Can I Get a Mortgage With Payday Loans?
Yes, you can still apply for a mortgage with payday loans and New Start Financial helps to arrange these mortgages.
Payday loans have caused a great deal of controversy and are often cited as the reason for consumers getting into considerable amounts of debt. Taking out a payday loan could limit your choice of mortgages, even if you pay it off in full and on time. Many lenders would interpret a payday loan as evidence of being overstretched and are often reluctant to lend. This is because they view resorting to such loans with very high rates of APR % as a sign that borrowers are under pressure.
I thought payday loans would increase my credit score?
You may well have taken out a payday loan thinking that it would improve your credit rating and may well have been informed of such but unfortunately it has the opposite effect. Most lenders will not consider you until 12 months has elapsed since clearing the loan. It could affect your credit score for several years, depending on the frequency and number of pay day loans registered.
Unfortunately, there is a lot of misleading information – even one of the leading credit report supplier’s websites states that payday use doesn’t harm your chances of mortgage approval. The discrepancies come from the fact that the credit scores offered by the main credit reference agencies can increase if you actively take payday loans and repay them on time. Their algorithms assume it proves you can repay on time, and thus must be a good borrower. Mortgage lenders though have their own scoring model, that specifically down scores any payday use, and you will often be declined on application regardless of your credit profile “score”. You may find that you have a top credit report score, and still be declined for a mortgage.
Why lenders don’t like to see the payday loans on my credit history?
Though High Street lenders will look at your application differently than specialist lenders, neither are keen on pay day loans. Lenders generally consider that payday loans indicate you cannot budget and would worry that future mortgage payments could be at risk. A good Broker can help navigate through the various options and will fully assess your credit report before deciding which Lenders are the most appropriate for you.
So, can I get accepted for mortgage with payday loans?
Having a payday loan on your record is not an automatic disqualification for getting a mortgage. Just like with other adverse situations, it depends on how recent and regular the payday loan use has been and among other criteria your loan to value (LTV) and if you have had any other credit issues.
Will my mortgage options be restricted?
Most likely, yes.
First thing that could be affected is the deposit requirement. Most of the lenders accepting payday loan use require more deposit/equity, usually starting at 15% (although 90% and even 95% are possible in certain circumstances. Rates and fees could also get affected due to the Lenders perceived increased risk of your application. The longer ago you used payday loans, the more deposit/equity you have, the better your overall credit profile, the better terms and conditions are likely to be. Our job is to ensure we get the best possible terms available to you based on your circumstances.
Finally, you may find that how much you can borrow is affected as well. Lenders use complex algorithms to calculate how much they will lend and they all tend to be different. As a specialist mortgage broker, we will be able to match you to the best possible solution.
Specialist Mortgage Adviser
To find out exactly what you're eligible for and at what rates please give me a call on 03456 123835 or fill out a quick enquiry form here.