If you are a foreign national living in the UK with credit issues, it would be difficult to apply for a new mortgage. On a positive note, the mortgage industry experts have come up with different strategies to assist applicants with credit difficulties. It is important that applicants also need to be aware of different types of credit issues that could cause them trouble with the mortgage application.
The fact that you not being a British national or not having permanent rights to reside in the UK is a significant consideration for lenders when determining your eligibility to apply for mortgage. It would further make the life difficult for non-British applicants if they have credit issues in the UK. The adverse credit combined with foreign nationality might limit the availability of lenders. The good news is a talented mortgage adviser would still be able to find you a good mortgage deal.
The Covid-19 pandemic has caused financial difficulties for many people and it has resulted in various types of credit issues. Stand out credit issues are county court judgments (CCJ), individual voluntary agreements (IVA), utility bill miss-payments, miss-payments on credit card balance, and there are other un-conventional reasons that cause a dip in credit score.
Non-British applicants with County Court Judgements (CCJ)
Non-British applicants might have a county court judgment (CCJ) against them if they owe someone money and a court (UK) decided that they have to pay it back. Applicants’ credit scores could be reduced if they have a CCJ against them.
The CCJ would appear on Non-British applicants’ credit reports. The credit reference agencies such as Equifax, Experian, and Call Credit would feed the lenders with adverse credit information. The underwriters would then assess the information on CCJ to decide whether to lend money.
Non-British applicants with Individual voluntary agreements (IVA)
An individual voluntary arrangement (IVA) is a formal agreement allowing applicants to make affordable payments towards their debt arrangements. This is normally over five or six years. At the end of the IVA, any unsecured debt left would be written off.
If a Non-British applicant is on an IVA, he could not take out any credit of more than £500 without obtaining written approval from the Supervisor of the IVA. It means that it would be difficult to find a lender for a new mortgage while being on an IVA.
It would be better to speak to a mortgage adviser who has experience working with specialist lenders who applicants with IVA. There could be other financial circumstances that could affect the lender’s decision. Therefore, it is advisable to review the full financial profile if an applicant has had an IVA in the past.
Non-British applicants with utility bill miss-payments
Sometimes, Non-British applicants comment that how could a recent miss-payment on public utility could affect their mortgage. It could often be due to a dispute between the provider and customer. Applicants claim that they were well capable of maintaining the utility payments and the confusion was caused by my lack of communication.
Irrespective of whether miss-payment has been a genuine mistake or happened due to real financial difficulty, lenders perceive it as an adverse financial activity. It has a negative impact on applicants’ credit files. The level of impact depends on the duration of the miss-payment. If the default has been for more than 6 weeks, it could be highlighted as a strong credit issue.
Non-British applicants must settle the miss-payment as soon as it’s been discovered. Further, they could speak to the relevant providers and the credit reference agencies to update the settlement. Credit building experts and would guide them further to reduce the impact on future transactions.
independent mortgage advisers would know the type of lender to approach, depending on the severity of miss-payment. In case if an individual applicant has directly approached a bank and submitted a mortgage application followed by a decline, it would be more difficult to apply again even with a suitable lender due to the recent decline.
Non-British applicants with poor management of personal credit agreements
Mortgage applicants have multiple existing credit arrangements. It works in favor of the applicants in a way that lenders can evidence applicants’ capability to manage credit. However, this could be another way around if the applicants do not manage their credit agreements properly.
For example, when applicants have a large credit card balance, the maximum loan amount affordability goes down. If the applicants have missed the minimum payments on the credit card while accumulating the balance, it would be highlighted on the credit file. The credit score would also be affected and the chances of applying for a mortgage with a high-street lender could be limited.
There are various credit arrangement providers in the market. Applicants apply for personal loans, hire purchase agreements, and other credit arrangements to cover payments. When an applicant is exceeding the total debt portfolio, lenders are concerned about the ratio of debt to equity.
For example, a lender might classify an applicant as a portfolio landlord, if you have more than four buys to let properties including the new application. Lenders would have strict criteria and even higher interest rates for portfolio landlords due to higher risk. It is important to manage the portfolio of financial assets and liabilities properly to boost future borrowing capacity.
Non-British applicants with mortgage payment arrears
If an applicant has missed a recent mortgage payment, it would be a matter of consideration when applying for a re-mortgage at the end of the current fixed deal end. This could be seen as a killer as any new lender would consider the applicant as high risk due to the arrears in mortgage payments with the existing lender. Therefore, it is critical to maintaining and monitor the mortgage regularly to avoid such issues.
Overall, when an applicant has multiple credit agreements in place, it is important to look after every component and monitor the committed payments. A single miss-payment could make a huge difference in the amount you would pay as your monthly payment on the mortgage. It is always advisable to speak to an independent mortgage adviser if an applicant has any type of credit issue. They would guide the applicant on the correct path towards securing the mortgage to buy the dream home.
As a mortgage is secured against your home, it could be repossessed if you do not keep up with the mortgage repayments
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