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Mortgages With a Default: What You Need to Know

Posted on:
April 2, 2024
Posted by:
Bluestone Mortgages

In recent years, financial challenges have become all too common, particularly with rising costs of living and inflation. The search for brokers looking for solutions for clients with adverse credit or satisfied defaults has surged, with as many as 10k searches per month*. As defaults and satisfied defaults become increasingly prevalent, brokers like you are likely encountering more clients who don’t meet the typical criteria of high-street lenders, making it difficult for them to step onto the property ladder. However, there’s good news – with specialist lenders like Bluestone Mortgages, we can still offer these clients a range of solutions.

Before we dive in, if you know exactly what you need, jump to one of the following sections:

How we assess customers with defaults

Thousands of people across the UK struggle to access affordable mortgages yearly because they don’t meet the criteria of high-street lenders. Sometimes unforeseen circumstances can arise, like missed payments on credit cards that go unnoticed, which can impact your client’s ability to stay on track financially. As you know, consecutively missing payments can lead to defaults that remain on your client’s credit profile for up to 6 years. In an effort to support customers looking to purchase homes, we’ve developed criteria that offer solutions to credit profiles of this nature, so if you find yourself picking up such cases, we may be able to help. Here’s how!

  • We allow up to 4 defaults within the last 3 years
  • All defaults under £300 are ignored
  • All defaults over 3 years are ignored
  • All Telecommunication defaults are ignored
What if my customer has satisfied their default?

We know that it could be highly frustrating to not meet the requirements for a mortgage, particularly for those clients who’ve been able to overcome and satisfy the financial blip that caused the default in the first place. But we approach these cases differently. Our flexible criteria allow us to accept clients with one satisfied default in the last three years, qualifying them for our ‘Clear’ product at 85% LTV or our ‘Deposit Unlock’ product at 95% LTV for first-time buyers with smaller deposits, subject to meeting specified requirements. Just this month alone (March 2024), 53% of our applications have been on our highest credit tier (85% LTV) – most of these having satisfied defaults!

Satisfied default success story to inspire you.

Sometimes, unforeseen circumstances can arise and impact your client’s ability to stay on track financially. At Bluestone Mortgages, we follow a manual underwriting approach to gain a realistic insight into your customer’s circumstances rather than turning them down based on an automatic credit search.

We understand that situations beyond your customer’s control could set them back and impact the way they keep up with their financial commitments. This case study illustrates how flexible we are in the way we deal with these default cases.

 

The Challenge:

A couple were looking to buy their dream house in England. They both worked in the retail sector, earning good wages. Unfortunately, one of the applicants had a credit card default dating back to August 2023. This occurred because their former partner had assured them that payments were being made on the credit card, but in reality, this was not the case, leading to the default.

 

The Solution:

Back in August 2023, the broker on the case conducted a DIP, which placed the couple on our AAA product (80% LTV). At the time, the couple required an 85% LTV mortgage to secure their desired property. To meet the criteria for our Clear product (85% LTV), the couple needed just one satisfied default, which had to be six months old upon completion. To facilitate this, our underwriter delayed completion until February 2024, ensuring the default reached the required age – the couple only needed to provide evidence of settling the default.

 

The Result:

Successfully, the couple purchased their dream property with our assistance, experiencing a seamless journey to homeownership. By February 2024, they secured an 85% LTV mortgage, transitioning from our AAA product to the Clear product within months.

Yes, our manual underwriting approach is where it’s at!

Going the extra mile for you is what we’re all about. We believe supporting your customers through the homeownership process should be fast and transparent for everyone. Our recent Trustpilot review says it all…

 

Katarzyna Starosta, Broker with a satisfied default case, comments:

I am a mortgage broker, and I came across many BDM’s but help that I’ve received from Nik Sukara was just brilliant! He replied to my emails and phone calls pretty much straight away, and I did call a lot. From the start Nik have helped me to get my customers better rate, all they had to do is pay of their default. The cases (Remo & purchase) were very urgent complicated, and he was there at every stage of the process. The service levels were quite worrying at the time, and I knew that this case and deadline we had was big ask. My customers will be completing more than likely this week and if not, Nik it would be still stuck with underwriter, declined or customers would give up. Customer service desk is also outstanding and actually very nice people. I will be confident to place more cases with Bluestone and looking forward to it.

Broker Katarzyna Starosta shares her experience working with us, highlighting our commitment to providing exceptional service and tailored solutions for clients with defaulted credit histories. Our dedication to understanding each client’s unique circumstances sets us apart, ensuring a smooth and transparent homeownership process for all involved.

At Bluestone Mortgages, we’re passionate about empowering brokers like you to navigate the adverse mortgage market. Whether your client has a satisfied default or faces other credit challenges, we’re here to help you find the right solution. If you are ready to explore how we can assist you with default or satisfied default cases, contact our team at sales@bluestonemortgages.co.uk, who will gladly guide you to other resources. You can also visit our products page to learn more.

*Stats based on L&G data in March 2024

Article tags:
bad credit
blog
broker
complex credit
This article was written by:
Bluestone Mortgages

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