If you have ever been in the unfortunate position of having had a property repossessed, you might think that your dreams of home-ownership ended right there and then. However, that does not have to be the case.
The fact that you fell into difficulties once before doesn’t have to forever blight your future.
Can I Get a Mortgage After Repossession?
Many people who come to us are afraid that if there’s one thing that will stop them from ever again getting a mortgage, it’s having had a property repossessed. You might be relieved to know that this isn’t necessarily the case and, depending on your circumstances, there are indeed options available to help people in your situation.
While a previous mortgage repossession will very likely reduce the number of lenders open for you to apply to, people with a mortgage repossession in their credit history can and do go on to get new mortgages. While most mainstream lenders will recoil at the mention of any major bad credit event in your past, there are specialist lenders on the market willing to consider applications from people in a wide variety of situations, with all kinds of financial histories.
So, getting a competitive deal on a repossession mortgage is very much a possibility – it all depends on how long ago the mortgage repossession took place, and what has changed in your financial situation since then. If you have taken positive steps to put yourself on a firmer footing, managing your lines of credit effectively and in a position to receive a regular income that will allow you to afford the mortgage repayments, then a specialist lender will take a more flexible view.
Our specialist bad credit mortgage advisers can offer free, no-obligation, initial advice to help you find the right deal for your circumstances – get in touch now to arrange a consultation and find out what your options could be.
How Much Can I Borrow If I Have Been Repossessed?
With an exemplary credit record you would expect to be able to borrow up to five times your annual income. With a repossession in your history, the amount of credit extended will be lower. As with all mortgage applications you will be subject to an affordability assessment, and again the age of the repossession will play a part. As a general rule, between 12 and 36 months after the repossession, you might be able to borrow three times your annual income. Between 3 and 6 years after the repossession, you might be able to borrow four times your annual income. Over 6 years after the repossession, you might be able to borrow five times your annual income.
Do I need a Larger Deposit if I Have Been Repossessed?
It’s almost certain that, if you have had a property repossessed, you will need to put down a larger deposit on any subsequent new mortgage. However, the time that has elapsed since the repossession took place will be a factor in any lender’s requirements and assessment criteria – the more recently the repossession, the bigger the deposit you will be expected to put down, Here is how it’s likely to play out.
Firstly, there is virtually no point in applying for a new mortgage in the year following the repossession. Being so soon after the fact, it’s almost impossible to find a lender to agree to it, and you will almost certainly need time for your finances to recover and to get yourself back on an even keel.
If you decide to apply for a mortgage between one and three years after the event, you can expect lenders to ask you to put down a minimum deposit of 30%, and sometimes as high as 40%. They will still regard you as a higher lending risk, and they will see this figure as giving them some security against any default possibly happening again. After three years, the criteria will ease up a little, and you should expect to put down 20% of the property’s value. After six years, deposit criteria are likely to return to somewhere near normal, and you should be able to get a mortgage with a 10% deposit.
As ever, the criteria used by both specialist lenders and high street banks will vary from lender to lender and change over time. Talk to one of our mortgages after repossession experts to get an accurate appraisal of your options in the current climate.
WHAT FACTORS AFFECT A MORTGAGE LENDER’S DECISION WHEN I HAVE BEEN REPOSSESSED?
A lot of people have been victims of unfortunate economic events – such as the credit crunch, or changes in certain sectors around Brexit. Many homeowners have lost their properties due to various factors beyond their control, but have gone on to recover from this and are now in a stable enough financial position to once again put down a deposit on a house or flat.
While mainstream lenders will typically take a very cautious approach, there are other specialist lenders who are prepared to consider applications from people who have had all sorts of financial difficulties in the past, including property or mortgage repossession. Conditions vary from lender to lender, with those specialising in particular bad credit niches perhaps being able to offer the most flexibility, so while your situation may be more difficult than most, it’s certainly not impossible to get a competitive deal on a repossession mortgage.
When it comes to making a decision on whether to offer a repossession mortgage, lenders will generally look at these three main areas:
- The details of the repossession itself – when it happened, and why. Also, how much money was involved, is there any money still outstanding, who was the lender, and what other adverse credit events are on your record?
- The way in which you have conducted your affairs since then – have you taken decisive action to repair your credit score, kept up with payments on any lines of credit, avoided any further bad credit events and generally been responsible with spending and saving?
- Your current financial standing – how long ago did any adverse credit events happen, do you have many other current financial commitments, and can you show a large enough to support your mortgage repayments?
Let’s take a closer look at each of these in the following sections.
The details of the repossession
When it comes to the actual repossession, then a potential lender will want to know:
- when it happened
- why it happened
- how much money was involved
- who the lender was
- whether any money is still outstanding
- what other adverse credit events are on your record
When did the repossession happen?
As with so many adverse credit events, as a general rule of thumb the longer ago it was, the better. If the repossession occurred within the past 12 months, then your chances of being offered a mortgage are pretty much non-existent. You’d be better off waiting a while longer before applying and putting your energies into rebuilding your credit record and saving up for a deposit. If it happened longer ago than one year, then getting a mortgage will still be tricky but it’s not impossible.
However, the age of the repossession will impact the loan-to- value (LTV) ratio – the percentage of the market value of the property you want to buy that the lender is prepared to offer. The remainder will have to be paid as a deposit. Between 12 months and 36 months after the repossession, you will need to be able to put down a substantial deposit; probably a minimum of 30%. If it happened over three years ago, then things start to look much better and you should reasonably expect to be able to borrow up to 80% of the value of the property. Once the repossession has been behind you for six years or more, you should be able to borrow 90% of the value of the property.
Why did the repossession happen?
The reason your property was repossessed is an important element. For example, if you were the victim of fraud, or were affected by some other reason outside of your control, then you are likely to be treated more sympathetically. You will need evidence to back up your claim. Our experts know the best way to present such information so that it helps rather than hinders your application.
How much money was involved?
Arguably ‘how much’ is a less important factor than ‘how long ago’, but it does still have an impact. For example, if the repossession related to the only property on which you had a mortgage and was for a relatively modest sum and/or percentage of the initial loan, then you are likely to be viewed more favourably than if the sum involved was vast, or a high percentage of the initial loan, or whether multiple properties were involved. It’s all about perceived risk: the lower the value and the fewer the mortgages involved, the better.
Who was the lender?
The reason this is a factor is that many lenders are members of banking groups owned by the same parent company. For example, HBOS (Halifax/Bank of Scotland group) comprises AA, Bank of Scotland, Birmingham Midshires, Halifax, Intelligent Finance, and Saga. That means that while each lender has a different name, you are effectively applying to the same company. It also means that if you had a property repossessed by one member of the group, the chances are that you would be automatically turned down for a mortgage by all of them.
At Just Mortgage Brokers we understand the relationships between lenders, so we can help you avoid making time-wasting applications that can further affect your credit record due to the number of checks that are recorded on it.
Do you still owe money to the lender?
If you still owe an amount of money to the lender who repossessed your property, then that is likely to affect not only your chances of being offered a new mortgage deal, but also the amount you would be asked to provide as a deposit.
If you are still paying off the debt, then that will affect the amount of money you have available to pay off any new loan. To assess mortgage affordability – in other words, your ability to repay what you borrow – lenders look at both your income and your outgoings. The decision as to how much they are prepared to offer is based on this affordability assessment.
Are there any other adverse credit events on your record?
When people are in financial difficulties they generally do whatever is necessary to keep a roof over their head. This is perfectly understandable, but it also might mean that other payments were withheld in order to keep on paying the mortgage for as long as possible. That means that as well as having had a property repossessed, there are likely to be other adverse credit events on your credit record.
These might include County Court Judgments (CCJs), an individual voluntary arrangement (IVA) or debt management plan (DMP), missed payments or a default notice. People with a bad credit history are considered by lenders to be a greater risk, and so are not able to borrow as much as those with an exemplary record. The age of the event is important – the longer ago it was, the less impact it will have, and if it occurred more than six years ago it will no longer show on your record.
If you were declared bankrupt as well as having the property repossessed, then that is also an issue. Most lenders will ask if you have ever been bankrupt or had a property repossessed and it is important to be honest here (they will check), and that makes contacting a specialist bad credit mortgage broker even more important.
The way in which you have conducted your affairs since then
Lenders will look for evidence that you have maintained your finances in good order since the repossession. They will not want to see new adverse credit events, such as defaults or CCJs. They are likely to be more open to the idea of extending credit to someone who may have experienced difficulties in the past, but who can demonstrate that those difficulties were a blip and that things are now on an even keel, than to someone who has a further history of financial problems.
MORTGAGE RATES IF I HAVE BEEN REPOSSESSED
The interest rate on your new mortgage if you have previously had a property repossessed, just like the level of deposit required, is likely to be higher than that for a conventional mortgage deal, especially the closer in time to when the repossession occured. If the repossession happened less than three years ago, it’s likely you will be badly hit by a very high interest rate compared to a standard loan.
You will find that the longer it has been since the mortgage repossession, the less of a perceived risk you will pose, and the more reasonable the interest rates become when you apply, with things returning to normal usually after six years, when the adverse credit event falls off your official credit history.
Unfortunately, we are not able to list interest rates on repossession mortgages here, as they fluctuate with time, and new products can come onto the market at any time, or as and when market forces demand. However, to get anywhere near a competitive rate anytime during the 2-5 years following a repossession, you will need to approach a specialist lender who usually deals solely with people who have a bad credit history. Typically, these lenders do not advertise their rates on the high street or online, and you will need to apply through a trusted intermediary.
So, the most suitable course of action is to consult with an expert mortgage advisor, particularly one with a lot of experience in dealing with applications from people with bad credit like us here at Just Mortgage Brokers. We have access to over 12,000 mortgages from more than 90 lenders – often on an exclusive basis. Our initial consultations are free, during which we’ll be able to identify your options going forward, and exactly which lenders will be able to give you the right mortgage product, with the right mortgage product and interest rate for your circumstances. Don’t hesitate to get in touch to find out more about how we can help.
MORTGAGE LENDERS IF I HAVE BEEN REPOSSESSED
As outlined previously, it’s likely that the vast majority of mainstream lenders will no longer be an option when you are looking for a mortgage in the first few years directly following a repossession. However, this doesn’t mean that your chances of getting a mortgage during this time are impossible – there are several lenders on the market, who you won’t find on the high street or online, who specialise in products designed to help people in a number of bad credit situations, including repossession.
The right mortgage lenders to deal with if you have been repossessed at any stage are those specialists who understand that people are sometimes victims of circumstance, that they can change, and that just because you have experienced financial difficulties in the past, it doesn’t mean that you are still a high risk now. These lenders will take a wide view of your circumstances and make honest assessments of your current ability to meet mortgage repayments, rather than making snap decisions based on historic information. To them, a mortgage after repossession does not brand you for life.
As these lenders do not operate in the public sphere, you will not be able to find them or contact them yourself. It’ll be necessary to work with a specialist mortgage advisor who has an in-depth knowledge of the range of providers and products available, as well as the nuances of every lender’s criteria, in order to apply and successfully secure an affordable mortgage deal to suit your circumstances. Don’t hesitate to get in touch to find out more about how we can help.
Mortgage advice if I have been repossessed
Your current financial standing will depend on a number of things. The main one is how long ago your financial problems happened; after six years, the majority will drop off your credit record and no longer be an issue.
Broadly speaking, those with good credit records and/or few other financial commitments can borrow more, in terms of both amount and percentage of property value, than those with bad credit records and/or heavy financial commitments.
If the repossession was more than four years ago and was also the only adverse credit event you suffered, then things look better again, and you might expect to get the going market rate while only being expected to put down a deposit of 10% – or in some cases, as little as 5%.
Bad Credit Mortgage Broker
At Just Mortgage Brokers, we have a specialist bad credit team that helps our clients secure an affordable mortgage after repossession. If you have a less than perfect credit history, then you are best served by the types of specialist lenders that you won’t find on the high street. We have many years of experience working with a network of bad credit lenders across the UK, so we know where to find a mortgage to suit the particular needs of each and every client, regardless of their credit history. With exclusive rates that are not available on the high street, we can help you fully consider your options.
We can also help you with your mortgage application and provide personalised mortgage advice. Get in touch today for free initial advice and no-obligation quotes from our team of experienced bad credit brokers.
- - What rate of interest will I be offered?
- - How long do I have to wait after repossession
before I can apply?
- - If there is a balance remaining after
repossession, do I need to clear this in order
to be considered
for a mortgage?
- - Do I always have to declare a repossession
once it has dropped off my credit file?
- - How long does a house repossession stay on my credit file?