Mortgage Arrears stopping you get a new mortgage?
Mortgage Lenders do not like lending to applicants who have had a track record of missing mortgage payments. In fact, apart from not paying a tax bill, it is the single biggest detractor.
Any status on your credit record apart from ‘U’, ‘0’ or ‘AR’ must be 3 months old. One Mortgage Lender I use measures this time period by completion the others in the sector by the application date.
‘U’ means the data was unavailable to the credit agency so the exact position will need to be clarified, usually through a combination of mortgage statements and bank debits. Again if there are any arrears in the last 3 months you will need to wait.
‘0’ means the account was paid in full in the month due. So that’s fine.
‘AR‘ means you are in an arrangement with your current Mortgage Lender to either catch up past missed payments or to make a lower payment than the original contract. A lot of Mortgage Lenders will automatically decline your case on credit score. They could simply want to distance themselves from a potentially drawn-out manual underwrite and concentrate their efforts on straight forward customers or their front line decision system does not have the capacity to desfire the subtleties so anything other than a ‘0’ goes in the dumping pot. There are a pocketful of Mortgage Lenders that can look past the systems and entertain ‘ARs’ if they started years ago. They would seek mortgage statements to demonstrate the arrangement was maintained satisfactorily and ideally would like to see correspondence from the Mortgage Lenders on the arrangements being pre-agreed.
MORTGAGE ARREAR LEVELS
So how bad can mortgage arrears be? Well as a rule of thumb:
• None in the last 3 months, 1 or 2 in the last 12 months, and
• Maximum of Status ‘3’ in the last 24 months.
If they are 2 years old then the Status ‘6’ is possible provided the Status was no greater at the time of the bullet points above. If over 3 years then applicants who have had multiple repossessions may be possible.
There are extreme “exceptions” in return for larger equity and interest rates. For example, I have one Mortgage Lender that discounts mortgage arrears that occurred 12 months ago and allows a missed payment in the last 3 months but the rate is nearly five times the high street and the equity in the property needs to be 45%.
All of the above relates to first charge mortgages their second charge mortgage counterparts are generally more tolerant when it comes to Missed Mortgage payments.
Niche Advice is a Mortgage Broker and offers suitable advice to applicants looking to obtain new first or second charge mortgages who have had Missed Mortgage payments.