Arrangement to pay and Mortgage application

1971rr

Can anyone please advise me?I am hoping to apply for a mortgage next year under the Help to Buy scheme,phase 2 and so will only have a 5% deposit.I am waiting until March 2014 when a default will drop off but the final blip on my otherwise fair credit history is an Arrangement to Pay with MBNA which finished in Feb.2011 when I paid it off.
Will this scupper my chances of a mortgage as it will be over three years old at mortgage app. time?I have a good history over the past six years of paying a couple of cards and this AP will be the only adverse info on my credit record.Thanks for any reply.

Candyapple

An AP is seen as the same effect as having a default on your file is. Will it scupper your chances of a mortgage, nobody knows until you try. It would obviously help if your deposit was very large, but you've said you'll only have 5%.

You-kip

1971rr wrote: »

Can anyone please advise me?I am hoping to apply for a mortgage next year under the Help to Buy scheme,phase 2 and so will only have a 5% deposit.I am waiting until March 2014 when a default will drop off but the final blip on my otherwise fair credit history is an Arrangement to Pay with MBNA which finished in Feb.2011 when I paid it off.
Will this scupper my chances of a mortgage as it will be over three years old at mortgage app. time?I have a good history over the past six years of paying a couple of cards and this AP will be the only adverse info on my credit record.Thanks for any reply.

You saying an AP is the only adverse info on your credit file is like saying you've only got 1 criminal record which was armed burglary.

izools

Please ignore the above two posts OP.

An AP is by no means considered to be as bad as a Default.

A default means the payments were so lacking that the lender had to terminate your agreement with them.

An AP means that the lender hasn't terminated their agreement with you, but agreed temporary reduced payments due to circumstances.

It shouldn't affect your ability to get a mortgage, especially with 36 months of flawless history since.

Don't worry about it.

My mother had a Barclaycard in an AP for seven years and she hasn't been declined for anything in years including various lines of credit from the likes of American Express.

An AP is negative but it's the least negative form of adverse data.

To say it's comparable to armed burglary is absolute codswallop. If you're going to compare it to anything you should perhaps say that you messed up someone's fence but they agreed to let you repaint it rather than reporting you and making an insurance claim.

Thrugelmir

izools wrote: »

Please ignore the above two posts OP.
An AP is by no means considered to be as bad as a Default.

An ARP shows that the account is in "default" i.e. arrears. As the borrower has not met or is not meeting their contractual obligations.

So the date of default is only one part of the equation. The other is when the account is either normalised i.e. the arrears are cleared and the account is then conducted in a satisfactory manner, or the account is settled and closed.

ARP's have a material bearing on the outcome of mortgage applications. To think otherwise is foolish.

Candyapple

https://forums.moneysavingexpert.com/discussion/1626051

2 people on that thread who applied for a mortgage and were declined due to AP on their files.

Thrugelmir

Further to my earlier post.

The significance of the default date is that under the majority of financial contracts. If default occurs, i.e. payment is not made on the contractual due date. Then the lender under the terms and conditions of the contract that the borrower agreed to. The lender can seek repayment of the entire debt immediately.

izools

An account that has an "AP" marker on it is not defaulted.

A defaulted account is one where the lender has terminated the agreement with the borrower - e.g. the credit agreement is no longer in place and a statutory demand for the full amount has been sent to the borrower.

The lender will have formally frozen interest on the account if it is defaulted.

An account in an Arrangement to pay is one where the lender has not terminated the agreement, but allowed the customer to make reduced payments whilst suffering financial hardship but the original terms of the account still stand and no statutory demand for the full amount has been issued.

The lender may have informally frozen or reduced interest on the account whilst the borrower is continuing to make reduced payments under the Arrangement to Pay.

I never said an Arrangement to Pay would have no negative effect.

My suggestion that an Arrangement to Pay has much less of an effect than a Default Notice is correct.

You are far more likely to be declined for credit due to a default in your credit history than for an arrangement to pay in your credit history.

1971rr

Thanks alot Izools for your comprehensive replies.I rang the Woolwich today as I have been with Barclays for many years and their lending criteria regarding AP's is an instant decline within one year of completing an AP.So,with my default dropping off March 2014 I should be ok.
As I've closed the account with MBNA I didn't want to wait another three years until this AP drops off.
Once again thanks for taking the time to reply Izools.