Can I Get a Mortgage After Repossession?2023-09-07T09:09:14+00:00

Can You Apply for a Mortgage after Repossession?

If you are a homeowner who has been affected by repossession, you may be wondering if it is possible to get a mortgage for a new home. If so, read on. Below, we list the key points you need to know when applying for a new mortgage after a lender has taken possession of a previous residential property.

Stop Repossession

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Can you submit an N244 form online?

Applicants (defendants) can often find completing an N244 form challenging due to ascertaining whether the information they are entering is correct and/or comprehensive enough.

Only when submitted to the court and used correctly will an N244 form delay or stop the proposed repossession. In turn, with the right legal help and representation, an emergency hearing can prevent eviction. Our considerable experience in the field of residential property law means that we have the expertise to apply to the court correctly, gain an emergency hearing, stop the eviction order and save your home.

If you need assistance or advice with your online or printed application then contact our team for free guidance.

Houses

Is It Still Possible to Get a Mortgage?

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.

Timing

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.

Application Quality

Following repossession, the success of a new mortgage application very much depends on its quality. If there were mitigating reasons for the repossession, it could be helpful to include some evidence to support this. Naturally, lenders take into account the underlying history, whether you still owe the previous lender money and the relative health of the rest of your credit file.

Notably, some lenders take a standard approach and follow rigid lending policies. As a result, they might decline any applications that do not fit their profile. In contrast, specialist lenders might prove more flexible, especially if there was a legitimate reason for the repossession. In this sense, support from a knowledgeable and experienced mortgage broker can be of great value in packaging and presenting an application in the right way.

For these reasons, following repossession, many applicants decide to apply for their new mortgage through a broker who is familiar with lenders’ varying criteria, the different possibilities on offer from time to time and the best way to put an application together.

Depending on an applicant’s current situation and financial record, it may be possible to arrange a mortgage through a specialist lender at surprisingly competitive rates of interest, especially after a few years. One could apply to a lender in a different group of companies from the one that initiated the repossession; for instance, the Lloyds Banking Group includes Halifax, Birmingham Midshires and Bank of Scotland.

Affordability

Loan affordability and total value are crucial. Characteristically, for three years after repossession, banks, building societies and specialist lenders will calculate maximum affordability at three times the applicant’s annual income.

With time, it is usually possible to obtain a higher income multiple. Significantly, the amount of deposit paid also affects the rates of interest on the loan.

Legacy Payments

Former owner-occupiers (also known as mortgagors) of repossessed properties might still owe money their lenders. Typically, this situation arises due to negative equity or a shortfall on the monthly payments and extra costs.

Unfortunately, legacy payments mean that the number of available lenders is likely to be fewer and the requirement for an initial deposit noticeably higher. Equally, a history of multiple repossessions and high amounts of unresolved debts could also complicate matters and limit the choice of lenders.

Wherever possible, one of the best ways to achieve a new mortgage is to pay off any old loan balance. Clearing an individual debt record in this way means the amount shows as paid and, as a result, it is possible to normalise one’s credit history sooner than would otherwise be the case.

How to Stop Repossession

Make sure you talk to your lender

1. Don’t take emergency finance

Other companies may have misled you into believing that a bridging loan or short-term finance is your best or even only choice. That’s not true. The temporary relief will be short-lived when you are facing repossession for a much higher sum.

Try not panic and stay calm

2. Don’t accept a quick sale

In desperate situations, you may be tempted to accept a below-market-value “instant cash” offer on your home. Avoid quick sale companies at all costs—they profit from your misfortune. We can provide better options.

 Review household expenditure

3. Get us to help

We can help you navigate through your options. We will force your lender to give you time to make a decision that suits you. Our first step is to assess affordability for you to keep the property long-term. If this is not an option, then we will ensure you speak to regulated finance professionals or have time to sell your property on the open market.

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