This article is for general information only and does not constitute regulated mortgage advice. Mortgages are subject to status, affordability and lender criteria. Finance 4 Homes Ltd is an Appointed Representative of Beneficial Ltd. Beneficial Ltd is authorised and regulated by the Financial Conduct Authority.
A default on your credit file can complicate a remortgage, but it does not necessarily bring the process to a halt.
So, can you remortgage with a default? Potentially, yes. The outcome will depend on more than the presence of the default itself.
A lender may look at when it happened, how much was involved, whether the debt has since been settled, what your credit history has looked like since, your mortgage payment record, affordability and the amount you are looking to borrow.
Two homeowners with defaults on their credit files could therefore face different lending criteria and different mortgage options.
What does a default actually mean?
A default is a marker on your credit file showing that a lender considers the credit agreement to have broken down, usually after missed payments.
It can relate to different types of borrowing or financial commitments, such as:
- credit cards;
- personal loans;
- finance agreements;
- overdrafts;
- other credit accounts.
A default is not the same as a single missed payment, although missed payments may occur before one is registered. It is also different from a court judgment over unpaid debt, such as a County Court Judgment (CCJ) in England and Wales or a decree in Scotland.
These distinctions matter because mortgage lenders can apply different criteria to different types of adverse credit.
How a default fits into the wider remortgage application
Lenders can assess more than the presence of the default itself.
The context can include the age of the entry, its current status, whether there have been further credit problems, how the existing mortgage has been maintained and the proposed loan-to-value ratio.
For homeowners dealing with several types of adverse credit rather than one default, our guide to remortgaging with a bad credit history explains the broader position.
How long does a default stay on your credit file?
A default normally remains on your credit file for six years from the date it was registered.
MoneyHelper explains how long a default stays on your credit file, including what happens when the six-year reporting period ends.
Paying the debt does not normally remove an accurate default immediately.
Instead, the account can be updated to show that the outstanding balance has been settled or satisfied, while the original default remains visible until the reporting period expires.
This creates an important distinction.
How long a default appears on your credit report is not the same as a universal mortgage waiting period.
There is no single point during those six years at which every lender will suddenly treat an application in the same way. Individual lenders set their own criteria.
Why the age and status of the default can matter
A default registered recently may be assessed differently from one that occurred several years ago.
The current status can also form part of the lender’s criteria.
For example, an application involving an older satisfied default is not necessarily assessed in the same way as one involving a recent default with an outstanding balance.
That does not mean either situation guarantees acceptance or refusal. The lender can still consider the rest of the credit record and the proposed mortgage.
The amount involved may also be relevant
The size of the default can form part of some lenders’ criteria.
However, there is no single amount below which a default can be assumed to be acceptable.
A relatively small default does not automatically mean an application will be approved, just as a larger default does not determine the outcome on its own.
The amount may be considered alongside the default’s age and status, affordability, LTV and wider credit history.
What happened after the default?
A credit file shows more than one event.
A lender reviewing a remortgage application may also see subsequent information about how credit commitments have been managed.
That can include:
- further missed payments;
- additional defaults;
- current borrowing balances;
- other adverse-credit markers;
- recent credit applications;
- the conduct of existing accounts.
This is one reason the date of the original default cannot be considered in isolation.
A default that occurred several years ago followed by other credit difficulties presents a different credit history from an older default with no subsequent adverse entries.
Neither scenario guarantees a particular mortgage outcome, but the distinction may affect how an individual lender applies its criteria.
Does your existing mortgage payment history matter?
Your mortgage conduct is another part of the overall picture.
A default on an unsecured credit account and missed payments on the mortgage itself are not the same issue.
Where mortgage repayments have been maintained, that information forms part of your more recent financial history. If the mortgage itself has fallen into arrears, different or additional lender criteria may apply.
A lender will still consider the application as a whole rather than treating one positive or negative factor as decisive.
Your credit score is not the mortgage decision
Credit scores can be useful indicators, but a consumer credit score is not the same thing as a lender’s mortgage decision.
Different credit reference agencies can hold different information and use their own scoring systems. Mortgage lenders also apply their own criteria when assessing an application.
A high consumer credit score therefore does not guarantee mortgage acceptance, while a lower score does not by itself show which products may be available.
The information within the credit report can therefore be more informative than the headline score on its own.
MoneyHelper explains how to check your credit report for free, including how to access information held by the main credit reference agencies.
Affordability still matters when remortgaging with a default
A credit check is only one part of the mortgage assessment.
Depending on the type of remortgage and lender assessment required, income, expenditure, existing commitments and the proposed repayments may also form part of the affordability review.
The FCA’s mortgage affordability rules set requirements around how affordability is assessed for regulated mortgage lending, although the precise requirements can differ in certain remortgage circumstances.
Having substantial equity does not automatically mean that a new mortgage will be affordable.
Likewise, the presence of a default does not replace the need for the lender to consider other parts of the application where an affordability assessment is required.
How does loan-to-value fit into the picture?
Loan-to-value, or LTV, compares the proposed mortgage balance with the property’s value.
For example:
| Property value | Proposed mortgage | Approximate LTV |
| £300,000 | £180,000 | 60% |
| £300,000 | £225,000 | 75% |
| £300,000 | £270,000 | 90% |
These figures are illustrative only.
Lenders can offer different products at different LTV levels, and adverse-credit criteria may also vary between products.
LTV may therefore form part of the lender’s eligibility criteria, but a lower LTV does not remove the default from your credit history or guarantee acceptance.
Full remortgage or product transfer: why the distinction matters
Changing your mortgage does not always mean applying to a new lender.
A full remortgage normally involves replacing your current mortgage with another mortgage, often from a different lender. The new lender can apply its own underwriting, credit and affordability requirements.
A product transfer generally means moving to another mortgage deal with your existing lender rather than replacing the lender itself.
The eligibility process for a product transfer can differ from a full remortgage, depending on the lender, the circumstances and whether anything else about the mortgage is changing.
For someone with a default, that distinction can matter because the process and checks involved may not be identical.
Can a default affect the rate or mortgage options available?
Potentially.
A default may affect which lenders or mortgage products are available and the terms offered. This can include the interest rate or LTV criteria, depending on the lender, the default and the wider application.
There is no standard rate, LTV requirement or product outcome that applies to every borrower with a default.
Mortgage pricing changes over time, and lender criteria for defaults vary. The same credit event can therefore be assessed differently between applications.
What information is relevant to a remortgage application with a default?
The details recorded about the default provide more context than the presence of the marker alone.
Relevant information can include:
- the date of the default, showing how old the entry is;
- the amount involved;
- whether the balance remains outstanding or is shown as satisfied;
- whether there are other defaults, missed payments or adverse entries;
- your current mortgage balance and deal end date;
- whether an early repayment charge applies;
- your approximate property value;
- your income and current financial commitments.
Having this information does not determine whether a mortgage application will succeed. It provides a clearer picture of the factors that may need to be considered.
What if the default is wrong?
An inaccurate default should not simply be assumed to be an unavoidable part of your credit record.
If you believe information on your report is incorrect, the Information Commissioner’s Office explains your rights when correcting information on your credit file.
The entry can generally be queried with the relevant credit reference agency and, where appropriate, the organisation that supplied the information.
Checking the underlying report is therefore useful for understanding what a future lender may see and whether the information recorded is accurate.
An accurate default generally cannot simply be removed because it makes obtaining credit more difficult.
So, can you remortgage with a default?
A default can make a remortgage more complex and may limit the range of products available, but it does not provide a yes-or-no answer by itself.
A lender may consider the:
- age of the default;
- amount and current status;
- credit history since it occurred;
- mortgage payment record;
- affordability of the proposed mortgage;
- property value and LTV;
- wider details of the application.
Lender criteria for defaults vary, so the same credit event can be assessed differently depending on the application and lender.
An outcome available to one borrower should not be treated as an indication of what another borrower will receive.
Looking at your remortgage options after a default
A default can affect a remortgage application, but the entry needs to be considered alongside the rest of your circumstances. Its age, amount and status, together with your recent credit history, affordability and loan-to-value ratio, can all influence the options available.
If you are unsure how a default may affect your next mortgage application, we can discuss your circumstances and help you understand the mortgage options that may be available, subject to affordability and individual lender criteria.
You can learn more about how we support applicants with adverse credit through our Mortgages with Defaults service.
We cannot guarantee that an application will be accepted, as lending decisions and product availability depend on your circumstances and the lender’s criteria.
You may be charged a fee for mortgage advice which could be up to 1% of the loan. The precise amount will depend on your circumstances, but we estimate it to be 0.75% of the loan amount. These are illustrative estimates. Your actual fee may differ depending on your circumstances, complexity, credit history and lender requirements.
Not all applicants will qualify. Mortgage products, interest rates and borrowing amounts depend on individual circumstances and lender criteria.
If you are experiencing financial difficulty, free and impartial debt guidance is available from organisations including MoneyHelper, StepChange and Citizens Advice.
Finance 4 Homes Ltd is an Appointed Representative of Beneficial Ltd. Beneficial Ltd is authorised and regulated by the Financial Conduct Authority. This information is for general guidance and relates to the UK consumer mortgage market.
THINK CAREFULLY ABOUT SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP PAYMENTS ON YOUR MORTGAGE.