Bad credit mortgage

Posted on 13 September 2010 by Rachel

We have a £250,000 deposit. My husband earns £100,000 a year and I earn £25,000. We have no outstanding loans, credit cards etc and we are looking to borrow £350,000 ( to buy a £600k property)

Now the bad bit! - My husband is one of 3 directors of their own company and in 2007 during the recession we couldn't draw a salary for a few months. This left us with 3 defaults and one ccj (for £300!)

 I'm thinking of trying with our own bank Santander who we've banked with for 13 years and who can see we are responsible with money....failing that what do you think our chances would be?


Approaching your own bank first is a very good idea. Your existing track record with them, combined with the low loan amount required in comparison to the properties value, may allow Santander to be more flexible than normal. Although I'm afraid recent experience makes me think this is unlikely.

Your chances of securing a mortgage will depend very much on the timing of events and the monetary amount of the defaults and CCJ registered. If these were registered over 24 months ago then it is likely an independent mortgage broker could find a fixed rate mortgage with a rate below 5%. If however they were registered less than 24 months ago the rate would climb to almost 6% and even that would depend on whether or not the CCJ has been satisfied. If you have not done so already, you should seriously consider satisfying the judgement. This will greatly improve your chances of getting a mortgage once the credit reference agency records have been updated.

The other consideration that you should be aware of is how lenders will calculate your husband's income. If he is the director of a Limited Company they would usually use the Director's remuneration and any dividends shown in the annual accounts. Where these show an upward or downward trend over the last 3 years they will take the latest figure. If there is no trend then they will take an average of 3 years or the latest figures if these are lower.

If you are not successful with Santander, I recommend that you speak to an independent mortgage broker. They will have access to a range of smaller Lenders who do not rely on the computer to make their lending decisions and I believe this will give you a greater chance of securing the mortgage you are after.


Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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