Getting a Mortgage After Late Payments

Can I get a mortgage with late payments

If you’ve had late payments or missed payments on your credit record, you might be concerned that getting a mortgage will be challenging. However, while late payments can impact your ability to secure a mortgage, they don’t necessarily mean that homeownership is out of reach. With the right approach and by working with the right specialist lenders, you can still obtain a mortgage after late payments.

People may have the odd missed payment due to simple banking errors. Most high street lenders allow for human error where there is the odd late payment. If there is a history of regular late payments, then this is where it causes an issue with high street lenders. A series of late payments in the last 12-24 months can lead to mortgage application rejection from high-street lenders.

In this article, we’ll explore what lenders look for, how late payments affect your mortgage application, and which mortgage lenders are open to borrowers with a history of missed or late payments.

How Late Payments Affect Your Mortgage Application

Late payments are recorded on your credit report and can lower your credit score, making lenders view you as a higher risk depending on the amount of late payments on your credit file.

The more recent and severe the late payments are, the more they may impact your ability to get a mortgage. Multiple late payments will further decrease your credit score. Most lenders will check your credit report, including any late payments, when evaluating a mortgage application.

However, late payments are only one part of the picture. Many lenders will take other factors into account, such as: Late payments remain on your credit record for six years. Credit reports show any late payments or missed payments to creditors for up to six years.

• The number of late payments: A few isolated late payments might not be a dealbreaker, but multiple missed payments over a longer period can indicate a pattern of poor financial management.

• The type of credit missed: Missing payments on unsecured credit, such as personal loans or credit cards, might be less damaging than missed mortgage payments or secured loan payments. Lenders view late payments on secured loans, like mortgages, more seriously than on unsecured loans, like credit cards. Mortgage lenders view missed payments on secured debt as more severe than those on unsecured debt, impacting approval chances.

• How recent the late payments are: Lenders will be more concerned about late payments that occurred within the last 12 months compared to those that are several years old.

• Reasons for late payments: If you had late payments due to a one-time issue, such as redundancy or illness, and you’ve since recovered financially, some lenders may take a more sympathetic view.

What Lenders Look For in a Borrower With Late Payments

Lenders typically assess mortgage applications by considering various factors beyond just your credit score. Here’s what they look for, including the specific lender’s criteria that may vary from one lender to another.

Future lenders will review an individual’s past payment history, particularly focusing on any late payments or arrears. They emphasise how a negative credit report can impact the chances of securing loans from future lenders, as varying criteria among lenders may influence their decision-making processes.

1. The Time Since Late Payments

The more time that has passed since your late payments, the better. Most lenders prefer applicants who have shown improved financial behaviour for at least 6 to 12 months. If you’ve made all your payments on time since your late payments, this demonstrates improved financial responsibility. Older late payments are less likely to impact mortgage approval than recent ones.

2. Your Current Credit Score

Although your credit score may have been affected by late payments, showing steady improvement over time will work in your favour. Regular on-time payments on outstanding debts will help boost your score and show lenders you’re back on track. Multiple late payments will further decrease your credit score. Lower credit scores make it harder to qualify for competitive mortgage rates and terms.

3. Affordability and Income

Lenders will want to see evidence that you can afford the mortgage payments based on your current income and financial situation. A solid income and manageable debt levels are critical, especially if your credit history includes late payments or significant outstanding debt.

4. The Deposit Size

A larger deposit can often offset some of the risks associated with late payments. If you can provide a deposit of 15-25%, lenders may be more willing to approve your mortgage application, even with a history of late payments. Many specialist lenders require applicants with late payments to provide a larger deposit than those with a clean credit history.

5. The Severity of Late Payments

Lenders will consider how serious your late payments were. For instance, if your late payments were only a few days overdue, some lenders may overlook them. However, defaults, arrears, or missing several months of payments are more serious and will impact your chances more significantly.

Options for Mortgage Renewal with Late Payments

If you’re coming up to your mortgage renewal and have had late payments on your credit report, it’s natural to worry about your options. The good news is that you may still have several routes available even with a less-than-perfect credit file. The easiest and most accessible option is a mortgage product transfer with your current lender.

This type of deal switch doesn’t usually involve a full credit check or affordability assessment, making it ideal if you’ve recently had missed payments but are now back on track. If you’re considering a remortgage with a new lender, things can be trickier.

Opting for a 2-year mortgage deal can be a smart and strategic choice if you’ve had recent missed or late payments on your credit file. Many borrowers with adverse credit find that locking into a shorter-term deal allows them the breathing space they need to rebuild their credit score while still with a high street lender.

Over those two years, you’ll have the opportunity to prove you can manage your credit commitments responsibly by maintaining consistent payments on your mortgage, bills, and any existing loans or credit cards. This consistent behaviour not only helps improve your credit profile but also allows you to stay with a high street lender.

By the end of the term, assuming your credit report shows improvement and there are no further issues, you’ll likely have more options and may qualify and have access to mainstream mortgage product with a lower rate.

Always consult with a bad credit mortgage broker to assess whether a product transfer would be the right option for you. 

How to Improve Your Chances of Getting a Mortgage After Late Payments

If you’ve had late payments in the past but want to improve your chances of getting a mortgage, here are a few steps to take:

First, understand that which mortgage lender you apply to can make a big difference in the outcome. Mainstream lenders often use automated systems that may lead to immediate declines based on red flags like late payments, whereas specialist lenders take a more personalised approach, potentially resulting in better opportunities for those with credit issues.

Next, focus on making timely payments on all your financial obligations, including car finance agreements. Late payments on car finance can have severe repercussions on your credit score and lender perceptions, which can impact your mortgage application.

Lastly, while late payments on unsecured debts like a phone bill are considered less significant by lenders, consistent late payments on important credit accounts, such as mortgages, are taken much more seriously and can negatively impact your creditworthiness and loan eligibility.

1. Check and Improve Your Credit Report

Before applying for a mortgage, it’s essential to check your credit report. Look for any errors or inaccuracies that could be negatively affecting your credit score. You can improve your score by making payments on time, keeping credit card balances low, and avoiding new credit applications. Being registered on the electoral roll can positively influence your credit score.

2. How much Deposit

If you’ve had late payments, saving for a larger deposit can significantly increase your chances of mortgage approval. The higher deposit the less riskier you appear to lenders. Aim for a minimum of 10-15% but strive for 20-25% if possible.

3. Work with a Specialist Mortgage Broker

A specialist mortgage broker can help you find lenders that are more open to borrowers with adverse credit, including late payments. They have access to a wide range of lenders and can help match you with one that fits your financial profile.

4. Provide Evidence of Financial Stability

Lenders want to see that your financial situation has improved since your late payments. Make sure you have a solid income and low debt-to-income ratio. Providing evidence of regular, stable income will reassure lenders that you can meet your mortgage payments.

5. Be Honest About Your Credit History

When applying for a mortgage, it’s essential to be upfront about your credit history. Hiding late payments will only cause issues later in the process, and lenders appreciate transparency.

High Street Lenders Who May Consider Mortgages After Late Payments

High street lenders are a possibility depending on how many missed payments. High-street lenders typically use an automated decision-making process that may lead to automatic declines for applicants with late payments. Here are some of the lenders that offer mortgages to individuals with bad credit, including late payments.

Working with a specialist mortgage broker helps as they will check lenders criteria and find the right mortgage options based on your individual situation.

Specialist lenders Who May Consider Mortgages After Late Payments

Understanding how different mortgage lenders evaluate late payments can significantly improve your chances of securing a mortgage. Not all mortgage lenders will reject applications with past late payments, especially if they specialize in working with applicants who have credit issues.

Mortgage Products and Options

Various mortgage products and options are available, including fixed-rate, variable-rate, and tracker mortgages. Mortgage lenders offer different deals, such as cashback, free valuations, and low-fee options, to attract borrowers. Specialist lenders provide mortgage products tailored to individuals with bad credit history, including subprime and adverse credit mortgages.

Mortgage brokers can help you compare mortgage products and options from various lenders to find the best deal for your circumstances. Considering factors such as loan-to-value ratio, interest rates, and repayment terms can help you choose the most suitable mortgage product for your needs. By exploring your options and working with a knowledgeable broker, you can find a mortgage that fits your financial situation.

Conclusion

Securing a mortgage after late payments is possible, but it requires careful planning and working with the right lenders. Many high street lenders may hesitate to approve applications from borrowers with a poor payment history, but several specialist lenders, including Pepper Money, Aldermore, and Bluestone Mortgages, are willing to offer mortgages to those who have experienced credit issues.

Specialist lenders often have a proven track record of success in approving applications from individuals with bad credit. Specialist mortgage lenders are more likely to consider applications from individuals with late payments.

To improve your chances of success, check your credit report, work on building up a larger deposit, and consult a specialist mortgage broker who can help you navigate the market and find the best lender for your situation. With the right strategy, securing a mortgage after late payments can be within reach, helping you move forward towards homeownership.

Get help from an experienced mortgage broker.

You can speak to one of our expert mortgage advisors who would be able to guide you through the process. They will advise if there is a lender available and the maximum loan amount based on your circumstances. We are a whole of market mortgage brokerage with access to all lenders. Call us on 01332 470400 or complete the form with your details for us to give you a call back.

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