A County Court Judgement (CCJ) can seriously affect your chances of getting a mortgage. But, there is a way to get a home loan with a CCJ linked to your credit status.
In this article, we’ll explain how to get a mortgage with a CCJ and share some tips on how to improve your chances of approval.
A CCJ, or County Court Judgement, is a legal judgement typically issued by the county court to an individual or a company that failed to repay certain debts.
Did you know? Brits owed more than £1,000 billion at the end of November 2020!
CCJs are often a creditor’s last resort after exhausting options like reminders, letters, and notifications to collect the debt.
Having a CCJ can get in the way of getting a mortgage because it directly affects your credit score and stays on your credit report for six years.
Fortunately, there are ways around it.
For example, most applicants are highly likely to get a mortgage with a satisfied CCJ. If you pay the full amount you owe within a month, the CCJ will be removed from your credit report.
If you pay your debt after a month, the CCJ will remain on your credit report for six years and hinder your chances of getting a mortgage.
However, not every lender automatically rejects an applicant with a CCJ. If you can prove a regular stream of income, some lenders might consider you for a loan, but you’ll almost certainly get a deal with higher interest rates and be required to pay a sizeable deposit.
It’s also a good idea to contact a CCJ mortgage broker and discuss your options.
Lenders will look at the following factors when determining whether or not you are eligible for a loan:
The CCJ’s registration date plays the most important role in a lender’s decision-making process. It’s far easier to obtain a loan with a CCJ that was issued several years ago than one that was registered in the last year (although it’s still feasible with a sizeable deposit).
Different lenders have different requirements. Some creditors may require you to finalise a CCJ before continuing with the application process.
Most specialist lenders that deal with bad credit customers have a certain limit set for a CCJ size. If yours is beyond that limit, then your chances of getting a mortgage are slim (provided that the CCJ was issued recently).
If you borrow up to 85% of the property value, the maximum amount permitted with a CCJ that’s older than three years will be around £2,500. If your CCJ was registered in the last year, the maximum loan you can get is £1,000. Mortgage lenders that accept larger CCJs normally require a deposit of 25-35%.
Your credit reports will show the number of CCJs you have, as well as the dates and amount you owe. If you have more than one CCJ, you may need to put down a deposit of more than 25% to get a loan.
Lenders are more likely to accept applicants, regardless of the size and age of the CCJ, as long as they’re willing to put down a large deposit. Any deposit that’s around 25% or higher will almost certainly get your mortgage application approved. Take note that mortgage approvals have risen since the pandemic lockdowns.
The type of mortgage you’re applying for can also influence a lender’s decision. If you’re a first-time buyer and are applying for a residential mortgage, most lenders would approve an application if the loan was closed more than a year ago and you offer a good deposit.
However, getting buy-to-let mortgages with a CCJ is more challenging. Lenders would likely demand a hefty deposit to get or switch to a buy-to-let mortgage and others won’t consider your application if the CCJ was issued in the past year.
Anything that can affect your credit score, can also affect your chances of getting a mortgage.
Minor transgressions, such as late or missed payments, are usually acceptable in 85% loan-to-value mortgages, provided that they’ve been paid within three months. If more than three months have passed since you’ve missed a payment, the lender will almost certainly require more deposit.
Other serious negative items include IVAs (Individual Voluntary Agreements), repossessions, and bankruptcy, though you can get a mortgage with an IVA.
CCJ and a mortgage don’t normally go hand in hand, but it is possible to obtain a home loan with a CCJ as long as you agree to a higher deposit and if the CCJ was issued more than a year ago.
If you’re unsure about any part of the process, you can always speak to a mortgage broker. Every case is different and some lenders are willing to work with applicants with a CCJ if they meet certain criteria.
Most lenders would consider an applicant with a CCJ if it had been issued over a year ago. Still, some lenders may rely on different criteria for how to get a mortgage with a CCJ.
Your current lender might get notified when you receive a CCJ notice. Depending on the severity of the CCJ and your relationship with your lender, they may or may not take action.