If so, a bad credit mortgage might be the right mortgage for you.
Bad credit mortgages are also referred to as adverse credit mortgages, sub-prime mortgages, poor credit mortgages, credit repair mortgages and credit-impaired mortgages.
Lenders assess a borrower’s reliability based on the borrower’s credit report. Therefore, if you have a history of bad credit, lenders consider you a riskier client and will often refuse your mortgage application.
Getting a mortgage with bad credit can be quite a challenge. 1 in every 4 people in the UK are refused a mortgage due to bad credit. Bad credit borrowers are particularly struggling to get adverse mortgages these days because of the credit crunch. American lenders provided too many mortgages for people with bad credit who couldn’t make their repayments when rates increased. These unpaid loans created a domino effect (known as the sub-prime mortgage crisis) that has hit the UK market in a big way. Lenders are now more cautious about who they provide with loans. Bad credit mortgages used to account for 8% of the mortgage market, but now that percentage has dropped to 2%.
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Specialist lenders understand that your financial problems from the past don’t define your ability to pay off your mortgage in the future. Specialist lenders (and some mainstream lenders) can provide you with an affordable mortgage that can help you improve your credit report.
If you succeed in making all your mortgage repayments on time, you can prove that you are a responsible borrower. Once you increase your reliability, you may be applicable for better rates since you are no longer looked at as a risky borrower.
Keep in mind that most specialist lenders only work through a bad credit mortgage broker (a mortgage adviser), so you may have problems finding bad credit mortgages on your own (especially since there is more competition to get one these days). Additionally, you shouldn’t send mortgage applications to a lender by yourself since refusals can damage your credit rating even more. Speak to an expert mortgage adviser who can evaluate your financial situation and search through thousands of deals that aren’t available to the public to find you the best sub-prime mortgage available.
Many factors can impair your credit report. The most popular circumstances include:
It only takes 1 missed credit card payment to give you bad credit. You never know what events may occur that can affect your finances. Redundancies, divorces, or illnesses can leave you in a tight spot and damage your credit report. But mortgages for people with bad credit don’t punish you for the period in your life when you were short of cash.
Remember that time can affect your credit report, so your history of bad credit may not matter if it occurred a long time ago. Typically, if your bad credit complications occurred 3 or more years ago and you have no more adverse marks on your credit report, you may be applicable for a mainstream mortgage that comes with better rates. In order to determine if you are applicable for a mainstream mortgage with your credit history, you should speak to a mortgage adviser who can assess your financial situation and let you know what kind of mortgage will best suit you.
Before you look into getting a bad credit mortgage loan you should check your credit report for two reasons. First, make sure everything is correct on your credit report – you don’t want a mistake to keep you from getting a mortgage. Secondly, become acquainted with your credit history so that you have an idea of where you stand. The worse your credit history, the higher rates you’ll be charged for your poor credit mortgage.
You can check your credit by contacting credit reference agencies such as Experian, Equifax, and Callcredit. You can either go online, call, or ask for your credit report to be posted to you. The fee for this service is typically £2, but you can also get your credit report for free by signing up for a 30-day free trial at: www.experian.co.uk
Especially because of the credit crunch, bad credit mortgage rates are usually high. Mainstream lenders may offer better rates than specialist lenders, but there is a very limited amount of bad credit mortgage lenders from mainstream companies (and these lenders are less likely to approve you, even if your bad credit was cleared months ago). Different lenders approve different levels of adverse credit, so ask a mortgage adviser to find the right lender and deal for you.
Make sure you have enough money set aside for a large deposit. Most bad credit mortgage lenders require you to have at least a 25% deposit, although you will be offered a lower rate if you can provide an even bigger deposit.
Since you’ve had financial trouble in the past, make sure you are positive that you can make your repayments. If you continue to have credit problems when you have your adverse credit mortgage, you will find yourself stuck with the same lender who can charge you very high rates. Higher rates will only complicate the situation and you may find yourself facing repossession. Stay on top of your finances and only agree to a mortgage if you know you can pay it off.
Just fill in this short form and a mortgage adviser will contact you to answer all of your questions, give you bad credit mortgage advice, and get you on your way to buying your home.
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