Mortgage Defaults: how they affect your mortgage application
Mortgage defaults – which means missing some monthly repayments on your mortgage – can occur for a number of reasons; a payment problem with a family-run business, divorce, death and even an administrational error are all among them. But if you get in touch with your lender early on and explain about the likelihood of forthcoming mortgage defaults, you can often secure yourself some time to get back on the straight and narrow.
What’s the problem with mortgage defaults then?
However that might not be where the story ends. When you come to apply for a different mortgage, the new lender will not look kindly on previous mortgage defaults as it implies that you are not a reliable borrower – even if they occurred through no fault of your own. That’s why it is imperative that you seek advice from an independent broker with experience in these types of application problems, like The Mortgage Broker Limited (TMBL).
How does the new lender know I have mortgage defaults?
Every time you make a financial error – which could be anything from a missed credit card or council tax payment, to mortgage defaults – it will show on your credit score. This is a file that is held (but not determined) by one of three credit reference agencies in the
So what should I do about mortgage defaults?
As is always the case when a mortgage application is not an ‘open and shut book’ case, the first port of call if you have mortgage defaults is a mortgage broker, like TMBL, that is experienced in the sector. You could then be referred to a lender that is designed to cater for borrowers with mortgage defaults – or a lower-than-average credit score.
What’s the difference between a mortgage defaults loan and a standard mortgage?
Depending on the severity of your mortgage defaults – and when they occurred – the mortgage you will be offered may be what’s known as a subprime deal. This can be more expensive in terms of interest rates and require a larger deposit. It may also come with higher upfront fees and tie-ins.
Will I always have to settle for this if I have mortgage defaults?
No. If your mortgage defaults are not severe, some mainstream mortgage providers are flexible on this and may accept your application regardless. And if you just want to reduce the interest rate you are paying with your current lender you can usually transfer your existing balance – though you won’t be able to borrow more – onto a ‘retention deal’ . This way your lender that won’t carry out a credit search and your mortgage defaults will therefore be deemed irrelevant.
