Can I get a mortgage with a CCJ?

If you have been issued with a County Court Judgement (CCJ) you may now be wondering if it has scuppered your chances of ever being approved for a mortgage.

Indeed, any financial failings from the past can come back to haunt you when it comes to trying to secure borrowing, including a mortgage. These can include late payments, debt management plans, repossessions, individual voluntary arrangements and bankruptcy.

When it comes to County Court Judgements, there are many factors that can impact on your chances of obtaining a mortgage. High Street lenders are generally less likely to approve CCJ mortgages. However, specialist lenders may accommodate you. A CCJ mortgage broker can provide access to these lenders as well as advice. They are also likely to find the most suitable mortgage term and interest rates for your situation.

What is a County Court Judgement?

Firstly, we will establish what a County Court Judgement is. A CCJ is issued to an individual who fails to make agreed payments on a debt. A CCJ would not be pursued by a creditor until all other avenues of redress have been exhausted. This would typically include letters asking for payment, letters demanding payment and default notices, all of which will negatively affect your credit score regardless as to whether or not it reached the stage of a CCJ.

A County Court Judgement will not, therefore, come as a shock to the debtor as they will have been given ample opportunity to repay the debt or approach the lender to agree a debt repayment plan before they were issued with a CCJ.

If possible, it is always worth preventing these situations in the first place because of the long-term impact they will have on your financial status and access to money.

However, if you have been issued a County Court Judgement it will have an ongoing negative impact on your future finances and of course, your chances of securing a mortgage. If you have been subject to a CCJ, the likelihood of a lender approving you for a mortgage depends on a number of factors.

About the CCJ

Is the CCJ outstanding or settled?

If you repaid the debt within 30 days of the CCJ being issued, it is unlikely that it will adversely affect your chances of obtaining a mortgage. The same can be said if you have successfully appealed against the CCJ. However, you may find that the issue of default letters in the run-up to the CCJ may still appear on your credit history.

Whether the CCJ has been paid off, settled or is still outstanding is likely to be the biggest factor in a lender’s decision. If the CCJ has been settled, the length of time that has passed since this happened will also have a bearing. Many lenders will refuse to lend money to an individual with an outstanding CCJ, while some lenders will not approve a mortgage if a CCJ has been settled within the past three years.

Judgment in default

A judgment in default takes place when an individual chooses to ignore a CCJ. The court hearing takes place without them and the court makes a decision in their absence. This situation can reduce your chances of obtaining a mortgage even more, especially if you ignored the judgment made by the court.

When was the CCJ issued?

If your CCJ was settled and occurred more than six years ago it will be removed from your credit file. At this point, many lenders will consider approving a mortgage. However, when the CCJ was settled will be a factor in their decision, not just the date on which the CCJ was issued. For many lenders, the CCJ will need to have been settled for more than a year before they will consider you for a mortgage.

Size matters - how big was the CCJ?

The size of the CCJ is another important factor in a lender’s decision over whether or not to offer you a mortgage. If the CCJ was issued within the previous two years and was for more than £2,500 then securing a mortgage will be much more difficult. If the CCJ was issued within the past year its size would need to be much smaller for a CCJ mortgage to be considered.

The importance of a deposit

The size of the CCJ and when it was issued will be a factor in determining the size of the deposit that the mortgage company will require. If the size of the CCJ is larger and it was not issued very long ago, the mortgage provider will require a larger deposit than they would from a borrower with a smaller CCJ that was issued a long time ago. 

A CCJ issued within two years could require a loan to value (LTV) term of 85%, meaning you would be required to put up a deposit of 15% of the property’s price.

If the CCJ occurred within the last year and for a smaller amount, a lender could require an LTV of between 65% and 75%, meaning you would be required to find a deposit of between 25% and 35% of the property’s price.

The higher the deposit you have, the greater chance you have of securing a mortgage with a CCJ. Therefore, if you have been issued a CCJ in the past and you know you will want to take out a mortgage in the future, it is worth saving as much money as you can towards the deposit.

How many CCJs can I have?

When it comes to the number of CCJs you can have to still be considered for a mortgage, this depends on factors such as the size of the CCJs, when they were issued and whether they are still outstanding or have been settled.

Once again, the size of your deposit will be an important factor. The higher the deposit you can put down, the more CCJs a mortgage company would be willing to accept, subject to date of issue and status of the CCJ.

What can I do to increase my chances of getting a mortgage?

If you have been subject to a CCJ in the past and are looking to apply for a mortgage, there are steps you can take leading up to the mortgage application process to increase the chances of gaining approval. Firstly, you should ensure that you are up to date with all the repayment requirements of your CCJ. Secondly, you should make sure any other credit agreements are up to date.

You should also avoid applying for too much credit, as simply applying for credit can negatively affect your credit score, regardless as to whether or not you proceed to take out the credit. It could also be a good idea to check your credit report to ensure it is up to date and correct.

You can also help to increase the likelihood of having your mortgage application approved by ensuring that your credit history has been clear since the CCJ was issued. Proof of regular income will also go in your favour.

Affordability checks

You will need to undergo affordability tests for a mortgage with a CCJ. The criteria of these checks are likely to be stricter for an individual with a CCJ than for someone with a clear credit history. You may find that the amount of money you can borrow (which can ordinarily be up to five times your salary) will be reduced.

Your income and employment history are also important. If you have been with your present employer for less than a year, you may not be able to borrow as much as you could if you had been with your employer for a longer period of time. If you are self-employed, you will need to provide at least two years of accounts. If you have less self-employment history than this, you will find your borrowing levels much more restricted.

Which mortgage is right for you?

The type of mortgage you require will be another factor that will influence the likelihood of you gaining approval. A standard mortgage or re-mortgage would be the most likely product to be approved. A lender may impose more restrictions on a first time buyer mortgage, with tighter criteria when it comes to the size of your CCJ. The mortgage provider may also require proof of regular rental payments.

If your application for a re-mortgage is refused or it is looking unlikely to be accepted, then, provided that you have adequate equity in your property, you may be able to get a secured loan instead. A secured loan is lending that is secured against an asset you own. This is typically your home, but it could also be other financial assets. 

Much the same as a mortgage, the secured loan lender can take possession of the property if you fail to make the agreed payments and you could ultimately lose your home. A secured loan could be a suitable option if you do not want to borrow much money - the amount of money you can borrow with a secured loan would be less than what you could borrow with a mortgage. 

The term of a secured loan can still be up to 25 years, the same as most mortgages. The longer the mortgage term, the cheaper your monthly repayments are likely to be. However, this will result in you paying far more interest in the long-term. A secured loan could be an attractive option because it is generally easier to obtain than a mortgage. However, because it is secured against your home, it is a riskier option than taking out an unsecured loan if you are able to do this.

What about defaults, debt management plans, IVAs and bankruptcy?

There are other unfavourable financial situations that will also affect your chances of obtaining a mortgage. If you have defaulted on credit payments, this will adversely impact upon your credit history and therefore your chances of securing a mortgage with a CCJ. Missed mortgage payments are likely to be considered the most serious of defaults by a potential lender, while other types of payments may be seen as less serious.

A debt management plan or individual voluntary arrangement (IVA) allows an individual to agree to repayments with their creditors, paying a reduced monthly sum off their debt. A lender will usually require debt management plans to have been fully repaid before considering approval of a mortgage application.

For IVAs, a lender may require a longer period to have lapsed before considering a mortgage application.

In the most serious of financial situations, you may find yourself bankrupt. You can either declare yourself bankrupt or a creditor can force bankruptcy upon you. Once you have been declared bankrupt you will no longer be contacted by your creditors. However, most of your assets will be sold to repay your debts and some debts may be written off.

If you have been declared bankrupt, most regular mortgage lenders will not consider offering you a mortgage, regardless as to when the bankruptcy occurred. Your mortgage application may be considered by a specialist lender provided that the bankruptcy has been discharged and it occurred more than six years ago.

Buy to let mortgages & CCJs

If you are looking to obtain a buy to let property, then you could find this more difficult. A longer period since the issue of the CCJ is likely to be required and you will probably need to provide a larger deposit.

Why not contact our expert team today. We're here to help you navigate the complexities of obtaining a mortgage in less than perfect circumstances.

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