Can I get a mortgage with a default?

Occasional missed payments are not necessarily a cause for concern. Not paying on time or not paying enough for several months can lead to a default notice from the creditor(s).

Seeking expert help can overcome obstacles when you apply for a mortgage. This can make it possible to get a mortgage sooner than you think.

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Author: Carl Shave - CEO and co-founder
Last updated: 09 Apr 2024

What is a default?

A default happens when you have missed, or haven’t paid in full, several payments to the same creditor. The creditor closes your account to prevent further borrowing and adds a mark to your credit report. This can negatively impact your credit rating.

A default notice is a formal letter sent to you if debt is regulated by the Consumer Credit Act. Sending the letter is a legal requirement, it doesn’t mean that legal action has begun.

The creditor does not have to send a notice if the debt is not regulated by the Consumer Credit Act. However, it will still affect your credit report.

An introduction to Bad Credit Mortgages

Bad Credit Topics

Whether it be late payments, defaults or CCJs, we’re here to help you secure a mortgage.

Useful Information

What happens if I get a default notice?

If you get a default notice the creditor can:

  • Demand the full outstanding balance (not just the overdue amount).
  • Pass the debt to a collection agency.
  • Start court action.
  • Start proceedings to repossess assets that form part of the agreement (a car or property).

If you can afford to bring the account up to date, you should. If you can pay the late balance on time, you can request to remove the default from your credit report.

You can check your credit report with any of the three main credit reference agencies, Experian, Equifax or TransUnion.

If you are unable to pay your debt, reach out to the person you owe money to. Try to come to an agreement on a repayment plan for the amount you owe.

If you have deliberately withheld payment because of a dispute, make sure the creditor’s accounts department are aware. It is better to get in touch with them at this stage than if they commence legal proceedings against you. If you can avoid having a county court judgment (CCJ) registered against your name, then you should.

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Can I get a mortgage with a default?

Credit file defaults are a common reason for mortgage rejections. However, they are less harmful than other types of bad credit issues such as IVAs or bankruptcies.

High street banks and building societies will, typically, turn down mortgage applications with defaults.

Typically, a mortgage application will be automatically turned down by high street banks and building societies. But, many specialist lenders are still willing to consider a mortgage application for people with adverse credit and defaults.

A bad credit mortgage with a default will not be as competitively priced as if your credit record were clean. You will usually need the assistance of an experienced bad credit mortgage broker to find the very best deal.

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How long does a default stay on my credit file?

A default lasts six years on your credit file from the date of registration. A collection agency may add another default to your credit file if they buy your debt. This happens when the collection agency takes over the debt, resulting in two defaults on your report.

The collection agency will re-register the first default as “satisfied” and then register a new default as “debt assigned”. This tells anyone checking your report what has happened.

The expiration date remains the same. It stays on your report for six years from the first entry, and then both entries should be deleted.

If a default has been registered correctly this will remain on your credit file for 6 years. This is even if you have paid it off in full. However, if it has been registered in error you can request its removal.

To do so you will need to contact the company that has registered the default or the credit reference agencies where it is recorded. Ensure you have evidence to hand that you can provide where required. Items such as proof of payment, bank statements, identification and proof of address.

This will be determined by what it is you are looking at in respect of its impact. A secured loan or mortgage may affect your approval, but it won’t always prevent you from being approved. The date and amount of the default will be taken into consideration as will all other aspects of your situation.

Having a default on your credit score can be a cause for concern, but we can assist you. We search the market for a good deal on a mortgage for people with defaults. There are ways to improve your credit score.

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Mortgages with a Default FAQs

Your chances of getting a mortgage improve once a default is removed from your credit record. This is provided there are no other negative marks, and you meet the lender’s requirements.

Lenders will assess mortgage affordability based on your income and outgoings and will perform the usual checks on your account.

 

Typically, certain lenders will consider an application following six months of the default date.  There may be occasions where it can be considered after three months but this is much more restricted.

Ultimately it will depend on other relevant factors such as the amount of equity or deposit you have and the overall risk profile of the application.

Generally speaking, satisfying a default will boost your chances of being accepted for credit. High street lenders probably won’t offer a mortgage, even if a default is resolved. A specialist mortgage lender is likely to care more about when the default happened than if it was resolved. It is your recent credit history that carries the most weight.

Defaults stay on your credit record for six years, and the older they are, the less impact they will have. A 4-5 year old default is less harmful than a one year old one, satisfied or not.

The size of a default generally does not matter if it is over 12 months old. Within 12 months, lenders will commonly set a maximum amount of £1,500.

Lenders usually accept up to two defaults within two years. Lenders are usually more lenient when considering

It should be possible to remortgage your property with defaults on your credit record, as with a standard mortgage. A lot will depend on:

  • the size of the previous default,
  • the length of time since the default occurred,
  • whether it was for mortgage payments or for another loan,
  • and whether it was settled.

Default notices in the past 18 months are important, and having other marks on your credit record could make things harder.

Your actions since the default(s) to rebuild your credit score will also be considered. This includes:

  • regularly repaid credit card bills,
  • mortgage payments being paid on time,
  • not falling behind on any other outgoings for an extended period.

Some lenders are more flexible than others about defaults on your credit history.

If you fall into arrears on an account, the lender will close it and a default will be registered. As well as the missed payments showing on your credit report, the default will also show.

A default notice will set out how much you owe and when you need to pay it by. If you can pay, you should do so when you receive the notice.

You can request to remove the negative mark from your credit history if you pay the amount you owe on time. However, the late payments will remain on file.

Contact your creditor if you are unable to make a payment. It’s possible you will be able to arrange to make smaller regular payments to clear the debt.

If you can’t pay, talk to your creditor to and make repayment arrangements. Also, check your credit report for any problems.

If you see the same default twice on your credit report, it means the debt was sold to a collection agency. If this happens, then the first default should be marked as “satisfied”. The debt collector will re-register the default, but it should be flagged as “debt assigned”. Anyone checking your report will then understand that your debt has been sold on.

The default on your credit report will stay for six years from the first entry, even if it is entered again. After that, both entries should be removed.

If a lender is willing to offer a mortgage, how much they offer will depend on your ability to repay. A mortgage affordability assessment looks at your income vs your outgoings.

If you have good credit, you can usually borrow up to five times your income. Lenders will always take your affordability into consideration.

If you have bad credit, like defaults, and other financial commitments, you will probably be able to borrow less money. You might also be expected to put down a bigger deposit.

Often, it depends on when the default occurred and how much risk the lender thinks they are taking.

Try our mortgage affordability calculator

Lenders may allow defaults for a variety of reasons depending on their criteria. These could include, but are not limited to:

  • the date of the default,
  • how much it was for,
  • together with the overall circumstances of the applicant.

Some specialist lenders who we have access to for those with defaults are:

  • Precise
  • Pepper Money
  • Aldermore
  • Kent Reliance and many more

Why choose Just Mortgage Brokers for your Bad Credit Mortgage?

  • This is our speciality – it’s what we do
  • Direct access to lenders underwriters enabling us to discuss your situation in detail
  • Exclusive deals available
  • Broker only bad credit lenders available to us giving you greater choice
  • Unlimited mortgage broker – giving a wide range of lenders at our disposal
  • Great customer reviews

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