You can’t have failed to notice there’s a cost-of-living crisis. With wages failing to keep up with rising prices, more and more people are finding it more and more difficult to make ends meet. Banks are already signalling that this could lead to an increase in people falling behind on mortgage payments and defaulting on loans.
For SMEs, business owners and the self-employed, these are worrying times. When times are tight it can also be tempting to miss the odd monthly credit card repayment but falling behind with any type of credit agreement can make it more difficult to get credit in the future. And if you’re thinking of getting a mortgage or remortgage in the next year, that could spell trouble.
Getting a mortgage with defaults can be difficult as any failure to meet your financial responsibilities can be reflected in your credit history, which in turn can put many mortgage lenders off giving you a mortgage. After all, why would they want to lend money to someone who hasn’t been able to pay back money reliably in the past?
For business owners missed payments do not need to mean missing out on a mortgage
Some missed payments are worse than others
Generally speaking, mortgage lenders are more concerned with missed payments on secured loans, such as mortgages, than they are with missed payments for things like phone or credit card bills.
One-off missed payments, for example, if you only missed a single payment on a credit card are also less serious than regularly failing to meet your financial responsibilities. Although even missing one payment on an unsecured product will be considered more serious if you also have other instances of falling behind with secured loans on your credit score.
However, that doesn’t mean that you shouldn’t be concerned about missing the odd credit card or other bill payment. The best option is always to avoid falling behind with any payments or repayments. Most lenders or service providers don’t want you to fall into debt and would rather have some money from you than none. So it’s always best to keep a close eye on all of your financial commitments, and if you think you may struggle approach your lender as quickly as possible.
Making it easier to borrow
There are some things you can do to make the likelihood of finding a mortgage even with defaults, although some may be easier than others.
If you can increase your deposit this can improve your chances of having a mortgage application approved. This is because the more money you are able to pay toward the cost of your new home, the less your bank or building society has to lend you and the lower the risk to them. Your chances of success are also greater the longer the mortgage term is for.
On a day to day basis you can make it easier to get a mortgage by avoiding any behaviour that would make lenders less likely to let you borrow from them. This could include things like changing your job or employment pattern during the time you are making your mortgage or remortgage application, plus making sure that you don’t fall further behind on any loan repayments.
A massive red flag for lenders is so-called payday loans. Taking out one of these short-term loans is seen as a clear signal that you are unable to manage your finances. Avoid them like the plague.
Getting professional help
It can be tempting to think that we can manage all our financial needs ourselves by going online. This may be true if your financial circumstances are straightforward, but if you have missed payments or defaults you will find that the process is so complicated and time-consuming you will get better results by speaking to a professional adverse credit mortgage broker.
Brokers not only have access to mortgage deals that you won’t find anywhere else, they also have up-to-date knowledge of what lenders are looking for. It’s important to understand that different lenders have different lending criteria and that these criteria change over time. While one lender may never consider someone with missed mortgage repayments for example another might. A specialist bad credit broker like Simply Adverse will be able to look at your particular set of circumstances and determine which lender will be the best to approach for a chance of success.
Not only that they will also do much of the legwork for you, ensuring that documents are correctly completed and that you have provided all the information lenders will need.
We are all undoubtedly facing a challenging and changing financial landscape, but with the right information and advice we should still all be able to continue finding mortgage and remortgage deals we can afford, even with a history of defaults.
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