Can I Qualify for a Mortgage After Repossession?

It is logical to assume that following the repossession of your home, qualifying for another mortgage would be out of the question. In reality, this simply is not the case! At UK Property Finance we have successfully helped dozens of clients get back onto the property ladder after a repossession however as with all types of specialist finance, it is a case of ensuring you meet the necessary criteria and knowing which lenders to approach.

If you are concerned about your eligibility for a mortgage after a repossession, we strongly advise obtaining expert broker support, such as that provided by UK Property Finance, before taking your case to a lender.

What affects mortgage eligibility after a repossession?

Your eligibility (or otherwise) for a mortgage following repossession will be affected by a number of factors, including, but not limited to the following:

  • When the repossession occurred
  • Your affordability of the new loan repayments
  • The value of the repossession
  • Why the repossession took place
  • Your credit history (before and after)
  • The mortgage lender who repossessed
  • New loan to value requirements

Date of Repossession

If you apply for any financial product following a repossession, you will initially be asked when the repossession occurred. This is the single most important factor considered by lenders when establishing eligibility.

If applying for a mortgage less than one year following repossession, you have little chance of being accepted. If your home was repossessed within the last three years, you may still find it difficult to obtain a mortgage however if your home was repossessed more than five years ago, you could qualify for a mortgage of up to 85% or even 90% loan to value (LTV).

When Did repossession Occur? Required Deposit Eligibility for Mortgage
Less than a year ago N/A Zero
One to two years ago 30% to 35% Low
Two to three years ago 30% to 35% Low
Three to four years ago 15% to 20%  Moderate
Four to five years ago 10% to 15% Moderate
Five to six years ago 10% Good
More than six years ago 5% Excellent
Please note that the information in this table is to be interpreted as a rough guideline only. All lenders impose their own unique policies and lending criteria, which may differ significantly from one bank to the next.

Interest Rates & Borrowing Costs

As with normal eligibility checks for a mortgage, the date of the repossession will also have an impact on the interest rates charged and the borrowing costs. As a rule of thumb, the more recent the repossession, the higher the interest rate and the more you can expect to pay for your home loan. It is normally possible to reduce borrowing costs somewhat by offering a larger deposit, but more recent repossessions almost always mean higher rates of interest and increased borrowing costs.

In a working example, a repossession that took place three years ago could mean paying an APR of 5% on your mortgage. If you apply for the same loan five years after repossession, you could be looking at an APR as low as 3% or even 2%.

The Value of the Repossession

The default amount will also be taken into account when determining eligibility (or not) for a mortgage following a repossession.  This differs massively from one case to the next.  In some instances, properties are repossessed when struggling debtors owe several thousand pounds on just one property. In others, multiple properties with a combined value and debts in the millions may be repossessed.

It is however not simply a case of higher-value repossessions raising red flags with lenders. The circumstances of the repossession and the general financial situation of the applicant will also be taken into account. In this scenario, a repossession with a relatively modest overall value could be viewed in the same manner as a high value repossession when deciding eligibility to qualify for a mortgage.

Why the repossession took place

Some lenders will only be interested in why your property was repossessed in the first place however others will pay little attention to the reason the repossession happened, only that it did. It is not uncommon for a repossession to occur as a result of borrowers being misled or even defrauded and there are various instances where issues like these occur through no direct fault of the borrower.

This is why it is of the utmost importance to ensure that you apply for the right mortgage with the right lender. The more legitimate the reason for the repossession, the more likely you are to qualify for a subsequent mortgage, but you may find that some lenders pay no attention to the reason for the repossession and are only interested in the fact that it happened.  This is precisely why you should direct your applications exclusively through a broker such as UK Property Finance and at specialist lenders who consider each application by way of individual merit.

For more information or to discuss your eligibility for a mortgage in more detail, contact a member of the team at UK Property Finance anytime.

What happens to my debts after repossession?

When repossession occurs, it doesn’t always eliminate the debts of those concerned. Banks and lenders repossess properties to sell and recover the monies they are owed. There are no guarantees that the sale of your property will cover your debts in their entirety.

Assuming the property is sold at auction, it may sell for a significantly lower price than its usual market value and its sale price may not be sufficient to cover the outstanding mortgage, coupled with the estate agent fees and legal fees etc incurred during the repossession and sales process. Some borrowers mistakenly assume that a repossession will wipe the slate clean and eliminate their debts, but this often proves not to be the case.

How credit scores are affected by repossession

Repossessions can have a detrimental and long-lasting impact on your financial future. Like most minor and major financial oversights, the repossession of your property will be recorded on your credit report, where it will remain for the next seven years, during which time, you may find it difficult to qualify for many everyday financial products and services. After seven years however the repossession will be erased from your credit history, at which point, it will no longer influence your eligibility or otherwise for subsequent financial products, including mortgages.

Please note that this only applies in the event that you have settled your debts with your creditors or are meeting your agreed default repayment obligations. If you still owe money following a repossession and fail to keep up with your agreed repayments your arrears may continue to be recorded on your credit history. The same also applies if your creditor passes your debt to a collection agency or files a judgment in court.

For this reason, it is of paramount importance that you ensure you carefully monitor your outstanding debts following repossession. If you have any questions or concerns regarding your debts or outgoings, contact a member of the team at UK Property Finance anytime. We would be delighted to provide you with an obligation-free consultation to discuss the available options.

Which mortgage lender repossessed the property

For obvious reasons the original mortgage lender who repossessed your property is unlikely to ever grant you a further mortgage. In fact, they will no doubt decline every financial application you submit to them, but it is also worth noting that any subsidiaries, partners or affiliates of the lender may do likewise.

For example, Lloyds, Halifax, and Birmingham Midshires are all part of Lloyds group which could mean that none of these banks will do business with you if any one of them repossessed your home. This is why it is important to target your applications only at those who are likely to even consider them. Each time an application for a mortgage is declined it inflicts further damage on your credit score, making it more difficult to qualify for a mortgage in future.

Other Credit Issues

It is not uncommon for individuals struggling with mortgage debt to also have other credit and debt issues. Everyday examples of which include missed payments, formal debt management plans, CCJ’s, defaults and so on. These may have occurred long before the repossession took place or may have manifested around the same time.

Any kind of credit issue can and will affect your eligibility for a future mortgage. Irrespective of the nature and severity of the credit issue, it will be noted and taken into account by the lender. Some lenders place a heavier emphasis on credit scores than others, but it is largely accepted that your credit score will be considered for mortgage eligibility.

Again, this highlights the importance of strategically selecting lenders that are suitable for your case. If you have a poor credit history, it is inadvisable to submit an application to any mainstream lender. You are unlikely to get past the initial credit check during which time your credit score will receive another negative entry.

Credit Conduct After Repossession

If a lender is willing to look beyond simple credit scores alone, they may consider your conduct and evidence of financial performance after the repossession took place. In a typical example, you may for whatever reason have experienced a number of extremely problematic years, though have since returned to financial strength and stability. You have demonstrated that you are now in a strong financial position and have not had issues since the repossession. In this case some lenders may be more likely to give your application consideration.

Of course, this mainly applies to specialist lenders who often consider all applications by way of individual merit. To ensure you direct your applications to the most appropriate lenders, arrange your free consultation with the team at UK Property finance anytime.

New Loan to Value Requirements

The larger the loan, the trickier it is to qualify. Similarly, the higher the LTV (loan to value) the stricter the criteria. A larger deposit, reducing the LTV of the loan is as such more likely to succeed.

In addition, it is worth remembering that the more recent the repossession, the higher the likelihood of being asked for a larger deposit. It may therefore be worth delaying your mortgage application until you have a suitable deposit in place.

General Mortgage Affordability

Each lender has their own unique method of assessing affordability. Some lenders have a maximum borrowing of 3X your annual income. Others may be willing to offer 5X your income and more. This will be determined by a variety of factors, including when the repossession took place, your current financial position, your credit history and so on.

In any case, you will only be offered a mortgage when the lender is satisfied that you can comfortably afford the repayments especially considering the serious difficulties you encountered with your previous mortgage arrangement as no lender would want the same scenario happening again.

Can I re-mortgage after repossession?

The short answer is yes, but remortgaging after repossession follows all the same basic rules as those of a standard mortgage application. You will typically find that specialist lenders who accept mortgage applications from customers following repossession will also consider re-mortgage applications.

The Importance of Independent Support

At UK Property Finance, we strongly advise against taking your case directly to any major lenders. The vast majority of major banks and lenders in the UK are becoming increasingly selective where mortgage eligibility is concerned. Unless you have a near flawless track-record, you are unlikely to pass the initial credit check. Each rejected application will further damage your credit score which could make it even more difficult to qualify for a mortgage in future.

Proudly representing responsible borrowers across the UK, UK Property Finance provide a whole-of-market brokerage service for post-repossession mortgages. Our experienced advisors will help you choose the best possible course of action to safeguard your financial future, pairing your requirements with a competitive loan you can afford.

Best of all, we will ensure your credit report is protected throughout the process. Book your free initial consultation with UK Property Finance anytime to discuss your requirements in more detail.

*Please note that the UK Property Finance website provides information for reference purposes only, which under no circumstances should be interpreted as formal legal or financial advice. We are only able to provide expert financial support and suggestions upon discussing the individual requirements of the clients we work with. We cannot and will not guarantee the completeness, accuracy or relevance of the information published on the UK Property Finance which is subject to change at any time and without notice. If you require financial advice and support of any kind, please book your free initial consultation with a member of the team at UK Property Finance anytime.