Mortgage with defaults

Getting a mortgage with defaults on your credit file can be a challenge. Many lenders won’t consider your mortgage application if you have a history of missed repayments. However, there are other lenders that will be willing to look at your financial situation in more detail before making a decision.

Getting a mortgage with defaults

Defaults on your credit file are one of the most common reasons why many lenders decline mortgage applications. But there are plenty of bad credit lenders that will still consider your application. These lenders have helped people get mortgages even if they have CCJs or been made bankrupt.

If you are in this position, using a broker with a good knowledge of the bad credit mortgage market will help you get the best mortgage deal.

What is a default notice?

A default notice is a formal letter sent by your creditor after a number of missed repayments and will typically include:

  • The terms you have broken in your agreement
  • How much you need to pay
  • The date you will need to make this payment by
  • The consequences that will occur if you fail to comply
  • The length of time you have to respond to the notice (typically within 14 days)

A default can remain on your credit file for up to 6 years and will be visible to anyone you make a credit application with during this time.

When can you apply for a mortgage?

Satisfying a default (paying it off) can help to increase your chances of mortgage approval. Although you’ve missed repayments, lenders will be able to see that you’ve done all you can to rectify the situation. Paying this debt, however, won’t remove the default from your credit file and it will remain for 6 years from the date of the default.

Bad credit lenders are most interested in your recent credit activity, so applying for a mortgage soon after satisfying a default is not a good idea. The older the default, the smaller the impact will be on your mortgage application.

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Why Clever Mortgages?

At Clever Mortgages we can offer you the support and advice required to ensure you get the right mortgage for your first home.  We provide access to a comprehensive range of mortgages from across the market. We are also authorised and regulated by the Financial Conduct Authority (FCA) and adhere to the Treating Customers Fairly (TCF) guidelines, so you can be confident that we will treat you with integrity and only recommend products that meet your needs.

Mortgage types

A fixed rate mortgage is where your interest rate stays the same for a set time period (usually between 2-10 years). As a result your repayments are exactly the same each month, regardless of what happens to other mortgage rates. These types of mortgages are popular with first time buyers and people looking to budget each month, especially those who have suffered from a poor credit history.

The main downside to a fixed rate mortgage is that if mortgage rates go down you can be paying a higher amount than you would on a variable rate mortgage. However, this can also go in your favour and if interest rates increase you can be paying less than you would on a variable rate.

Every lender will have their own standard variable rate (SVR), which is considered their basic mortgage. This interest rate goes up and down, usually in line with the Bank of England’s interest rates but the lender is free to raise this at any time.

This means that your monthly payments can go up or down depending on what the interest rate is at a given time. Some months you could be paying more whilst other months you could be paying much less.

A discount mortgage is when a reduction is applied to the lenders Standard Variable Rate (SVR) for a certain length of time (typically 2-3 years). Discount mortgages are attractive as they can allow you to pay slightly less than the bank's standard rate. However as the SVR can still fluctuate they are not ideal for people who are looking to stick to a strict long term budget.

A tracker mortgage is basically a type of variable rate mortgage.  What makes them different from other variable rate mortgages is that they follow – track – movements of another rate, the most common rate that is tracked is the Bank of England Base Rate.

A capped mortgage is the same as a variable rate mortgage; however the interest rate can never rise above a set “cap”. These mortgages can work well for people who can budget for different mortgage repayments each month but want the reassurance that their payments will never go above a certain amount.

Offset mortgages are linked to a savings account as well as your current account. Your savings will be 'offset' against the value of your mortgage, and you'll only pay interest on your mortgage balance minus your savings balance. These types of mortgages work well for higher earners or people who have a good amount in savings that they want to use towards paying their mortgage.

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