Mortgage with a default.

brooklyn6662

Hello All

Firstly i apologise if this thread has been seen before in this and thank you to everyone who can offer any sort of suggestions or advice on my situation.

Here goes...
I’m currently in the process of applying for a mortgage with my partner. She is selling her property for 400k and we have a cash buyer. We will be using approx 100k of the sale (the rest goes to her parents) as a deposit on a 350k property so we will need a mortgage of around 250k. In March / April 2018 our mortgage broker got us DIP from Natwest for 262k 2 year 2.02%. We applied for it and it was declined due to adverse credit - a default on my account (i didn’t realise that the debt i had was a default). The mortgage broker then got us A DIP from Halifax 262k 2 year 1.94% which we applied and yup you guessed it, we got declined. Surely the mortgage broker knew this was going to happen? I might add we feel disappointed with our mortgage broker as he never did a credit check on us or ask us for a credit report from us until after 2 rejected mortgage applications. So we wasted time and money in applying for mortgages we were never gonna get accepted for.

In the meantime i looked into my default which is from July 2012 so will be coming off in August 2018. The outstanding was £2700 in which i only set up a payment plan last year (March 2017). I didn’t realise that setting up a payment plan meant the default would still show up as outstanding on credit searches. Other i would’ve cleared it there and then. I didn’t even know that it was an actual default on my file or how bad it would affect me getting a mortgage - i won’t go into the finer details but it was with vanquis bank and then lowell’s back in 2012. In May 2018 i cleared the default so it now shows as satisfactory.

Since then the broker has got us a 285k 5 year 3.58% with Pepper Money and 244k 2 year 2.08% with TSB. Given the ups and downs we’ve been through so far the TSB offer was amazing and again our hopes were up. TSB however required more information from my employer as they couldn’t work some payments on my payslips. Payroll wouldn’t disclose these payments so the offer went down to 222k which was devastating as that amount is too low for us. TSB had 6 months of my weekly payslips as well as last years P60 which all show i earn a decent salary but due to this additional payment which appeared on some of my payslips which they decided to not take into consideration plus the payment of 2400 on my credit to clear my default the offer went down to 222k

Our mortgage broker said that the Pepper Money offer is our only chance now due to my default. Our offer of 350k on a property was accepted and we have a cash buyer for our sale. But we are now stuck with a very high rate 3.58% on 5 year deal if we go ahead with Pepper Money. I

Both our buyer and the seller are getting fed up with the length it’s taken us to get sorted. They have been waiting for months for us to get a mortgage offer so we don’t have much time. The default comes off my record on August 1st 2018. So then my credit file will be clean, my partners report is also clean. Natwest say we can reapply again in 6 months, but is there any alternatives or options where we could get the amount we need at a decent rate before then ?

Thank you for reading as i know it was very long and for any inputs or advice you can give me.

ACG

Affordability must be on the tight side if Pepper are only offering a 5 year fix?

Halifax are not a bad shout if you have a historic default, but he should probably hve checked to see your credit report first to find out how it was displayed on your credit report.

I suspect if you have a payment place/arrangement to pay on a debt then you are going to struggle with a mainstream lender. So someone like Pepper is probably going to be the best you can get.

It would be interesting to find out why a 2 year fix is not available but I suppose it kind of is what it is. Have you asked your broker if there are lenders who charge similar rates on a 2 year fix? If affordability is the issue though, you might find a 5 year fix is the only way forward. Maybe see if you can pay the parents £22k less and pay that back in 2 years when you come to remortgage?

brooklyn6662

Hi ACG,

Thanks for your reply, yes the mortgage broker said it!!!8217;s likely down to affordability. Even though i thought we pulled in a decent joint income.

I am no longer on a repayment plan so any searches would now show as default settled/satisfied. From next week the default will come off my account all together.

If we were to apply for a mortgage after my default comes off, are lenders able to see that the default has only just been removed or that it was only paid in May 2018?

I don!!!8217;t think we could borrow the 22k from the parents as they have already lent us 15k to put us at 100k

The mortgage broker is currently trying to get a better deal and/or a shorter term from Pepper Money. I!!!8217;ll ask him if it is worth trying with Halifax again

ACG

In all honesty, I would probably stick with your broker and let them advise you of what is best.

They know far more about you than we do. The default should drop off after 6 years, but whoever the default was with may still know about it with internal records.

kingstreet

Don't assume because your default drops off in July 2018 mortgage lenders will see that immediately.

Many lenders take their data feed from their chosen CRA once a month; so the smart money waits until mid-August, obtains all three versions of their credit file and if they are clean, applies for a mortgage in September.

It's a common misconception the credit system works in real-time so if you pay-off a credit card today, your mortgage lender can see it tomorrow, when in reality it could be three months later...

The number of potential clients who, having been told they can't borrow as much as the lender affordability calculator suggests respond with "Well, I paid off my £5,000 credit card last Tuesday so they must have made a mistake!" who express surprise at the idea of telling their broker of this, so they can mark it "to be repaid on completion" would astonish many people.

When we issue illustrations and request authority to obtain an agreement in principle, we include this;-

"If you have any credit cards which are repaid in full each month, or you have recently cleared a loan or card balance, please let us know, so we don't accidentally include the balances in affordability calculations.

Issuer, holder and latest couple of months'; balances for each card/loan please, as the credit system does not work in real-time and lenders may see out of date data when searching your credit history."

brooklyn6662

Ok, Many Thanks ACG,

Hi Kingstreet, thanks for replying and your input. Yes i think waiting until September is the best thing to do. We are just concious of time though. As i think we would lose our cash buyer if we were to delay it any longer. I have spoken to Experian today who say the default will not show up from August 1st, but like you said it still may take some time with the other CRA!!!8217;s

I know some lenders require there not to be any defaults the account within the last 6 months or sometimes longer. How would the lender know if there was a recent default on the account? if the default has now been removed from all the CRA databases

kingstreet

brooklyn6662 wrote: »

I know some lenders require there not to be any defaults the account within the last 6 months or sometimes longer.

That's the default registration date, not the last time it was visible on a search...!