In the first year or two following repossession, former homeowners might encounter difficulty obtaining a new mortgage without a large deposit. Generally, a down payment of around a third of the value is necessary, i.e., 30 to 35 per cent.
After repossession, applications tend to be less straightforward than for someone with a flawless credit history. Nonetheless, selected lenders may be willing to consider requests that match their criteria. Much depends on the circumstances and what has happened since the possession proceedings. Naturally, lenders look at the risk factors involved in each case; the most significant factor is the time that has passed since the repossession occurred.
Fortunately, it becomes less tricky to apply for a new mortgage from the three-year point onwards. After this interval, depending on the applicant’s profile, applications for up 85 per cent of the property value are sometimes possible. As an example, if the new home has an agreed sale and purchase value of £160,000, some lenders might concede up to £136,000. Thus, the deposit would be £24,000.
After six years, it may be possible to find a mortgage with a deposit of 5 per cent. In other words, a homebuyer may be able to secure a loan for up to 95% of the purchase price. To continue the above example, the mortgage loan would be £152,000 and the deposit £8,000.
Interest rates usually are higher during the first four years following house repossession. After five to six years, the percentage typically returns towards current market conditions.