Can I Get a Mortgage After My House Is Repossessed?

Can I Get a Mortgage After My House Is Repossessed?

The consequences of house repossession can be far-reaching and it’s important to think about the long-term impact repossession will have on your financial status. Finding somewhere to live following an eviction might be your primary concern when you’re about to lose your home due to repossession, but what about the future?

In this blog post, we take a look at how repossession affects your borrowing potential, whether you’ll be able to get another mortgage if your home is repossessed and what you can do to protect your financial standing.

How Does House Repossession Affect Your Credit Rating?

When you get into mortgage arrears, missed payments are recorded on your credit file. Typically, this negatively impacts your credit rating, which makes it harder to borrow funds. If the situation isn’t resolved and your house is repossessed, this can further impact your credit rating. As a result, house repossession does make it harder to secure a future mortgage or any other type of loan.

Can I Get a Mortgage After Repossession in the UK?

Although getting a mortgage can be harder if your property was repossessed, this doesn’t mean it’s impossible.

Any mortgage lender will look at your credit history before offering you a mortgage, so a potential lender will definitely be aware that your property was repossessed. While some lenders will automatically reject applications on this basis, specialist lenders may be willing to offer you a mortgage.

If you’re applying for a mortgage after your home is repossessed, be aware that you may need a higher deposit than average. In addition to this, adverse credit may mean that you’re unable to secure a competitive rate of interest, so you may face high repayments.

How Long After Repossession Can I Get a Mortgage?

Technically, you can apply for a mortgage at any time following repossession. However, banks and mortgage companies may be unwilling to lend if your property was repossessed relatively recently. If you can secure a mortgage deal, the terms may be dependent on how long ago the repossession occurred.

If you apply for a mortgage within one or two years of repossession, for example, you may be required to put down a 30% - 35% deposit. If you’re purchasing a property for £200,000, this means you’ll need a deposit of at least £60,000 - £70,000.

However, if the repossession occurred three or four years ago, you may be able to secure a more competitive rate and a lower deposit requirement. Mortgage advisors may even be able to help you find specialist lenders who will offer 85% loan-to-value (LTV). If so, you would only need to put down a 15% deposit. On a £200,000 property, a 15% deposit equates to £30,000, so there can be a big difference in the mortgage deals you’re able to obtain depending on when your home was repossessed.

After six years, defaults are removed from your credit report, which can make it easier to get a mortgage. While the deposit amount, credit score and your annual income will still be taken into consideration by potential lenders, you should find it easier to get a mortgage at a competitive rate if you wait at least six years after a house repossession to apply.

What Affects Your Chances of Getting a Mortgage After House Repossession?

If your home has been repossessed, this won’t be the only factor that affects your ability to get a mortgage. In fact, lenders take many things into account, such as:

Legacy Payments

If the funds raised via the sale of your repossessed property didn’t cover the amount owed to your mortgage lender, you will still be in debt and may be required to make continued repayments until the outstanding amount is paid off.

If so, these ‘legacy payments’ form part of your outgoings and will be taken into account by potential future lenders. In many instances, it can be very difficult to secure another mortgage when you are still making legacy payments on a previously defaulted mortgage.

Annual Income

As you might expect, your annual income will still have a big impact on your ability to get a mortgage. Your salary affects how much you’re eligible to borrow, regardless of whether your home has been repossessed, and lenders will want to ensure you can make the required repayments on any mortgage they offer.

Reasons for Repossession

There are many reasons why homeowners fall behind on their mortgage repayments and the reason you got into arrears and had your home repossessed could affect how future lenders view your mortgage applications. If there were mitigating circumstances which led to the repossession, for example, lenders may be more willing to offer you another mortgage in the future.

Credit History

If you have other forms of credit, such as personal loans, secured loans, or credit cards, these will be taken into account when you apply for a mortgage too. Numerous defaults, county court judgments (CCJ) and a low credit score will inevitably make it harder to get a mortgage, particularly if your home was repossessed fairly recently.

Is It Too Late to Avoid Repossession?

As you can see, getting a mortgage following a repossession can be difficult and, in all likelihood, you’ll need to wait some time before applying if you want to obtain competitive mortgage rates.

However, avoiding house repossession can alleviate your financial worries, protect your credit rating and give you more financial freedom in the future. Contrary to popular belief, it’s never too late to stop a repossession, even if a possession hearing has already taken place or you’ve been issued with an eviction notice.

Although it’s best to take action as soon as you get into mortgage arrears, HomeKeep Solutions can help you to keep your home whatever stage of the repossession process you’re at. With an experienced team available 24/7 and no upfront fees to pay, stopping repossession could be easier than you think.

To learn more, contact HomeKeep Solutions now and talk to our friendly team today.