Here we explain a few steps to take prior to applying for a mortgage if you have had a missed or late payment.
Missed and late payments and mortgages aren’t usually what lenders like to hear in the same sentence when applying for a mortgage, however this does not necessarily mean that you can’t get a mortgage. This is a guide on what you should do to make sure you are in the best possible position to apply for a mortgage.
Before we begin let’s start with the difference between a missed payment and a late payment. A missed payment is when you don’t make a payment on the date you agreed to pay back to the lender. A late payment is when you make a payment after it is due. Both of these will have impacts on your credit which indicates to banks how reliable you are and may see it as a risk. The main thing to know is different banks and lenders look at different things so it does pay to look at the whole market.
The main thing is to help you understand your credit and how the banks see you:
- Check your credit report (Not just score)
One of the first checks most banks do is to check your credit score and profile, banks will use a number of credit agencies to do this (Experian, Equifax, TransUnion, etc) and cross reference the details. The first thing to do is check your credit score and report to let you know what is exactly on your file. Most credit agencies will allow you to check your score for free however you may need to subscribe to access your full account. There are some providers that may offer your report for free and can compare a few credit agencies such as ClearScore or CreditKarma but you should check their T&Cs.
- Understanding your credit report
Credit reports can look confusing so it is important to understand what exactly is on your file. The credit report will show you all your personal details and credit agreements that you currently have as well as your previous credit agreement. The report will show if you have any late or missed payments to the lender, how many missed or late payments, what date they were and for how much. Credit reports come with a key to help you understand your report however if you are not sure you can always call the credit agency to explain this. This helps you understand if everything that is on your file is correct such as address history, electoral roll details, credit agreements.
- Small things to improve your score
There may in some cases be things that can improve your score such as making sure your personal details are up to date. Address history and current address especially if you have moved in the past year. Registering on the electoral roll and making sure that it reflects on your report will help. Other things to consider is credit card usage, if you are maxing out your credit card usage and paying the minimum amount every month and not clearing the balance lower then 50-70% from a lenders point of view shows that you could be financially reliant on that credit card.
- Give yourself enough time
You want to make sure you are in the best possible position whether you are buying your first home, moving home or your deal is coming to an end you want to allow yourself enough time to help you achieve you goal and obtaining the right mortgage for your circumstances. Late payments and defaults take 6 years to come off your credit file completely however the longer you are on top of your payments prior to applying the better.
- Speak to a Mortgage Broker
Mortgage brokers understand that people fall on hard times and they can help you navigate through all this. Generally initial consultation is free and together with you they will ensure they understand your current situation and future plans. A whole of market broker can find all different types of deals whether you have had missed payments, late payments, defaults or CCJs they can help. The main thing is to be clear and honest about your circumstances as they shape their advice on this for you and if you don’t tell them then the advice they give you will not be accurate and could lead to them not being able to acquire the deal/rate they have mentioned.
- It can be possible
It is important to understand just because you have had a late or missed payment does not mean you can’t get a mortgage. It just means that some adaptations may need to made depending on your circumstances. This could be in the form of a higher deposit or working to improve your credit report but your broker will discuss these options with you. In many cases you should be able to apply for a mortgage on a good deal on your current circumstances as different banks and lenders do different things. It does pay to shop around and look at other providers not just your current provider or the main banks.
Remember mortgage providers will be governed by the Financial Conduct Authority so a big name doesn’t always mean better rates.
Your home may be repossessed if you do not keep up repayments on your mortgage.