Will a Late Payment Affect a Mortgage Application?

How Late Payments Appear on Your Credit File

Any late payments you have made (or missed payments) are usually recorded on your credit history by credit reference agencies and maintained on their records for mortgage lenders to access during the application process.

Common late or missed payments include:

• Credit card balances not paid by the due date
• Missed direct debits, such as a phone bill
• Late payments on personal loans or car finance
• Mobile phone arrears or other unsecured debt

These entries form part of your credit record and influence your credit score. The good news, which there is some, is that you can improve your credit score once impacted by late payments.

Do Mortgage Lenders Care About Late Payments?

They absolutely do!

I mean, if you were a mortgage lender reviewing the application of an individual who missed payments that were vastly lower than a mortgage payment, would you not care?

Once again, though, a lender’s criteria vary from one to another. For example, specialist lenders may offer more flexible options, whilst it is more likely that high street lenders reject applications due to their stricter requirements.

However, they all assess applications on a case-by-case basis, and consider:

• How many late payments do you have
• Whether they are recent or happened long ago
• The type of debt, such as secured or unsecured, and late payments
• Your current financial stability

Ultimately, lenders are trying to ensure that they are not making an error in judgment by offering you a mortgage. Essentially, they are doing their due diligence, knowing it’s better to be safe than sorry.

When Late Payments Become a Bigger Issue

Although a late payment can be bad, if it is very rare, then mortgage lenders tend not to be too concerned. However, repeated issues are taken more seriously and can result in a rejected mortgage application.

If you have:

• Missed mortgage payments or mortgage arrears (important for remortgaging)
• Ongoing outstanding debts
• A pattern of late or missed payments
• A low credit score

In these cases, lenders may see you as a higher risk because they are the result of consistently missed payments, telling a scary financial story.

Can You Still Get a Mortgage?

Although you will feel like a higher-risk client for most banks and lenders, late payments don’t automatically mean you will be rejected.

Firstly, all lenders offer mortgages based on their personal criteria. It’s no different to any other financial product you may have applied for previously, whether it be a credit card or car finance, etc.

To increase your chances of a successful mortgage application, you may want to consider:

• Working with a mortgage broker or experts
• Applying through different lenders with flexible criteria
• Providing a larger deposit
• Exploring a mortgage with late payments through other lenders
• Improving your chances before applying

The latter consideration can be done by diligently making all payments on time, and reducing debts that are unsecured, such as credit cards, etc.

By doing this, you will start to change your previously told scary financial story to one showing a responsible individual who can be trusted by mortgage lenders.

So, will a late payment affect your mortgage application? Yes, but it does not automatically mean rejection.

With the right mortgage advice, careful planning, and support from a broker, you can still find a new mortgage and secure the best deal available.

Click here, phone 0115 667 7630, or email hello@mymortgagespecialist.co.uk to get in touch with My Mortgage Specialist today, mortgage experts who will make a big difference to the whole process.