90% Mortgage

Posted on 12 March 2016 by Sara

Last year I took out a couple of pay day loans, naively thinking it wouldn't affect anything. I have an excellent credit rating, just one late payment from 3 years ago when I mis-timed a payment.  My husband has a clean credit history, although lacks open or closed accounts as I'm the main earner and everything has been in my name. I've now heard some lenders are refusing mortgages based on pay day loan history and I'm gutted!  I never would have taken one out if I had known. Does this ruin our chances of getting a 90% mortgage in the next year?

Hi Sara,

Firstly let me say that lenders aren't rejecting borrowers purely because they've taken a pay-day loan, though they are now a factor in the lenders credit scorecard. Lenders are concerned where potential borrowers have taken pay-day loans as this may be an indicator that the person concerned might be living beyond their means, however unless the case is an outright decline, then the lender may decide to see bank statements to see what the conduct of the account is like.

Also at the higher Loan To Value's (LTV's) the credit scorecards are that much tighter and therefore more difficult to get through.  

A couple of pay-day loans won't ruin your chances of getting a 90% mortgage but it may restrict the number of lenders available to you. Although the major lenders tend to work on a "the computor says 'no'" basis, there are still lenders out there who manually underwrite cases and can therefore judge each case on its individual merits.

If you'd like to chat through what John Charcol can do for you, then please let me know and I'll arrange a convenient time for to speak to a consultant.

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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