Mortgage after Repossession

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It’s understandable to assume that there is no chance of securing a mortgage after repossession. When you approach high street lenders with any kind of bad credit, there is a strong possibility they will not consider your application. This leads many to assume that all lenders have the same attitude.

Read on to learn about how lenders perform an assessment on a mortgage application where repossession is a factor. There are things you can do to boost your chances of approval if you’ve been repossessed.

Can I get a mortgage after repossession?

There are few credit issues as severe as repossession. You will need to understand that you face an uphill struggle to get approved for a mortgage.

There are lenders that specialise in adverse credit mortgages and offer specific products for this kind of applicant. These specialist lenders will take your unique circumstances into account and carry out a thorough assessment before they lend. Essentially, whether or not you can get a mortgage after repossession will depend on your circumstances. Think Plutus has helped a number of borrowers obtain a mortgage even after being repossessed.

The three key factors lenders will assess are as follows:

    1. The details of your repossession
    2. The state of your credit and finances in the time since the repossession
    3. Your current financial state

How to get a mortgage after repossession

You will need to do your homework and preparation before you apply for any mortgage, particularly if you have been repossessed. It will be the lender’s decision whether or not to lend to you, so you need to know how they will assess you after repossession.

How long ago were you repossessed?

The date of your repossession will be the core factor that lenders consider. The more time that has elapsed since the repossession, the greater your chances of getting a mortgage. If the repossession happened a week ago, you’ll need to wait at least a year before you apply for a new mortgage. Also, the more recent the repossession was, the higher the fees you’re likely to be charged.

The following table gives you a broad summary of the effect different repossession timelines will have on your mortgage application.

Years since repossession Deposit requiredLikelihood of approval
<1n/aVirtually impossible
1-2~35-40%Very unlikely
5-6~10% or lessLikely
6+5%Extremely likely

The amount of your repossession debt

The amount of debt you owed when repossession occurred will be another factor lenders will consider. For example, if you owed on multiple mortgages amounting to millions of pounds, this would be a huge red flag for lenders. If, however, your debt was just a few thousand pounds on a single property, lenders may feel more willing to be lenient.

Even if your repossession was huge and you lost more than one property, Think Plutus may still be able to find a way. Lenders all have their own criteria for assessing a mortgage after repossession. Our experience and expertise can help understand your situation and match it with the best lender available to you.

Still in debt after repossession?

After repossession takes place, your lender will usually hire an asset management company to sell your property. This is done to recover the value of the mortgage. Properties are usually sold either by private treaty or through an auction house. In some cases, when the property is sold, there will still be an outstanding debt, and the lender will require you to pay it back. Consider the following example:

  • Price paid for the property: £200,000
  • Deposit: £20,000
  • Mortgage amount: £180,000
  • Lender sells the property for: £160,000
  • Outstanding debt: £20,000

If you still have an outstanding debt after the sale of the property, and you are yet to pay this off, it will be even more difficult to get a new mortgage. It’s still worth speaking to a specialist adviser, however, as there may still be hope.

The reasons for repossession

The story behind the repossession may also be considered by subsequent lenders. For instance, you may have been the victim of a fraudster or faced some very difficult life events. Be aware, however, that some lenders will not take the circumstances into account, so it’s important to approach the right lender.

You may need to supply evidence of the reasons for repossession to support your application. With the help of a specialist adviser, this evidence could be presented appropriately to lenders to boost your chances of approval. This is why it’s so important to seek expert mortgage advice – we know the right lenders to place your mortgage application with and the best way to present your application.

Sometimes, different lenders are part of the same banking group, so if you’ve been repossessed by one then all other lenders in that group will most likely decline your application. It is essential to place your application with the right lender, and an expert adviser’s input can be crucial.

The current state of your credit file

If you’ve been repossessed, there will probably be other issues that have an impact on your credit record. Additional credit problems like IVAs, CCJs, defaults, bankruptcy and late payments can each have a negative impact on your mortgage assessment.

If you’ve had further issues since your repossession, lenders may still see your risk level as too high. From a financial standpoint, you are still having troubles, so you may not be assessed as suitable for a mortgage.

Lenders will often require evidence of financial stability for borrowers applying for a mortgage after repossession. It could be as simple as making credit card payments in a timely manner each month. Evidence that you have recovered financially, and are now in a stable position, is important to lenders. We’ve spoken to clients who have taken out payday loans in order to improve their credit rating, but this is not advised as lenders tend to look upon payday loans negatively.

How much can I borrow after repossession?

As explained previously, the primary factor that will be considered by lenders is the date of your repossession. This factor will also have a significant impact on the mortgage rates available to you.

Where repossession is recent, you should expect to have quite high rates on any offer made to you, and a larger deposit will be required. If your repossession happened five or six years ago, and your credit file has been spotless in the time since, you should qualify for some competitive rates and, perhaps, even 95% LTV products.

If you’ve had other issues with your credit file beyond your repossession, whether past or present, then the top rates may be difficult to obtain. The more issues present on your credit file, the higher rates you can expect to be offered if your application is approved. With good credit in the time since your repossession, you should have better rates available to you. Speak to an adviser at Think Plutus to learn what mortgage rates you could be eligible for.

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