Getting a mortgage if you have a history of late payments is possible and there are even lenders out there that will look at you if you have more than one late payment, with minimal deposit and at competitive rates.
Is there a difference between late payments and arrears?
Yes. Late payments are isolated missed payments on any account that were known as ‘status 1’ on your file, and are now up to date.
Arrears are simply missed payments that fall further behind and end up unpaid for more than one month. If you owe more than your current month’s due payments, you are classed as being ‘in arrears’.
Does the type of account that I missed the payment for matter?
The type of account is probably one of the biggest factors as to whether your mortgage application will be accepted or not.
Missing a payment on an unsecured account, such as phone bills, credit cards and personal loans, is less of an issue than if you were to miss one on secured credit such as a previous mortgage or secured loan.
A couple of missed payments from a couple of years ago on an unsecured debt is unlikely to lead a lender to decline your application, but if you have an existing mortgage with late payments registered, you are probably going to find it even more difficult, depending on how long ago they were and how many there were.
So, it matters if I have a number of missed payments?
If you’ve just got one missed payment on your credit file within the last six years, it probably won’t cause too much damage to it . But if it was more recent, then it could lower your score, which means that some lenders will decline your application.
Having a number of missed payments, however, can impact your credit score more heavily. As a result, lenders that accept these applications will probably want to see a larger deposit from you.
Does how recent the missed payments were make a difference?
This makes all the difference.
If you are currently owing missed payments and are in arrears, then your score will be far lower than it would be if they were from years ago.
If you’re looking to get a mortgage with a small despot of 5-10%, then you will need to have a clean credit history for at least 12-24 months for most lenders to consider you application, though there are specialists out there that offer very good rates, as long s the further they fell behind in their arrears was three months and that they are now up-to-date.
Why are mortgage arrears different?
Obtaining a mortgage after already having one that fell into arrears can be extremely difficult, as lenders deem these as the most severe infringements.
When struggling for money, a person’s usual behaviour puts their mortgage as the last thing that they want to stop paying, for fear of losing their property.
However, if you did stop paying your mortgage, this can show your potential new lender that you don’t have a realistic ability to repay a new mortgage.
One or two historical late payments on the mortgage going to status 1 on the credit file is not the end of the world (depending on how recent), however multiple late payments of status 1, or worse, status 2, 3, 4, 5, 6 etc. can really cause issues and prevent you from finding new finance elsewhere.
However, if you have a reasonable and genuine explanation to the lender as to why the payments have been missed, such as redundancy, bereavement or illness, then there are a few specialist lenders that will consider your application.
For further information on how to get a mortgage with missed payments, contact one of our expert advisers who will be able to talk you through the next steps.