Bad Credit Mortgages
Being turned down...
"1 in 4 of the UK population have some form of credit problem"
This can vary from a missed payment on a credit card to County Court Judgements. The consequence of this is that if you have credit problems then you will be turned down by most high street banks for a mortgage.
What are your options if this is the case? Not to worry, there are other lenders out there who specialise in lending to people with credit problems.
You must realise that there are over 10,000 mortgages available in the UK, and a reasonable number of these will cater for people with adverse credit. These aren't loan sharks but properly established lenders who are often subsidiaries of high street banks themselves.
For example Halifax and Bank of Scotland will only lend to people with clean credit, but their subsidiary BM Solutions will lend to people with heavy credit problems.
What constitutes bad credit...
You will be turned down by the high street banks if you have any of the following:
- Recent missed payments or late payments on any credit agreement you have such as credit cards, loans, mortgages, store cards
- Arrears on your mortgage or rent
- Have a default registered on your credit file
- Have a County Court Judgement (CCJ) registered on your credit file
- Have an Individual Voluntary Agreement (IVA) with your creditors
- If you were previously made bankrupt
- If you were previously repossessed
Your options...
The lending options open to you in terms of how much you can borrow and the interest rate you'll be paying on your mortgage will depend on how bad your credit is. If you have a few missed payments which are sufficient enough for you to be turned down by high street lenders then your interest rate will be marginally higher than what the high street banks can offer.
If you have County Court judgements or defaults or have an IVA or have just come out of bankruptcy or any of the above more serious credit problems then your interest rate will be higher to reflect the severity of your credit problem.
Deposit required...
The amount of deposit you need to put down will be higher the greater your credit problem. If you only have a few missed payments or have a CCJ for a small amount e.g. a CCJ for £300 which was registered over 2 year ago then you'll be able to get 95% lending meaning you only need to put down 5% deposit.
If your credit is more severe than this then you'll generally need to put down at least 10% deposit and even more if you have recent mortgage arrears. Remember that an adverse credit mortgage doesn't tie you in for life, after 2-3 years of consistent mortgage payments you will be able to remortgage to a high street lender at normal interest rates, so these types of mortgage help you to get back on your feet after suffering credit problems.
Amount you can borrow...
The amount you'll be able to borrow is around 4 to 5 times your annual income irrespective of the level of credit problems you have. However we have access to specialist lenders that can lend you up to 6 times your income!
However this is done on a case by case basis as the lenders take into consideration your ongoing monthly commitments before deciding how much to lend you, hence won't put you in a position where you're unable to afford your mortgage payments.
Remortgaging from an adverse credit lender...
If you are in a situation where you currently have an adverse credit mortgage and want to remortgage to a more favourable lender then simply go to our rate beater calculator on the left and type in your current mortgage payments to see if there is a better deal out there.
Before you do so just check a couple of things. Firstly are you still tied in to your mortgage? Because if you are then you're going to have a hefty penalty to pay for coming out of your mortgage, and this could make remortgaging pointless.
Secondly, have you maintained a perfect payment record i.e. always paid your mortgage on time with no missed or late payments? If you have then you'll definitely be able to find a better mortgage deal, but if you haven't then you'll just be going from one adverse credit lender to another which is a wasted exercise unless you're raising money on your mortgage.
If you have mortgage arrears...
If you are with a high street lender at the moment and have experienced credit problems such as mortgage arrears and are looking to remortgage then it's better to clear your mortgage arrears first before applying for a remortgage because otherwise you risk being put on a very high interest rate mortgage due to your arrears.
Mortgage arrears are very serious in lenders eyes because if you cannot prove so far that you are able to make your payments on time with your existing lender, then what guarantee does the new lender have that things will be different with them?
The only exception to this of course is if you're remortgaging to raise money in which case the benefit of raising that money may offset the drawback of changing to a high interest rate mortgage.
But again only go down this route if absolutely necessary, otherwise wait until you've built up a good payment history with your existing lender.
To find an adverse credit mortgage click here.
If you would prefer specific advice then click here.