first step, contact UK Mortgage Finder. We have a line of experts to give you the right advice and set you on the right way. Let us help you make your dream a reality.