Can you get a mortgage with debt?

Many people who are in debt automatically assume they won’t be eligible for a mortgage. This isn’t always the case and you should still have a chance to take out a mortgage if you have debts. However, if your existing or previous debt has had a negative impact on your credit rating, then it can affect your mortgage application. This can be anything from making late payments to paying into a DMP (Debt Management Plan).

Luckily, there are mortgage lenders who are understanding of people who have a less than perfect credit score. Rather than just taking into consideration your credit history, they will look at your current financial situation to assess whether you can afford the monthly payments.

How to apply for a mortgage with debt

Getting a mortgage with a bad credit score won’t be as easy as having good credit. It’s likely that you won’t be eligible for the same mortgage deals, as interest rates will be higher for bad credit customers. But there are still options available to you as long as you can afford to make the repayments.

Here we have provided some tips for getting a mortgage if you have any outstanding debt:

Work out your affordability

The most important thing that you should consider is whether you can afford the mortgage. The size of your deposit will make a difference on how affordable your mortgage is. Lenders are also unlikely to accept you at all if you don’t have a sizeable deposit to put down. In addition, if you do have a bad credit history then it’s often a requirement that you put down an even larger amount. This is typically between 15-30% of the total value of the property.

You should also work out if you can afford the monthly payments. If you know that they will be a stretch for you then there’s no point in applying as a lender will also be able to see that.

Check your credit score

Before submitting your mortgage application it’s a good idea to check your credit report. You can do this through a number of credit reference agencies including Experian and Check My File. Any information will remain on your credit file for 6 years so if you have any loan defaults, have been made bankrupt or been in an IVA then a lender will be able to see this information.

Knowing your credit score will give you a better indication of what rates and types of finance you can apply for. There might also be things that you can do to improve your credit score before submitting your mortgage application.

Organise your finances

Showing that you have your finances under control now will help with your mortgage application. If you can show that you have settled your debts then you have a much better chance of being approved than if it is still outstanding. A debt problem that has been solved is far better than one that is still ongoing. Make sure that you always make your payments on time and if possible, set direct debits so you don’t risk missing any.

Demonstrating good financial management is also especially important for first time buyers who have never had a mortgage before. You might not have borrowed much in the past and need to show that you are a responsible person to lend to.

Consider a mortgage broker

You should be aware, however, that some lenders will still reject applications even if you have settled your debts. Using a mortgage broker that specialises in bad credit mortgages can help to increase your chances of being approved.

Paying the Mortgage After Separation

Paying the Mortgage After Separation

For some of our customers, paying the mortgage after separation is their key concern. They come to Clever Mortgages, wanting to break their financial ties with a previous partner. In this guide we’ll look at:

  • How we helped our customer with paying the mortgage after separation
  • Making sure he also realised his goal of bringing down his mortgage term – so will become mortgage free sooner
  • Why using a mortgage broker can help make remortgaging a hassle-free process

Paying the mortgage after separation:

With Clever Mortgages, we were able to help Mr H with:

  • Paying the mortgage after separation – making him financially free from his previous partner
  • Bringing down the mortgage term by 9 years – meaning he’ll be mortgage free by the time he retires
  • Consolidating his secured loan – so he only has one monthly payment to make instead of two

Current Mortgage£194,976£9413.99%24 Years
Current Secured Loan£26,458£2737.91%24 Years
New Mortgage£222,429£1,4201.89%15 Years

Completed 08/10/2018

Our client had a mortgage on his home with his ex-partner – he wanted to remove her name from the mortgage, and consolidate his secured loan. He had a budget of £1500 per month, which was slightly more than he was paying for the two products at the time – but for the increased payments, he wanted to reduce is mortgage / loan term significantly – so that he would be mortgage-free by the time he retired.

We were delighted to be able to take the hassle away from the remortgage process for Mr H: He just had to tell us some details about himself and his financial situation, and discuss the goals he had for his remortgage.

We found a great deal with a trusted lender, and were able to get the mortgage with him as a sole applicant, meaning he was no longer financially tied to his ex-partner. We were also able to reduce the term of the mortgage by 9 years, all whilst keeping well within his £1500 per month budget.

We’ve helped 1000s of customers, with paying the mortgage after a separation.

We help customers achieve their remortgage goals, and we know the best lenders and products to look to for each individual situation. We could give you the best chance of getting on a great remortgage deal, even if you’re:

  • Needing a mortgage after an IVA
  • Looking to remortgage with a debt management plan
  • Worried about other defaults on your credit file
  • After a bad credit self-employed mortgage

Enquire with us about getting a remortgage with bad credit, and we could:

  • Search for the right deal for you, even if you’ve got a poor credit history – many of the customers we help have found themselves in a bad credit situation, and might have been on a Debt Management Plan or in an IVA.
  • Discuss with you the different options available for meeting your specific goals – we can discuss your individual goals for remortgaging with you, and take the hassle away from the remortgage situation.
  • Make sure your application goes to the best lenders for you – not all lenders offer mortgages to people with a bad credit history, but we know which ones are most likely to say “yes”, and to give you a good rate when they do.

Why should I use a mortgage broker for my remortgage?

  • You’re likely to only have to do one application – this will save you time, and more applications from being recorded on your credit file
  • Brokers can advise on what would improve your chances for achieving a specific mortgage goal – e.g. finding a guarantor or opting for a joint mortgage
  • They can take the hassle of application forms away – talking you through every step, and asking all the right questions

What next?

If you are looking for expert advice on getting a remortgage with bad credit, contact our team today. We are experts in offering solutions to people with bad credit and can help if you need a hand with your next move.

A man looks at bills and a calculator as he considers a debt consolidation loan

The main benefits of a debt consolidation loan

If you’re currently dealing with multiple loans from different loan providers then consolidating this debt can be a good option. A debt consolidation loan allows you to combine all your existing debts to provide you with one monthly repayment. This loan is used to pay off your individual loans, leaving you with one large loan instead. Consolidation loans are usually ideal for people who have multiple repayments to make on different credit cards, loans and overdrafts.

Here are some of the main reasons why taking out a debt consolidation loan can be a good idea and some of the things you should be wary of:

One monthly payment

It’s likely that your current payments are required on different days each month. This can be difficult to manage and often quite stressful. By consolidating your debt you can streamline everything into one single source and make just one payment each month. Having one payment can make managing your loans much easier. One fixed monthly payment can also help you to more easily budget for other things.

Lower interest rate

Using a debt consolidation loan can also help you to save money on interest. This is especially the case if you have several credit cards with high interest rates. If the rate of borrowing on a consolidation loan is lower than your original debt then you could reduce the amount of interest you pay on a monthly basis.

Improve your credit score

If you’ve fallen behind on any of your existing loan repayments then it’s likely your credit score has suffered. Taking out a consolidation loan can help to improve your credit score. This is because it gives you an opportunity to demonstrate that you’re a responsible borrower.

Things you should be aware of:

Even though a consolidation loan may save you money on a monthly basis, depending on the rate and term, you could be increasing the total amount you pay back and the duration of the repayments.

Another thing you should avoid doing is borrowing more than you need to. A debt consolidation loan should be a tool to consolidate your debt, rather than create more.


A man ticks a box next to five starts under the title "credit score"

Ways to improve your credit score

A poor credit history can complicate things when trying to get a mortgage. Many mortgage providers won’t lend to someone who has suffered from bad credit regardless of their situation now. If you’re confused about credit or you’ve been unsuccessful in getting a mortgage then you should work to improve your credit score.

Unfortunately, there’s no quick fix for your bad credit score. Your credit history has been built up over time and the things that have had the biggest impact will be different for everyone. You will need to demonstrate over time that you can continually make payments in full and on time. Any negative information that might be on your credit file such as CCJs, an IVA, late payments or bankruptcy will exist on your credit file for 6 years since the date they were recorded. You might need to wait until these have disappeared from your file if they are preventing you from getting approved.

Luckily, there are some things you can start doing right away to help improve your credit score:

1.     Check your credit report

The first step to improving your credit is to know exactly what your situation is. You should get into the habit of regularly checking your credit score. This is so you can make sure the information about you is accurate and up to date. You will also be able to see how your credit score improves over time as you start making more positive financial decisions. Checking your credit score is free through a credit reference agency including Experian, Equifax or Clear Score.

2.     Plan to pay off your existing debt

Try and pay off all your existing debt as soon as possible. If you can’t do this yet you should create a plan so you know when you’ll have this paid off. If you use any savings to help pay off debts then make sure you still have some money aside for emergencies. This will help you to avoid getting into any debt again. Paying off your current debt will help to show lenders that you’re working to rectify your current financial situation.

3.     Be cautious when using credit cards

Cancelling any credit cards that you no longer use can help to show that you’re intending to borrow less. It can also stop the temptation to use them at any point. On the other hand, if you don’t have a credit card, taking one out and managing it properly can help to improve your credit score. You should only do this if you know you can afford to make repayments on time and in full.

4.     Have some responsible credit

If a credit card is not appropriate for you, or if you can’t get approval for one, then taking out a small form of credit might be a better idea. This could be a mobile phone contract or store card. Providing you manage these well it can show lenders that you can pay bills responsibly, helping you to show that you can be trusted with a bigger loan.

5.     Get on the electoral roll

Another way you can help to improve your credit is by making sure you’re on the electoral roll. If you’re not then you should register as soon as possible. Although it’s not compulsory to vote, having your details on the electoral roll allows lenders to easily verify your identity and address. This can have a positive impact on your credit score.

6.     Consider bad credit finance

If you can afford to pay higher interest rates and potentially put down a bigger deposit, then bad credit finance options such as a bad credit mortgage might be for you. These are designed for anyone who has a low credit rating and unable to get competitive rates for finance. The benefit of paying higher mortgage rates, for now, is that providing you pay on time in and full, it can demonstrate that you are someone who can be trusted to lend to. If you can continue to prove this you will increase your chances at being eligible for more competitive interest rates in the future.