Mortgages after Late Payments
For many today, securing a spot on the property ladder can seem like an uphill struggle, or even an impossibility. It’s understandable, the mortgages and housing market has a singular level of biting competitiveness attached to it. As such, the mortgage process demands time, commitment, and a considerable amount of money. Yet, these inherent issues are only amplified if you’ve ever run into financial problems in the past.
Indeed, having had any monetary struggles can cause some people to rule the prospect of a house out altogether, for fear of being rejected as a potential borrower. One such case regards late payments, where you fail to repay any money you owe for a debt on time. Admittedly, this is a reasonable concern because it does impact the overall success of your mortgage application. However, one of the defining characteristics of the mortgage market is that it is flexible and versatile. And so, whatever your personal situation or financial circumstances, there’s guaranteed to be a solution out there suited to your best interests.
After all, late payments are more common than you may initially think, people often pay the odd debt late, and this sometimes happens unintentionally. In this instance, it would be draconian for having a late payment to mean that you’re excluded from getting a mortgage altogether. In fact, there are many mortgages after late payments out there. So, if this subject applies to you, you’re in good hands.
Although, there are quite a few distinctions to be made when it comes to getting a mortgage with a late payment on your credit history and, admittedly, they can make the whole mortgage procedure a bit more difficult if you don’t have access to the right advice. It’s for this reason why we recommend that you hire an expert mortgage broker to fully assess your financial background before finding the perfect mortgage product for you. We at The Mortgage Genie have aided plenty of our UK clients by landing them a mortgage after late payments, including handling all the complex paperwork involved. If you’re interested in saving yourself a substantial deal of stress by joining those among our success stories, then be sure to call us at 01915809890 today.
Albeit, notwithstanding how our mortgage services can help you, it still remains pertinent that you get to grips with all the details relating to mortgages after late payments. So that you can get a clearer perspective on the topic and thereby come to a more informed decision, we’ve put together this piece which covers all the salient information you should know. We’ll go over:
How do late payments impact a mortgage application?
One of the primary ways in which all mortgage lenders assess the eligibility of prospective homeowners is by carrying out a hard credit check in order to view the state of their financial profile. Afterwards, they then measure an applicant’s suitability by comparing their credit report against their own criteria.
The crux of high street lenders and mainstream building societies is that their criteria for borrowing is usually quite rigid and unforgiving. This is because they need to be wholly certain that you will be able to comfortably keep up with the required monthly repayments for a mortgage.
Evidently, if your financial history shows a presence of a late payment, i.e., that you previously failed to repay what you owed in time, then this works to negatively influence the strength of your mortgage application since it fundamentally goes against how mortgage arrangements function. That being said, single late payments are one of the less severe financial issues that one can encounter, relative to cases of repossession.
It should be said that hard credit checks leave a mark on your credit report. As such, if you want to get an idea of your current eligibility 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 seek out potential mistakes and fraudulent activity on your profile, so that you can deal with such problems as soon as possible. The trial and subscription can be cancelled at any time.
How long do late payments stay on your credit report?
A late payment will be visible on your credit file for 6 years. After 6 years have passed, the late payment will be automatically taken off of your profile. While this might seem like an extensive period of time, it’s worth noting that a creditor can only report a payment as being late if it has been overdue for a month or more.
For example, if you had to wait a few days before making a small payment on your credit card because your pay hadn’t come in yet, and so you paid the due amount about a week late, then this wouldn’t appear on your credit report, nor would it have an effect on your mortgage application.
Additionally, it is also actually possible to have a late payment removed from your credit report if it was recorded erroneously, or likewise, you have a perfectly valid reason for not having paid it on time. In such situations, you can contact the company you have the late payment with once you’ve fully repaid the debt and they can dismiss it if they find your reasoning sufficient.
Are late payments the same as arrears or missed payments?
No, late payments are not the same as arrears or even missed payments, and they are accordingly not judged equally by lenders. For clarification, late payments refer to a single late payment which you have since squared, albeit after it was marked as overdue.
Whereas, arrears are where you miss a series of payments consecutively. Such as, if you were to miss the due date of your monthly mortgage repayment for 3 months in a row. Similarly, missed payments are where you haven’t yet paid the overdue bill in full.
Arrears and missed payments are both likely to be registered as ‘defaults’ on your report and will cause your credit score to drop considerably. Late payments, on the other hand, are simply marked as being a ‘late payment’, and in this light aren’t as serious where mortgage applications are concerned.
Does the type of late payment I have matter?
Regarding getting a mortgage with a late payment, the specific type of late payment you made has a large influence over your chances of mortgage approval. Late payments fall into one of two categories, with each having a varying effect on your credit score. These are secured and unsecured late payments.
Unsecured late payments
Unsecured late payments consist of financial agreements such as mobile phone contracts, credit cards, overdrafts, and personal loans. In essence, instances where the debt isn’t secured against anything and where your own money-handling capabilities are relied on to keep on top of the necessary payments. Mortgage providers are inclined to be more lenient if your late payment falls into this category, though it may still have an adverse impact on your application nonetheless.
Secured late payments
Secured late payments comprise mortgages and other loans which have been secured against one of your assets, e.g., your home or car. If you cannot repay a secured debt, then a creditor is able to take the asset in question as collateral. Followingly, secured late payments are viewed as more consequential by mortgage lenders, especially if these late payments are recent alongside being frequent.
Will I need a bigger deposit because of late payments?
Strictly speaking, you aren’t required to put forward a larger mortgage deposit if you have a previous late payment on your report. However, a sizable down payment will always go a long way in strengthening your mortgage application.
The reason for this is that if you have a bigger deposit available, then you are capable of taking on a lower loan-to-value (LTV) ratio mortgage. Lower LTV mortgages imply that the lender is taking on less risk, effectively making approval for such mortgages easier. Therefore, a bigger deposit essentially works to offset the negative impact that a late payment can have on you as a mortgage candidate.
It may be the case that you don’t have an excellent credit rating due to a late payment and apply for a 85% LTV mortgage, requiring a deposit worth 15% of a property’s total value. If you don’t gain approval here, it’s possible for the lender to offer you a 80% LTV mortgage or 75% LTV mortgage instead. Although this would demand more savings on your part, lower LTV mortgages have the intrinsic benefit of coming with more competitive interest rates which prove helpful when the extra fees and charges for a mortgage are taken into account.
Can I get a mortgage after a late payment?
As you can now assume, it’s entirely possible to get a mortgage after a late payment. One thing to note when it comes to getting a mortgage if you’ve got a late payment, however, is that the context surrounding it is very important.
The matter of a missed payment is completely different if you simply forgot to make the payment, or were rather unable to due to lack of finances. Further still, if it was a secured late payment or unsecured late payment. In addition, how long ago the late payment occurred is also of significance, as mentioned.
Admittedly, lenders can be inflexible, but it’s unlikely for a single small late payment which happened over 3 years ago to mean that your mortgage application will be unsuccessful, particularly if you have a sizable mortgage deposit.
Can I get a mortgage after multiple late payments?
If the lender you apply to sees multiple late payments on your credit report, then this reduces your chances of being approved, as opposed to if it was just one late payment. This becomes increasingly detrimental if the size of the debt was quite substantial too.
Late payments themselves do not always mean that you have adverse credit, but if there are multiple late payments present on your credit report, and they happened less than 6 years ago, then this can imply bad credit. Likewise, if you have a court county judgement (CCJ), an IVA, a bankruptcy claim, or payday loans recorded on your profile on top of recent late payments, then under the same principle, this can result in rejection depending on how recently they occurred.
Having said this, multiple late payments don’t go to say that you aren’t eligible for a mortgage altogether, but they do mean that the options open to you will be lessened. The majority of high street lenders and building societies aren’t set up to accommodate those with bad credit, meaning you’ll have to go to a specialist lender. Specialist lenders are a lot more flexible than their mainstream counterparts, yet in order to find them it’s integral that you have a specialist mortgage broker at hand to support you.
At The Mortgage Genie we have a comprehensive understanding on how to get a mortgage and are dedicated to helping people secure loans of all types, including for mortgages after late payments. We sincerely hope that this article has cleared up any concerns you may have had about getting a mortgage with late payments.
Every day we assist a growing number of people in achieving housing happiness by finding the perfect mortgage product for them, one that’s tailored to their personal situation and individual circumstances, as well as by guiding them through each step of the, often complex, way. If you require a team of expert mortgage brokers, then be sure to reach us at 01915809890 and we’ll get started on your ideal mortgage solution. And why not see how much you could borrow up to today by using our mortgage calculator?