Default mortgages

If you’ve had a default on your credit file, you’re not alone. A lot of people fall behind on payments and quickly find a creditor has issued a default. You might not think twice about it – other than seeing it knock your credit score down a few points – and simply accept what’s happened, knowing it will disappear eventually.

A default isn’t the end of the world, but it can have an impact on the likelihood of you being approved for a mortgage. That doesn’t mean getting a mortgage with a default is out of reach, but it can make the process slightly more daunting, unless you focus your attention on default mortgages. Defaults are more common than most people realise and lenders understand that financial difficulties can happen for all sorts of reasons, which is why they offer bad credit mortgages.

Whether your default is recent or from years ago, Everest Mortgages will guide you through the process, compare lenders and help you take the next step towards home ownership.

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What is a default?

A default happens if you’ve missed several consecutive payments on a credit agreement, such as credit cards, loans, mobile phone contracts or bills. They don’t happen straight away, and most creditors wait until 6 or more payments have been missed before issuing a default. The lender then marks the account as being defaulted and reports it to credit reference agencies.

Defaults are recorded on your credit file for six years from the date they were added, even if you’ve since settled the debt. They don’t disappear simply because you’ve caught up with payments.

Why do people get defaults?

Defaults can happen for many reasons, and not all of them are a sign of poor financial management. You might have received a default because an unexpected job loss or reduced income made it hard to keep up with repayments. You might have been dealing with illness or a family emergency, which meant payments weren’t your priority. Administrative or banking errors could also be the cause, as could changes in contact details leading to missed bills.

Whatever the reason, it’s important to know that a default doesn’t automatically rule you out of getting a mortgage. In fact, many lenders are willing to consider applicants with defaults, especially if they’re older, small in value or have been paid off. At Everest Mortgages, we help you to explain your situation clearly to lenders, increasing your chances of being approved for a bad credit mortgage.

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How defaults affect your mortgage options

As a default will stay on your credit file for 6 years from the date that the default first occurred, there’s a high chance it will still be there when you apply for a mortgage. But, that won’t necessarily hold you back from property ownership. However, it may influence the terms and rates offered.

The older the default, the less lenders care. Many lenders will ignore a default that’s been on your credit file for a few years.
Recent defaults have the biggest impact, and those under 12 months old may restrict you to specialist bad credit mortgage lenders.
Low value defaults – for example, those under £200 – are considered minor by most lenders, and they’re not usually a dealbreaker.
If you have multiple defaults, you might find your options more limited than if you only had a single default. But, many lenders will still consider your application if you’ve been financially stable since.
Satisfied defaults are viewed much more positively than unpaid ones, so it’s a good idea to settle any you can before applying for a mortgage.

Does the type of default matter?

When you’re applying for a default mortgage, the type of default does matter. Lenders don’t view all defaults in the same light; some are treated as minor issues, while others carry more weight depending on the type of credit involved. Defaults are generally grouped by the length and nature of the credit agreement.

Short-term credit – the category that mobile phone bills or broadband contracts fall into – is usually seen as low risk, and may even be overlooked entirely by some lenders.
Medium-term borrowing, such as personal loans or credit cards, is taken a bit more seriously. The impact it has on your mortgage application will depend on the size and timing of the missed payments.
Long-term commitments, including secured loans or mortgages, are the most significant. A default on one of these types of agreements is more concerning to lenders.

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How to get a mortgage with a default

Getting a mortgage with a default is by no means impossible, but you do need to get your finances in order and have the right strategy. You can’t simply apply, assume lenders won’t see your credit history and hope for the best.

Improve your chances of getting a default mortgage

Look at your credit report

Make sure you check your credit report before applying for a bad credit mortgage. This will give you an idea of what lenders will see.

Check that your default is accurate

Mistakes happen and, if the default was registered incorrectly, you can challenge it with the creditor or credit agency. Even something as minor as the date being wrong could impact your mortgage application.

Settle the default if you can

If you’re able to, settle the default. Lenders often look more favourably on satisfied defaults, and paying it off can help you to access better rates.

Show financial stability

It’s important to keep up to date with all other repayments, as lenders like to see that you’re consistently able to pay bills and loans on time.

Save for a larger deposit

Having a larger deposit can help you to secure a bad credit mortgage with better terms. The more you can put down, the more comfortable lenders will feel about approving your application.

Work with a mortgage broker

A broker with experience of bad credit mortgages, like the team here at Everest Mortgages, can match you to lenders who understand how to assess applicants with defaults.

FAQs

Frequently asked questions

Does having a default make it harder to get a mortgage?

A default can make things a little trickier, but it doesn’t mean your chances of getting a mortgage are over. Many lenders will ask more questions or take a closer look at your finances before approving your application, but getting approved for a mortgage is still achievable.

Will I pay higher mortgage rates if I have a default?

Yes, borrowers with defaults often face slightly higher interest rates, particularly if the default was recent or for a large amount. The rate you’re offered will depend on how old the default is, whether it’s been satisfied, the size of the debt and the total number of defaults on your record.

How long will a default stay on my credit report?

Defaults remain on your credit file for six years from the date they were first registered, even if you’ve since paid them off. Their impact tends to lessen over time.

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