About This Scenario
This mortgage with defaults success story is an example from our own experience within the industry. We see many like this but this one in particular was special due to the added pressure of timescales of the chain and the end result being better than the original one aimed for.
We have consent to use this story but are not using real names of the borrowers as people prefer to keep details of their credit files private.
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John and Charlotte’s first purchase
John and Charlotte were looking to buy their first home near Winchester where they had always lived and wanting to put down a 15% deposit. They had seen the perfect three bedroom home that was ideal for the two of them, their three year old son and their labradoodle.
Both were in their early thirties and had professional positions earning approximately £80,000 jointly, John as a project manager for an engineering company and Charlotte as a marketing executive for an advertising company.
John and Charlotte had been renting for the last five years since living with their parents and were successfully making their rent payments of £1,400 per month.
Never considering themselves to have any challenges when taking a mortgage, they went to see their bank who they have both banked with since an early age. They wanted a quick appointment as they were conscious that the property they were buying had generated a lot of interest and any hold ups could mean losing the property.
The vendors of this property had also secured a new home for themselves relocating for a new job so there was additional pressure from the chain itself.
The property price was £340,000 and they were looking to borrow £289,000 which seemed fine based on their incomes and very low levels of debt.
The agreement in principle was a success so the full application was submitted to the lender and full supporting documents given. The valuation took place which came back with the figure of £340,000 so John and Charlotte were awaiting underwriting to finish so they would get their offer.
It was at this point that they received some bad news, some historic adverse credit has been picked up on Charlotte’s credit file meaning their bank would decline their mortgage unless they could increase their deposit from 15% (£51,000) to 40% (£136,000)!
Obviously this was a huge jump and they were not in the position to come up with the extra deposit.
First things first, they had to look in to what was causing the issue in the first place. Their bank would not give them any more details as to what the issue was besides advising them to get a copy of their credit file.
Charlotte obtained a copy of her check my file report following advice from a mortgage broker. The reason for this file in particular is because it shows a full six years of history from three major credit reference agencies, Experian, Equifax and Transunion.
On further inspection, it seemed that Charlotte had two defaults dating back just over three years. One was on a communications bill for just under £300 and the other a mail order account with a balance of just over £500.
She had been unaware of these defaults and said they had never caused a problem in the past. She was clearly not someone that did not pay her bills as all other accounts had been paid, her rent was always paid on time and her personal debts kept very low.
They had moved house around the time that the direct debits had not been collected and the letters that were sent were not received. (their post was not forwarded which was an expensive lesson, always redirect your post when you move!)
They now needed a new lender to start the process again and were conscious it had been 11 days since they submitted their full application to the lender and the chain was waiting for them to get their mortgage offer so they could all proceed with the legal work and begin heading towards exchange and completion.
Charlotte was anxious about speaking with the agents and certain that the property would be put back on the market to go to the next highest bidder. Having spoken with the vendors, the agents informed them that they have 72 hours to submit an application to a new lender and if an offer is not produced within 10 working days, the property would need to be re-marketed.
Having spoken with people close to her and even the agents themselves, they believed that their only route would now be an adverse lender and with a deposit of only 15%, this would likely be a high rate. The other concern was the timescales, the adverse lenders were generally taking a lot longer to produce mortgage offers than the high street lenders.
John was put in touch with an independent mortgage adviser believing they would be settling for an adverse credit lender and hoping they could get an offer within the 10 day period and if that was going to be possible, at least be close enough that they could persuade the vendors to wait a little longer.
The broker requested the Check My File report to be able to assess the exact detail of the adverse credit, who it was to, the date it was registered, the amount, the reason and whether it was settled. At this point, the defaults had still not been settled but Charlotte was more than happy to do so explaining she would have even if it wasn’t affecting the mortgage as they were hers to pay.
On the basis that the defaults be settled, the broker was able to convince Skipton Building Society to consider the case to which they said they could as long as their general credit scoring was enough to go through the computer, they could look to disregard the defaults. They were able to see that these adverse accounts were not typical and all else had been paid successfully so they did not feel that a bad credit mortgage would be justified given the severity of the events.
Skipton instructed a valuation immediately on submission of the application and finished underwriting within 3 working days. Exactly one week after the application was submitted, the house was successfully valued and a mortgage offer was produced. The great thing was not only would this mean John and Charlotte didn’t lose the property, the new product was £12 per month cheaper than the one that they originally applied for.
We’re pleased to say that all legals went to plan and five weeks later they were moving into their new home.
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Conclusion
If you are looking for a mortgage but you have defaults on your credit file or even defaults on you actual mortgage, do not assume that there will not be a lender that could consider your application.
In this instance, it would be best to speak with a qualified mortgage adviser that has experience of placing cases with adverse credit to find out what your options are.
You never know, you may end up being one of the mortgage with defaults success stories!
Please note that the above are only past examples and although nothing unusual about the outcomes, every situation is different so the journey may differ too.
If you would like I NEED ADVICE put you in touch with a qualified adviser to work out your options giving you individual advice, please complete the contact form.
They are experienced, which can boost your chances of being approved.
