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.
For example, a lot of people were victims of the credit crunch, but many have recovered from that and are in a position to put down a deposit on a property once again. There are lenders prepared to consider people who have had all sorts of financial difficulties in the past so it’s certainly not impossible to get a competitive deal on a repossession mortgage.
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What factors affect a lender’s decision?
When it comes to making a decision as to whether to offer a repossession mortgage, lenders will look at three main areas: 1, the details of the repossession itself; 2, the way in which you have conducted your affairs since then; and 3, your current financial standing. Let’s take a closer look at those.
1. 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.
Can I get a bad credit mortgage?
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.
2. 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.
3. Your current financial standing
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.
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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%.
We can help
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 lender 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 unlimited access to the market and 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.
Here at Just Mortgage Brokers we have an in depth FAQ sections which looks at any of the more major questions you may have – which can be found here – although we’ve put our most commonly asked below:
Can I get a mortgage after repossession?
How much will I be able to borrow?
What rate of interest will I be offered?