Mortgages After a Repossession
Getting a spot on the property ladder is never easy, it takes substantial time, dedication, and of course money. Particularly today, there are a limited number of houses on the market available, and perhaps even fewer that are to your taste and desired specification.
However, the difficulty of getting a mortgage is especially pronounced if you’ve previously experienced financial issues, as exhibited by adverse credit. Principally, this is because mortgage lenders must be wholly convinced that you are a suitable candidate, and will only select you if your profile matches up to their distinct and often rigid criteria.
One such standout instance which works against your favour when applying for a mortgage is a past home repossession. Having your home repossessed shows that you once defaulted on your previous mortgage loan, a case which mortgage providers go to great lengths to prevent. As such, if you attempt to apply for another loan soon after the fact, you’ll quickly find that your chances of attaining one are rather low.
That being said, one of the big defining factors of the mortgage market is that it is incredibly flexible. And so, whatever your personal situation or individual circumstances are, there may to be a mortgage package out there for you. Indeed, although it may be harder, mortgages after a repossession are certainly possible, it’s just that you will have to take certain extra steps in order to strengthen your hopes of approval.
The first being, to hire an expert mortgage broker who can thoroughly navigate all the options in front of you before helping in getting that perfect mortgage deal. We at The Mortgage Genie have assisted many of our UK clients by getting them a mortgage after repossession, including handling all the paperwork involved in the process. If you’re interested in joining those among our success stories, then be sure to get in touch at 01915809890 today.
Yet, despite how our mortgage services can help you, it’s still recommended that you come to terms with everything there is to know about mortgages after a repossession. So that you can fully inform yourself on the subject, we’ve put together this piece which comprises all the important details. We will go over:
Can I get a mortgage after repossession?
Yes, as we mentioned, it’s entirely possible to get a mortgage after having your home repossessed. Albeit, mortgages after a repossession come with some caveats. Reason being, that repossession represents one of the more severe forms of bad credit.
This is due to the fact that repossessions suggest you once failed to keep up with your monthly mortgage repayments. Consequently, lenders will hold your application to a markedly higher level of scrutiny this time around, since they need to be doubly assured regarding your suitability. Followingly, the context around your repossession will play an integral role.
How soon after repossession can you get a mortgage?
The leading factor which will contribute to your securing a mortgage after experiencing a repossession is how long ago it happened. As a general rule here, the more time that has passed since your repossession, the more likely it is you’ll be able to get another mortgage loan.
To be more specific, if your repossession date was less than a year ago, then it’s exceedingly improbable that you’ll find a lender willing to offer you a loan. The inherent difficulty begins to lessen after between 2-4 years, although it remains rather difficult. Subsequent to between 4-6 years is when your range of potential lenders will start to widen.
After 6 years, the repossession will be removed from your credit report, and so waiting for such a long period will benefit your application greatly. Moreover, this will entitle you to much better interest rates than if you were to only wait 3 years, for example. It’s notable that even after a repossession drops off your report, it’s still best to be straightforward about your financial history.
How much was your repossession debt?
Another aspect which lenders will look to when evaluating your application is the size of your repossession debt. The larger the loan you defaulted on, the less favourable it is your application will be considered.
For instance, if you were, or still are, in debt by hundreds of thousands on multiple mortgage loans, then lenders will view you as a very ‘high-risk’ candidate and be strongly inclined to reject you. Whereas, if your debt amounted to a few thousand on a single property and it has been wholly paid off since, lenders will show a degree of relative leniency.
Reasons why your home was repossessed
Evidently, the reason behind your repossession is also of significance to potential mortgage providers. Some lenders will take a more understanding approach towards your assessment if you faced extremely difficult circumstances or were a victim of fraud.
However, if you submit an application to a lender who is within the same banking group as the one who repossessed your last house, then there’s a high chance you’ll be declined. This is where expert advice, in addition to strong evidence to support your application after a repossession, becomes crucial.
How much can I borrow after a repossession?
Primarily, how much you’ll be allowed to borrow on a fresh mortgage loan after a repossession will depend on the time elapsed between the repossession date up until now, as well as your current annual income.
For the latter, lenders are typically willing to offer up to 4x an individual’s income. For the former, if the repossession was more than 6 years ago, then you may be eligible to receive a loan for up to a 95% LTV mortgage. As discussed, if the repossession occurred fairly recently, any mortgage offering is likely to come with high rates, meaning larger monthly repayments on top of the extra fees and charges.
Alongside these facets, the size of the mortgage deposit you’re able to put forward will also determine the success of your overall application, including the quality of the deals you’re entitled to. On this point, if your past home was repossessed between just 1-3 years ago, then lenders will often require a deposit of around 30-40% of a property’s total value. This figure decreases to around 10-20% if you wait for between 3-5 years, and to as little as 5% after 6.
How can I improve my credit score after a repossession?
All mortgage lenders have a set of eligibility criteria which they must measure you against before they can guarantee your suitability for another loan offering. This stands apart from their affordability assessment in that it regards the state of your credit score in particular. In essence, lenders will carry out a hard credit check to see whether, in addition to having your home repossessed, you’ve ever had a court county judgement (CCJ), an IVA, or if you’ve ever filed for bankruptcy or failed to satisfy other financial arrangements like payday loans.
As you can assume, the presence of any of the above on a person’s credit report works to negatively influence their mortgage application. Yet, such issues are heightened if you’ve also had your property be repossessed recently too. After all, it’s a given that a lender needs added assurance that you won’t default on your loan again.
Having said this, if they similarly occurred over six years ago, and you have access to a sizable mortgage deposit, then their severity will be reduced. Likewise, there are ways to improve your credit score before applying, such as paying off all your outstanding debts in full, ensuring that you’re listed on the electoral roll, and by reviewing the number of existing credit accounts you have open. The key is in consistently maintaining your track record which, admittedly, can take an extended length of time.
It’s salient that hard credit checks leave a mark on your file. As such, if you want to get an idea of your current financial health before you apply for a mortgage, you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you to see any mistakes or fraudulent activity on your profile, so that you can deal with such problems quickly. The trial and subscription can be cancelled at any time.
Do all lenders consider borrowers with a past repossession?
In a word, no, not all mortgage providers will consider prospective borrowers who have had a previous home repossession. The number one reason for this is that high street banks and mainstream building societies typically aren’t set up to handle mortgage applications with added complexity, instead they are rather geared towards standard applicants. This is why it’s intrinsically harder to get a mortgage after a repossession, because there’s a limited number of lenders capable of dealing with less straightforward mortgage candidates.
Importantly, this doesn’t go to say that there are no lenders who will consider you for a loan if you’ve had a repossession occur. In fact, there are specialist lenders out there equipped to find fitting mortgage products for candidates in distinct circumstances, such as those who have had a past repossession. These lenders assess applicants on a case-by-case basis, making them more understanding towards people who have run into financial problems.
The crux is that, in order to be able to find a specialist lender suited to your specific personal situation, you’ll require support from a specialist mortgage broker. Specialist mortgage brokers such as ourselves have access to a wide pool of specialist lenders, and therefore make the process easier and less stressful on your part. It’s worth bearing in mind that it’s not uncommon to be met with unexpected circumstances which can cause some monetary instability, and that this doesn’t completely rule out your chances of finding that perfect property, provided you have an informed advisor at hand.
Here at The Mortgage Genie we have comprehensive understanding on how to get a mortgage and are dedicated to helping people secure loans of all types, including those for mortgages after repossessions. We sincerely hope that this piece has answered all of your questions and cleared up any doubts you might have had surrounding mortgages after a repossession.
Every day we help a growing number of people to achieve housing happiness by finding the mortgage product that’s right for them, one which is tailored to their personal situation and individual circumstances, as well as by guiding them through each step of the way. If you’re in need of a team of expert mortgage brokers, then be sure to contact us at 01915809890 and we’ll set you on the path towards owning your dream home. And why not see how much you could borrow up to today by using our mortgage calculator?