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Mortgage declined due to late payment

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 8, 2023

Mortgage declined due to late payment

Late payments on your credit report can make it harder to secure a mortgage, although they’re not considered a major credit issue in the grand scheme of things. Some high street lenders would be reluctant to approve your mortgage loan application if your credit history has multiple instances of missed payments.

Specialty lenders have a higher risk appetite and would be willing to review your application and give you a fair shot at securing a mortgage.

Can you get your mortgage declined due to late payment? What do lenders consider “late” payments? Is there anything you can do to get them to reconsider your application? This guide explores the answers to these questions and more. Read on.

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Is it possible to get your mortgage declined due to late payment?

The short answer is yes. A late payment is still a credit issue, regardless of how minor it sounds. Lenders look at your credit past and use it to predict your future financial behaviour. If you have a history of making late payments on past loans, credit card bills, or even mortgages, that signals to lenders that you’re likely to repeat the same delinquent behaviour.

High street lenders will almost certainly decline your property loan application if your credit file reveals that you have been late on payments. Specialty bad credit lenders would be more open to digging a little deeper to see how deep the issues run. They’re interested in things such as:

  • How many payments were late?
  • How long ago did they occur?
  • Did the late payments eventually turn into arrears?
  • How severe were the arrears?
  • Did you ever settle the outstanding balances?
  • Did you rack up any additional credit issues?

The answers to these questions help specialty lenders assess your application objectively and determine how much of a risk factor you are to them. From there, they would be able to work out the value of the mortgage you qualify for, how large a deposit you would need to put down, and the interest rates you would be subject to.

A bad credit mortgage broker has insider knowledge of the lenders that will likely approve your application. They would be best placed to negotiate favourable terms on your behalf.

While having one late payment in six years may not be a reason to have your mortgage declined, a pattern of missed payments is a glaring red flag for prospective lenders. If that scenario describes your present predicament, don’t apply for a mortgage without speaking with a specialty broker first.

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Steps to take if you got your mortgage declined due to late payment

Your mortgage loan application was rejected because of the missed payments in your credit history. Now what?

As tempting as it might be to fill out and submit new applications to different lenders, this approach decreases your chances of ever getting approved. Here’s why.

Every time you apply for a mortgage, the lender runs a hard credit check as part of their due diligence process. That hard search leaves a footprint on your credit file that subsequent lenders will see when they do their due diligence, whether or not you get your application approved.

When other lenders peek into your credit file and see these previous searches, they’ll automatically conclude that you must be a high-risk borrower since you’re having difficulty securing credit. They may also conclude that you’re trying to secure multiple mortgages, which would be a little suspicious. Either way, they’re not going to approve your application.

Here’s what you need to do instead if you got your loan application declined due to late payments:

Get your hands on your credit file

Before you apply for your next mortgage, get ahold of your credit file from each major credit reference agency – Experian, TransUnion, and Equifax. You need to know your credit rating, where you stand, and the type of adverse credit issues in your report. Most borrowers aren’t usually aware of the late payments reported until their mortgage applications are denied.

Go through your credit report, verify that the information captured is correct, and make all the pending payments to bring them up to date. Once you do, notify the respective credit agencies so that they can update your information.

If you have other adverse credit issues in your file for which you have a reasonable explanation, request the credit agencies add a note to your file so prospective lenders can see this information beforehand.

Consult with a bad credit mortgage broker

Once your credit report is up to date, and you’ve made all the outstanding late payments, the next step is to speak to a mortgage broker whose expertise lies in bad credit applications. They know the ins and outs of the mortgage market, particularly the specific lenders that will likely approve your loan application. They’ll negotiate with them on your behalf to help you secure a competitive mortgage deal, given your specific circumstances.

If the broker feels there are still some kinks in your credit report that you need to iron out, they will work with you to try and improve your credit score. They know just what to do to make you more appealing to prospective lenders.

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What is considered a “late” payment?


A person holding a past-due bill

There is often confusion among borrowers as to what constitutes a late payment. When you sign a credit agreement, whether for a personal loan, auto loan, credit card, or mortgage, you agree to the terms of the contract. The agreement spells out, among other things, the date your repayment is due. You are obligated to abide by the credit agreement terms, which means paying your mortgage instalment on the due date or before.

Does it mean that your credit score will take a hit if you’re late by a few days? Not necessarily. Most lenders usually give borrowers a 15-day grace period to remit their payment without incurring late penalties or fees. After this grace period elapses, borrowers have an additional 15-day window to make their payment, including the penalties.

If the mortgage lender still doesn’t receive the payment 30 days past the due date, that’s when they report it as a late payment to the credit reference agencies. This information is then updated to your credit file, where it will remain for six years.

Can you remortgage with missed payments in your credit history?

You shouldn’t have a problem remortgaging solely based on late payment. It might be a little problematic if the late payments were on your current mortgage or if you’ve since racked up some severe credit issues during the lifetime of your loan. Most high street lenders would be unwilling to remortgage if your credit report reflects that doing so would put their capital at risk.

If your current lender declines your remortgage request, there are plenty of bad credit mortgage providers that would be happy to review and approve your mortgage application if you meet their lending criteria. You may have to put down a substantial deposit, but that’s a small price to pay if no other mainstream lender will consider your mortgage application.

Get expert help from a bad credit broker

If you got your mortgage declined due to late payment, it’s not the end of the road for your homeownership journey. Bad credit mortgage lenders exist for this very reason. They cater almost exclusively to borrowers whose adverse credit issues preclude them from securing property loans with high-street providers.

You just need to know where to find them.

Bad credit brokers understand the nuances of the mortgage market and have invaluable insight into the lenders that will likely approve your loan application, even with missed payments and arrears. Our broker-matching service will connect you to an experienced broker who will help you secure a competitive mortgage deal.

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Can I still get a mortgage with late payments on my credit record?

It’s going to be hard, but it’s not impossible. Unlike high street providers, a specialist lender or credit mortgage companies have a high-risk appetite and even higher lending appetite. They assess mortgage applications on a case-by-case basis to determine how severe your credit issues are.

Based on their findings, they will give you a fair mortgage offer with competitive rates and terms despite the late payments on your record. A bad credit broker is in the best position to find these lenders and help you secure a mortgage.

How far back in my credit history will lenders check for late payments?

Any adverse credit issue will stay on your credit report for six years from when it was first registered. All your credit information for open and closed accounts would be visible to lenders if they occurred in the last six years. If a late payment appears anywhere in your credit file, you can expect prospective lenders to inquire about it.

What’s the latest I can pay my mortgage?

When you sign a mortgage contract, you agree to abide by its terms, including the payment due date. You should endeavour to make the repayment on the due date or before. If you’re unable to pay within that time, most lenders have a 15-day grace period within which you can make the repayment without incurring any late fees or charges.

Once this period elapses, you have an additional 15 days to make the payment, late fees included. If you don’t make the required repayment within 30 days from the due date, the mortgage lender will report the late payment to the credit reporting agencies, at which point it will make its debut in your credit file.

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