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By Ben Kennish

If My House is Repossessed, Can I Get Another Mortgage?

A fully inclusive guide on whether or not you can acquire another mortgage after a property repossession.

It’s to be expected that following a repossession, life will be difficult for some time. Not only is it likely to have an impact on your finances, but it’s also an incredibly emotionally challenging and distressing period for home owners who are evicted from their property.

We talk a lot about preventing repossession, and how to avoid it altogether, but what if it’s already too late, and it’s happened? Can you get another mortgage after the repossession of a property?

Today, we’re going to be answering your questions and taking a look at whether you’ll be able to acquire another mortgage after the repossession of your home.

 

Let’s Get Straight to It. if Your Property was Repossessed, is it Likely that You’re Going to be Accepted on Another Mortgage in the Future, or Not?

Okay, so today we’re going to be delving straight into answering the question, “if my house is repossessed, can I get another mortgage?”

The good news, is that the answer is yes. However, it comes with a BUT, which is to be expected.

A lot of this “but” has to do with how much time has gone by since your home was repossessed. How long ago in the past was it that your home was repossessed? This will have a direct impact over whether or not you’ll be accepted on another mortgage.

Another factor that will have direct influence over whether or not you’ll get another mortgage, is the mortgage lenders and companies you’re asking themselves. Different lenders and companies will have different policies and ideas about what sort of time frame is acceptable, and whether or not they’ll lend to clients who’s previous properties have been repossessed.

As well as this, some of the work is yours to do, and your credit rating – as well as how well you’ve maintained it – since the repossession occurred will play a big part on whether or not you’ll have another mortgage accepted.

Saving up a significant deposit will also affect whether or not you’ll be able to get a mortgage.

These, however, are not all of the factors which can have an impact on whether or not you’re likely to be accepted on another mortgage.

Read on below to find out more about the factors that will determine whether or not you’ll be deemed eligible for another mortgage after repossession in more detail.

 

How Long Ago did the Repossession Take Place?

The first factor that we’re going to look at in more detail which will have a direct impact on whether or not you’ll be accepted for another mortgage, is how long ago the repossession actually took place.

It all depends on how long ago it was that your home was actually repossessed. If your home has been repossessed within the last three years, the chances are that you’re going to find it difficult to get another mortgage. The longer the amount of time since your repossession becomes, the more likely you become to be able to get a mortgage.

 

Will I Be Able to Get Another Mortgage After Three Years?

So, after three years have passed, what are the chances of you being able to get another mortgage?

After the three years have passed, it may become possible for you to get another mortgage. This is likely to be up to 85% of the house value.

READ MORE  If Your House is Repossessed, Do You Get Money Back?

The interest rate you’re likely to have to pay on the side, however, may be slightly excessive. If you’re willing to pay somewhere around the 6% mark in interest, then you should be okay. If not, you might struggle to find a deal that’s right for you.

In comparison to a person who hasn’t been repossessed who will pay an interest rate of between 2% and 3%, 6% is a definite jump.

Remember this, however: the higher a deposit you are able to out down on the property, the less of a risk you will be considered to the mortgage company. However do remember that if you are still recovering from a repossession order, the saving up for a deposit is likely to be a challenge in itself.

 

Will I Be Able to Get Another Mortgage After Six Years?

After three years, six years is the next significant milestone to reach after your home has be repossessed.

If in these last six years, you have managed to maintain a good credit score and record, then this puts you in a good position, as well as if you’ve been able to raise a decent deposit. In these circumstances, the expensive interest rate we mentioned above should decrease somewhat.

If you do manage to save more than a 15% deposit to put down on an 85% mortgage, then you actually may be able to get a higher loan to value mortgage – also referred to as LTV mortgage.

Preferably, your repossession will have happened six or more years ago, which will enable you to apply for more reasonable interest rates. In the current market, this could be as low as at 2% or 3%.

We would advice taking into account, however, the amount of deposit you have alongside any credit issues. This will have an impact on your eligibility also.

 

How Do You Know Which Mortgage Lender to Approach About the Mortgage?

Next up, we’re going to be taking a look at how you should ensure you choose the right mortgage lender to approach about your new mortgage.

Our advise on choosing a mortgage company after repossession, would be to go through a mortgage broker. They will be able to do the research and tell you what your most viable options are, tailored to your own circumstances. Many of them will look to high street lenders.

This may take some time. Furthermore, it’s worth us mentioning that not all high street lenders will be happy to loan to someone who has been repossessed in the past.

Take into consideration the amount of interest that you’ll have to pay. We have discussed this briefly above, but remember that different mortgage lenders will each have a different criteria. Some lenders will not lend to you whatsoever if you have been repossessed in recent years, whereas others might.

The good thing about using a mortgage broker, is as mentioned above, they will be able to tailor these to your individual circumstances. They will take a look at your current financial situation as well as your credit score in order to match you to the right lender. In most cases you’ll have pay a brokerage fee, however you’ll find that these fees end up paying for themselves in the long term.

By opting for someone to help you to choose specialist mortgage lenders or banks, you’re more likely to find a company who will loan to someone who has previously been repossessed. However, you’re also going to have to accept that the cost of borrowing is likely to be higher.

READ MORE  Is there Really a Best Time to Sell Your House?

Try and think of it all as progressive. You’re further forwards than you were a couple of years ago!

 

What Other Factors Might Affect You Getting Another Mortgage After You’ve Been Repossessed?

Those are two of the main factors that are likely to affect whether or not you’re going to have another mortgage offer accepted. However, there are some more things that you should be thinking about when you’re looking forwards to getting another mortgage.

Read more about them just below.

 

What Was Your Reason for Being Repossessed?

People’s homes get repossessed for a wealth of reasons. The reason behind your repossession could have a direct impact over whether or not you’ll have your mortgage accepted in the future.

Some of the reasons that people may have their homes repossessed is because they have lost their jobs and been made redundant, and some may even have been the victim of fraud.

When you apply for another mortgage, this reasoning will be taken into consideration by the lender who you have approached. The more out of your control the situation was which led you to having your property being repossessed, the higher the chance you have of a lender agreeing to approve you for a mortgage.

 

How Many Previous Repossessions Have You Had?

Some people may have been involved in more than one property repossession. It almost goes without saying that if you have, this is going to negatively impact the chances of you being eligible for a mortgage.

If you’ve only had your property repossessed once, then it’s more than likely you’ll be able to clear your credit file and be approved for another mortgage after three or more years, as we have discussed above.

However, if you have had more than one property repossessed in the past, then this might not stop you getting a mortgage altogether, but it’s certainly going to make the overall process a lot more difficult. Either having a significant sum of deposit to put down or leaving more time for you to apply for the mortgage will help you with this.

 

How Much Was the Repossession for in Total?

The actual amount that was involved in the repossession process is likely to have a direct impact on your eligibility for another mortgage. For example, how much arrears you were in and how much you failed to pay will be considered.

The sum of your repossession total could very well be the decider for mortgage brokers.

 

Do You Have Any Past Credit Issues?

Lenders look at your credit rating to see whether it’s healthy or not. If the only thing affecting your credit score is the repossession, it might make it more difficult for you to borrow than others who haven’t been repossessed, but it doesn’t make it impossible.

If it is found that you do have other credit issues – for example, a bankruptcy or county court judgement – then your chances of future borrowing are immediately lesser.

But then again, so long as your credit score is positive and you have conducted yourself well since the repossession, your chance pf borrowing does increase.

READ MORE  How Long Does It Take for a Home to be Repossessed in the UK?

Mortgage lenders look at the recovery from the repossession as well as the repossession itself.

 

Have You Done Your Research and Applied to the Right Lender?

As mentioned above, applying to the right lender can make a big difference to whether or not your mortgage offer will be accepted – hence why we would advice using a mortgage broker if you can.

Some companies belong to a group who have access to multiple lenders – some of which will be in the same “group”.

It’s highly unlikely that the mortgage company who repossessed your last property will offer you another mortgage in the future. Do remember, other lenders in the same “group” may not consider you eligible either.

 

How Much Was Your Shortfall Debt?

If your lender sold the property and you were unable to pay off all of the money you owed to the lender, then you will be considered to be in shortfall debt. You therefore still owe this money to the lender.

Again, owing money to a previous lender will have a direct impact on whether or not you’ll be able to borrow again.

If you are in shortfall debt, then your previous mortgage company should have contacted you about this already. They must do this within six years of the repossession.

The shortfall debt amount will also have interest on it.

 

Have You Tried Finding a Guarantor?

In some cases you may be able to find a guarantor to back up your mortgage application. This could enable more mortgage lenders to consider your application.

Very simply, the definition of a guarantor in this sense is someone who signs to say that if you fail to pay your mortgage, they will make the payments for you. these people tend to be either close friends or family members.

 

Have You Gone Through a Realistic and Detailed Mortgage Affordability Calculator?

Last of all, but by no means least, you’ll have to sit down and work out your ability to actually afford the mortgage – or have a professional do this for you. This must be done both realistically, and in some detail.

In order to decide on how much they will lend you, mortgage companies will look at your income. The amount they lend will usually be a multiple of this.

Typically, this amount tends to be around three times your annual earning, when a repossession has been in the last three to four years.

As time goes by, and you reach the milestone six year mark post repossession, in some cases you’ll be able to increase the multiple of your income, and ultimately borrow a higher sum of money. A limiting factor against this will be the loan to value of the property.

Some people may consider this prior to the actual repossession of the property, and during the process too. We would always recommend taking steps to prevent the repossession happening in the first place. Although, as you can see above, life does go on and you are able to move forwards, it all takes time, money, and a tainting of your credit rating.

Prevention is the best solution.

 

We hope you have enjoyed our post on whether or not you’ll be able to acquire a mortgage after a repossession, and that it has helped you to understand your options a little better.

Thanks for reading!

 

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ben@benkennish.co.uk

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