Mortgages with a Default

hallsy85

Hi guys,

I've been lurking around the debt-free diaries for a while, but have made the rather grown up decision recently that I'm going to start saving for a house whilst my rent and outgoings are low enough to save a sizeable deposit.

I'm looking to buy in mid 2015 - we should have a deposit of around £40k then, looking to buy a property around £250k (less if we can find the right place!) - so have a 15% deposit.

The only issue is I will have a default (satisfied), due to drop off in August 2017 - it was satisfied in April 2012, so will have been satisfied for 3 years by the time we look at mortgages. I've seen a few posts about this kind of thing on here, but just wanted to clarify. I'm guessing I won't be in the prime lender market, but I should be able to get a mortgage with one default (it was for about £350), at admittedly sub-prime rates shouldn't I?

kingstreet

At 85%, a satisfied default for under £500 over four years earlier should still be possible at High Street rates.

Just before you're ready to start looking, see which versions of your credit file the default is visible on and run them past a broker.

hallsy85

Thanks KingStreet, I'm continuing to keep building my credit rating and keep everything nice and squeaky clean, so hopefully this shouldn't be an issue come mid 2015. I know it's thinking ahead, but I think it's worth planning!

ACG

If you had a 15% deposit now id be confident of you getting a mortgage tomorrow subject to everything else fitting.

In 2 years time unless something goes drastically wrong i dont think you will have a problem with the majority of lenders.

hallsy85

Thanks ACG, only just read this - I've not been on for a while!

A brief update - I've got my credit report through Noodle - although looking to get them from the other agencies obviously, and my situation is currently as follows:

- 40k deposit currently saved between us (14k of our own savings and parental gifts)
- Looking at £230-300k properties - so almost 15% deposit on 300k and 15% on 260k and lower
- Combined salary of £80k
- No monthly payments outside of rent - no car loans etc

Account wise, my credit report has shown 5 satisfied defaults

Lowell - satisfied years ago - drops off report in a week - value £95
HSBC - satisfied years ago - drops off report in Jan 15 - value £1,028
Three - satsified years ago - drops off report in Feb 15 - value £200
MBNA - satisfied years ago - drops off report in Mar 15 - value £719
Capquest - satisfied years ago - drops off report in a week - value £719

Along with these, there are 2 non-satisfied defaults - on for £267 with Barclays and one for £425 with Natwest.

Before I met my partner, 3 years ago, I used a number of payday loans, always paying back on time and these are now a few years old on my report.

Based on the above, would we stand any chance of getting a mortgage with these? There's the option that my partner could get a mortgage on her own, so we could explore these, but would rather buy together if at all possible.

Thought the best policy is honesty, full disclosure etc, and am fully prepared for the worst!

ACG

As above, 15% deposit and this should be achievable.

One for a broker I think but there will be ways to get this through assuming the defaults are the only issue.

hallsy85

Defaults are the only issue - was very irresponsible up until 2 years ago and have been squeaky clean since, no late payments, saving where possible, cutting costs of useless monthly expenditures etc.

What I missed above is that the 2 outstanding defaults are due to drop off in Nov 14 (Natwest £425) and Sep 17 (Barclays £267) - I mentioned this last one above, but am hoping that the amounts are small enough not to cause an issue. I'm also speaking to both companies about them as neither have been able to provide account information on the defaults either when queried.

With this in mind, i'm keen to speak to a broker and put all my cards on the table with financial statements, credit reports etc. Is there a centralised place i can find a broker with free advice?

Appreciate the advice ACG, thanks again for being so helpful on these boards!

ACG

There is a website called unbiased.co.uk - if you untick sponsored listings.

With that many defaults though, paying for advice could end up saving you a fortune. Most brokers should be able to get this through for you - fee free brokers are unlikely to put the time in to potentially get this through at better rates.

hallsy85

Thanks ACG, appreciate it. Generally what kind of fee would a broker charge? Appreciate that it's best to get someone that's motivated to get the best rate possible dependant on the circumstances, so would happily pay for the best advice, especially if it saves us thousands down the road.

ACG

It really depends, some brokers charge set fees (anywhere from £250 to £2000), others charge a percentage of the purchase price (usually between 0.5%-1%), personally I charge based on work involved in conjunction with how much commission I will receive (as in I work out how much I would want for that case, deduct the expected commission and charge the difference), but there is no set way.

Im not saying you should pay a fee btw. Im just saying, sometimes by paying a fee you may end up in a much better position financially.