Getting a Mortgage with Missed Payments

Getting a Mortgage with Missed Payments

Obtaining a mortgage for those that have missed payments will likely be more difficult than for applicants who have a clean credit history.  What the missed payments relate to and the time of when they occurred will also likely have an impact on if a mortgage can be arranged. Typically the more historic, the better the chances. If the applicant’s credit history is purely an occasional missed or late payment rather than a registered default or CCJ then the chances of success are increased. However this may not necessarily be the case should for example, the missed payments relate to a mortgage that will be viewed in a more severe way than a small default on a mobile phone account.

Depending on the severity of the missed payments will in turn determine what sized deposit or amount of equity you may require and the interest rate available. Typically the longer the period since the missed or late payments occurred the smaller amount of deposit or equity will be needed and the better the rate on offer.

CAN I GET A MORTGAGE WITH MISSED PAYMENTS?

This question is one of the most common we are asked and one that, as with many, has no straight forward answer however, for many the response is usually yes. As with any adverse credit entry on a potential borrowers file, the individual circumstances need to be taken into consideration. Credit factors such as:

  • How many missed payments are there
  • When did they occur
  • What do they relate to
  • Are they missed payments or classed as late payments
  • Are they in addition to any other adverse credit events

Other elements of the borrower’s circumstances will also play its part. These being:

  • Size of deposit or amount of equity
  • Current debt to income ratio
  • Present financial conduct
  • Loan to income ratio

HOW DO I GET A MORTGAGE WITH MISSED PAYMENTS?

Getting a mortgage with missed payments can feel like an up-hill struggle as many lenders simply have no room for consideration when you cannot demonstrate that you can maintain payments on any previous credit or loan you have had. However, as all lenders differ in the way they make their assessment of a potential borrowers ability to obtain funds for a mortgage it can still be possible.

Throwing caution to the wind and simply approaching numerous lenders to carry out their respective credit checks until you receive a positive response is one way to go about it but, certainly one we strongly recommend against. If you hit the jackpot in the first or second go it can be a worthwhile exercise however the damage multiple searches can have on your credit file could in fact make things worse and in turn much more difficult in obtaining any credit.

The best course of action is perhaps to speak to a specialist mortgage adviser who deals with this type of lending on a regular basis. Their knowledge and expertise will enable them to assess your complete credit file together with your overall situation and begin to establish which lenders you may have available before making any unnecessary credit checks.

Having a copy of your credit file to hand will assist, as the adviser will be able to use this to establish the exacting information in regard to the missed payments.

WHAT DO MORTGAGE LENDERS TAKE INTO ACCOUNT WITH MISSED PAYMENTS?

When a lender looks at an application for a potential borrower with missed payments they can take many factors into consideration. The more common aspects are as follows:

  • What type: The type of borrowing or credit facility the missed payments relate to will be an influencing factor.  Missed payments on a mortgage are likely to be viewed more severe than say on a credit card.
  • Deposit/equity: The amount of deposit you have available or the amount of equity will determine the risk in regard to the security.  The lower the loan to value (LTV) the better.
  • Income and affordability: How much you are borrowing in relation to your income and in turn overall affordability will be taken into consideration when assessing your application.  The less you borrow in relation to your income the better chance it will be viewed affordable.
  • Other credit issues: Do you have any other credit issues in addition to the missed payments.  If the missed payments are the only factor this will indicate to the lender that you are still managing your finances better than if they are in addition to other events such as defaults and CCJs.
  • Number of missed payments: One missed payment will likely be seen as an oversight whereas many and frequent missed payments will indicate that you have struggled to meet your obligations and budget accordingly.
  • When they occurred: More recent missed payments will indicate to a lender that you are possibly still experiencing financial difficulties whereas if they are more historic and the recent history is good, this will likely show that you are now back on your feet.

ARE SOME MISSED PAYMENTS WORSE THEN OTHER FOR A MORTGAGE APPLICATION?

Where the timing of missed payments will play its part in your possible approval for a mortgage, the type of loan or credit it relates to will also be important. Having more than one missed payment on a form of unsecured credit such as a personal loan or credit card could be view less severe than a solitary missed payment on a mortgage. Although not a given, the following list is in order of which are deemed more severe/important from the least impact to the worst:

  • Mobile phone contracts
  • Utilities ie gas; electric
  • Bank overdrafts
  • Credit cards or catalogue accounts
  • Unsecured Loans or finance agreements
  • Secured loans or second charge lending
  • Mortgages

MORTGAGE RATES IF I HAVE MISSED PAYMENTS?

When arranging a mortgage, one of the things high up on the list of priorities for people is the rate or product they are getting.  If you are in a position where you have the choice of any lender to obtain your mortgage then you will be in the fortuitous position of being able to choose the right option to suit your individual needs.  However on occasion the pool of choice may be reduced due to a multitude of reasons such as, affordability, amount of deposit or equity, and for some the credit rating. With the latter, the credit could be affected by missed payments and if so could in turn result in a higher interest rate being offered and possibly a larger deposit or greater amount if equity being required. The severity of the missed payments such as how many, when they occurred and what they were for will be determining factors in this.

Should it be the case that at the time of your application you have to arrange your mortgage on a scheme that is less favourable than that if your credit rating was in good order, then hopefully in time, by improving your credit history, you will put yourself in a position of having greater choice and hopefully as a result better suited mortgage deals.

BEST MORTGAGE LENDERS IF I HAVE MISSED PAYMENTS?

When you have a record of missed payments on your credit file you still want to ensure you are getting the best and most suited mortgage for your needs.  With each and every lender applying their own individual way of assessing the credit worthiness of those with missed payments there is no definitive list of best mortgage lenders that can be given.

Certainly the more severe the missed payment history the greater expectation of a lesser choice of lenders that will be available to choose from however, with the right research, the best mortgage lender for your specific situation should still be found. Using an experienced mortgage broker who specialises in this sector can pay dividends when finding the best lender as they will be able to use their knowledge of the market to ensure that you obtain the right mortgage not only now, but also to give you a plan of action for your future plans and requirements.

DO MISSED PAYMENTS AFTER MY CREDIT SCORE?

Having missed payments on your file will likely effect your credit score however, your overall score will take into consideration your total credit picture. For example, if you have a one off event where you have missed a payment but the rest of your credit file is exemplary then it is unlikely that your score will be affected. However if the missed payments are regular and or more recent, then expect this now to have much more impact on your overall score.

Do bear in mind, that when applying for a loan or mortgage each lender will make its own assessment of your credit rating and not simply take that as given by any of the recognised credit reference agencies.  What may be indicated as a poor score from a credit reference agency may still not be a barrier from obtaining a mortgage.

HOW OLD DO MISSED PAYMENTS NEED TO BE BEFORE I CAN APPLY FOR A MORTGAGE?

The simplest way to answer this question is just to say the more historic it is the better however, although this likely bears true in most circumstances, all is not necessarily that straight forward.  How old missed payments need to be before you can obtain a mortgage will very much be determined by what it is in relation to and how much deposit or amount of equity you have. Secured loan or mortgage payments will, in relation to their unsecured counterparts, need to be more historic and or require you to have a larger deposit or amount of equity.

Although criteria is ever changing the following gives an indication of how the market works.  We do however still recommend that in all instances you contact us. Our expert advisers will always be abreast of what is relevant at the time and be best placed to ensure you get the right advice for your own individual circumstances.

Unsecured

LTV

Missed in the last 3 months Missed in the last 6 months Missed in the last 12 months Missed in the last 24 months Missed in the last 36 months Missed over 36 months
Up to 95% None Maximum status 2 Maximum status 2 Maximum status 2 Any Any
Up to 90% None Maximum status 2 Maximum status 2 Maximum status 2 Any Any
85% or below Any Any Any Any Any

Any

 

Secured

LTV

Missed in the last 3 months Missed in the last 6 months Missed in the last 12 months Missed in the last 24 months Missed in the last 36 months Missed over 36 months

Up to 95%

None Maximum status 1 Maximum status 1 Maximum status 2 Any Any

Up to 90%

None Maximum status 1 Maximum status 1 Maximum status 2 Any

Any

Up to 85%

Maximum status 1 Maximum status 1 Maximum status 1 Any Any

Any

75% or below

Any

Any Any Any Any Any

HOW LONG DO MISSED PAYMENTS STAY ON YOUR CREDIT FILE?

Missed payments are treated in exactly the same way as all other information on your records and will stay on your credit file for 6 years. Although the information will remain on file for this amount of time, lenders will tend to be more sympathetic towards those missed payment entries that are more historic.

Do also make sure that any records entered on your credit file are correct. For example a missed payment can be dealt with more severely by a lender to an entry recorded as a late payment. 

  • - How many late/missed payments are acceptable to a lender?
  • - How old do my late/missed payments need to be before I am considered?
  • - I missed a payment last month, will I be considered?
  • - I was 3 days late on a payment, is this classed as a missed payment?
  • - How many missed payments are you allowed before repossession?
  • - What are the consequences of missing mortgage payments?