Can I get a mortgage if I have had a house repossessed?
Life after repossession won’t be good for a while. But if you’re presently behind on your mortgage payments and considering allowing your house to be repossessed, please read the last section of this article first. There are ways of avoiding your home being repossessed.
But before that, lets take a look at if it’s possible to get another mortgage if your house is repossessed in the past.
If my house is repossessed can I get another mortgage
The simple answer to the question ‘if my house is repossessed can I get another mortgage‘ is yes. Although there is of course a ‘but‘.
The ‘but‘ in this answer depends mostly on the passage of time. That is, how long since your house was repossessed in the past. But another factor that plays a role in whether you are able to get another mortgage is which new lender(s) you approach.
But also, in order to stand any chance of obtaining another mortgage will be impacted by how well you’ve maintained your credit since the repossession happened. However, if you are able to save up a significant deposit, this will impact on your chances of getting another mortgage.
There are various factors which will have an impact on your mortgage application after repossession. These factors are explained below.
Let’s take a look at the factors that will affect whether or not you’ll be eligible for another mortgage.
How long ago was the repossession?
Depending on how long in the past you were repossessed, will depend on whether or not you’ll be able to get another mortgage.
If your house was repossessed with in the last three years you may find it difficult to get another mortgage. With the passage of time, your chances of getting another mortgage grows.
Getting another mortgage after three years
It may even be possible to get a mortgage after three years have passed of up to 85% of the house value. But the interest rate you pay may be on the high side. If you are prepared to pay an interest rate of circa 6%, you may stand a chance.
A rate of 6% compares to rates for a person who hasn’t been repossessed in the past of currently between 2-3%.
However, the higher the deposit you can put down on the property, the less risk the mortgage company is taking. But if you are recovering from a repossession, saving up for a deposit may not always be easy.
Getting another mortgage after six years
Another significant cut off period is after six years have elapsed since your repossession. If over the last six years you’ve maintained a good credit record. Plus if you’re able to raise a reasonable deposit. The interest rate you pay will come down from the excessive rates discussed above.
However, if you’ve not manage to save more than 15% to get an 85% mortgage at this stage, you may be able to get a higher loan to value (LTV) mortgage.
Where your repossession happened more than four or five, but preferably six years ago, you may be able to apply at more sensible interest rates. Perhaps even as low as around 2-3% in the current market.
However, it should be noted that rates will also depend on the amount of deposit you have as well, as other credit issues.
Choosing the right lender to approach for another mortgage
My first advice when looking for another mortgage, after you’ve been repossessed, is to use a broker. You could approach high street lenders and visit each one in turn.
But this will not only be time consuming. You may not find a high street lender that’s happy to lend to you after you’ve been repossessed in the past.
One consideration to take into account is the amount of interest you may have to pay. As already discussed above. Different lenders have differing criteria. Some will not lend to you if you’ve been repossessed in recent years. Whereas others will.
A mortgage broker will be able to match your personal circumstances. They consider your credit history and financials to match with the right lender. You will have to pay a brokerage fee. But the fee will pay for itself in the long run.
By having to choose specialist mortgage lenders or by using banks or lending companies that are more open to previously repossessed clients, you may have to accept the higher cost of borrowing.
Think about it as a cost of learning. As this may help you soften the blow.
Other considerations when looking at getting another mortgage after repossession.
Other factors that will affect getting another mortgage after repossession
Here are a few more factors to think about if you’ve previously been repossessed when looking at getting another mortgage.
What was the reason for being repossessed
People get repossessed for many reasons. This could be the loss of a job and being made redundant to being the victim of fraud.
When you apply for another mortgage, the reason why you were repossessed will be taken into consideration by the mortgage lender.
If you can demonstrate that what happened was largely out of your control, you will stand more of a chance to convince a lender to advance you another mortgage.
More than one previous repossession
If you’ve had just one repossession in the past, then you should be able to clean up your credit file and obtain another mortgage after about three years.
But if you’ve had more than one repossession in the past, you may be on trickier ground. This may not stop you from getting another mortgage. But you may need to leave more time before applying for a new mortgage or have a significant deposit to put down.
How much the repossession was for
The amount involved in the repossession may affect your eligibility for another mortgage. How much money you failed to repay on your mortgage when you were repossessed will make a difference to your application.
Whether your repossession was millions or for a few thousand may be the decider on whether you will get a new mortgage. But all of these details can be discussed with your mortgage broker.
Other credit history issues
What lenders look for is a clean bill of health as far as your credit rating is concerned. If your credit history is only affected by the repossession, then whilst this may be more difficult to borrow than someone without a repossession in their history, at least it is possible.
However, if you have other bad credit history issues like County Court Judgments (CCJ’s). Or if you’ve been made bankrupt. Or if you have any current outstanding arrears of loan defaults. You are reducing your chances of future borrowing.
However, as already mentioned if you have conducted yourself well since the repossession, you stand a good chance of borrowing once more.
Mortgage lenders are keen to lend to people who can demonstrate a good recovery after a significant credit issue like a repossession.
Make sure you apply to the correct lender
Making an application to the wrong lender could result in a rejected mortgage offer. This is why using a mortgage broker is the best route to take.
You will find that some companies belong to a group where they have multiple lenders within the same group.
Your mortgage company that repossessed your home is unlikely to offer you a mortgage in the future. But also you may be banned from borrowing from other companies in the same group.
The amount of the shortfall debt
If the sale proceeds when your repossessed home were not enough to pay off the money you owed to the lender, then there will be a “shortfall debt“. You will still owe the lender this shortfall debt.
If this is the case and you still owe an amount of money to your previous lender, this will impact whether or not you can borrow again.
Your previous mortgage company should have written to you about any shortfall debt and how much you owe. In order for them to be able to collect any shortfall, they must inform you of the amount owed within six years of the repossession.
Bear in mind that interest will continue to accrue on this shortfall debt amount.
Finding a guarantor
It may be possible to find a guarantor to support your mortgage application. By having a guarantor you are opening up your mortgage application to other lenders that may not be otherwise interested in your application.
A guarantor is someone that will offer to the mortgage company to step in to pay your mortgage payments should you default on the mortgage. Mortgage guarantors can usually be found with either close friends or family.
Mortgage affordability calculation
The last factor to consider is your ability to be able to afford the mortgage.
Lenders tend to look at a multiple of your income of how much they will lend. Typically this is a multiple of three-times annual earnings where your repossession was within the last three-four years.
But you may find that as time passes and you reach the six-year mark past your repossession date, you may be able to increase your earnings multiple and borrow more money. But of course the limiting factor here is the LTV against the property.
Finally, are you considering this question about whether you’d be able to get another mortgage because being you’re repossessed as you read this article?
If you are, this next section is specifically for you.
Currently in arrears on your mortgage and in the middle of being repossessed
Are you in the middle of being repossessed as you read this article? Are you currently in arrears with your mortgage company?
If you are then it’s not too late to stop your repossession. Having read to so far about ‘if your house is repossessed can you get another mortgage‘, you may be thinking that being repossessed isn’t so bad after all.
But don’t let this lead you into a false sense of security. Being repossessed is not a nice process and it can leave a lasting stigma. Being repossessed is about not being in control of your destiny.
But you can take control of your destiny. You can stop your repossession from going ahead. But you must act fast and you need to seek help immediately.
If this describes you. If you want to take back control. Please contact us today to see if we are able to help you. By using one of our solutions to stop repossession, you will be back on your feet much sooner. Your credit rating will be less damaged too.
You may be in default of your mortgage right now. You may also be in arrears. But this isn’t too bad when compared to being repossessed.
Your credit file will repair much quicker than it would if you go ahead and get repossessed.
There may also be a chance to get some equity out of your house that you may not get if you’re repossessed.
This will depend on the level of equity in your house at the moment and how much arrears you have. These details can be discussed over a cup of tea or coffee.
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