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what is a
bad credit mortgage?
A bad credit mortgage is a mortgage for people with a poor credit score, a low credit rating, or adverse credit in their history. There are specialist lenders who will provide loans to bad credit applicants, although the interest rates and monthly payments will likely be higher than for customers with better credit scores. If you have a good income or a substantial deposit, it might be possible to find a competitive mortgage.
BAD CREDIT
lifetime MORTGAGES
A lifetime mortgage is the process of using part of the value of a property to release cash without having to move. It can be difficult, but not impossible to achieve, if you have a bad credit history.
So, how does bad credit affect lifetime mortgages? As part of any application for a lifetime mortgage the lender will check your credit report. If you have bad credit you might be concerned about how it has a negative impact on your application.
However, having bad credit does not mean it is impossible for you to be approved for a lifetime mortgage, the most important thing you can do on any application like this is be honest. Also, speaking to one of our specialist advisers at Finance Advice Centre will help give you all the information you need to ensure your lifetime mortgage application has the best chance of being approved.
Can you get a lifetime mortgage with a bad credit history?
Credit card debt
For finance that requires monthly payments the lender will look at your credit card debt and your ability to make repayments. However, with an lifetime mortgage plan it is a bit different. As there are no monthly payments you need to make, your credit card debt will not be considered in your lifetime mortgage application. The debt is unsecured with credit cards, this means that your credit card is not linked to your property. If you decide to repay your credit cards with lifetime mortgage funds, it is your responsibility to pay it back.
Repaying your credit cards with lifetime mortgage funds means you will be moving your debt from unsecured to secured. It is extremely important you get some advice on the implications of doing so from an expert adviser at Finance Advice Centre.
Failing to make your minimum monthly payments when you have credit card debt could also lead you to be in arrears. As a result, this could lead to other credit issues like CCJs and charging orders.
Arrears
You can still get a lifetime mortgage if you have arrears. Debts that are secured against your property, such as a mortgage with arrears, will have to be repaid in full. If the debt is unsecured, for example, personal loan arrears, the lender will consider the details of your arrears, including the total amount you owe and the number of missed payments. Even though the unsecured debts are not tied to your property, the provider does not want creditors to apply to the courts to have them secured. So, the lender could ask you to repay the arrears as a condition of the lifetime mortgage.
For finance that requires monthly payments the lender will look at your credit card debt and your ability to make repayments. However, with an lifetime mortgage plan it is a bit different. As there are no monthly payments you need to make, your credit card debt will not be considered in your lifetime mortgage application. The debt is unsecured with credit cards, this means that your credit card is not linked to your property. If you decide to repay your credit cards with lifetime mortgage funds, it is your responsibility to pay it back.
Repaying your credit cards with lifetime mortgage funds means you will be moving your debt from unsecured to secured. It is extremely important you get some advice on the implications of doing so from an expert adviser at Finance Advice Centre.
Failing to make your minimum monthly payments when you have credit card debt could also lead you to be in arrears. As a result, this could lead to other credit issues like CCJs and charging orders.
Arrears
You can still get a lifetime mortgage if you have arrears. Debts that are secured against your property, such as a mortgage with arrears, will have to be repaid in full. If the debt is unsecured, for example, personal loan arrears, the lender will consider the details of your arrears, including the total amount you owe and the number of missed payments. Even though the unsecured debts are not tied to your property, the provider does not want creditors to apply to the courts to have them secured. So, the lender could ask you to repay the arrears as a condition of the lifetime mortgage.
CCJs
self-employed mortgagesCounty Court Judgements (CCJ’s) relate to any debts that you have left unpaid. The county court will have adjudicated that the debt is valid and needs to be repaid for the CCJ to be registered and unless you settle it within a month, it will stay on your file for six years.
For a lifetime mortgage application your credit record will be checked by the lender. If you have any CCJ’s on record they will need to be settled, depending on how much you owe, lenders can request that the CCJ is repaid either:
· Before they release the lifetime mortgage funds
· On completion by your solicitor before they transfer you the rest of the funds or
· By you after receiving the lifetime mortgage funds (usually within sixth months)
As you can see here it is possible that you can still get a lifetime mortgage with bad credit. For further advice and help with arranging this, contact Finance Advice Centre today to speak to one of our professional advisers.
self-employed mortgagesCounty Court Judgements (CCJ’s) relate to any debts that you have left unpaid. The county court will have adjudicated that the debt is valid and needs to be repaid for the CCJ to be registered and unless you settle it within a month, it will stay on your file for six years.
For a lifetime mortgage application your credit record will be checked by the lender. If you have any CCJ’s on record they will need to be settled, depending on how much you owe, lenders can request that the CCJ is repaid either:
· Before they release the lifetime mortgage funds
· On completion by your solicitor before they transfer you the rest of the funds or
· By you after receiving the lifetime mortgage funds (usually within sixth months)
As you can see here it is possible that you can still get a lifetime mortgage with bad credit. For further advice and help with arranging this, contact Finance Advice Centre today to speak to one of our professional advisers.
Can you leave a partner with bad credit off the mortgage?
Providers will normally want the mortgage application to include the information of both partners who will be living at the property. However, this is not always the case, and some lenders will consider a single applicant as long as they meet the affordability and lending criteria.
Bad credit can have an affect on the ways in which potential lenders view your joint mortgage application. The majority of providers consider applications using a sliding scale and will offer a choice of products with varying interest rates.
Some lenders offer products that are specifically designed for applicants with credit problems and may ask for a larger deposit depending on the types of bad credit you have experienced. Contact Finance Advice Centre today for tailored advice on the most suitable joint mortgage options for you.
Bad credit can have an affect on the ways in which potential lenders view your joint mortgage application. The majority of providers consider applications using a sliding scale and will offer a choice of products with varying interest rates.
Some lenders offer products that are specifically designed for applicants with credit problems and may ask for a larger deposit depending on the types of bad credit you have experienced. Contact Finance Advice Centre today for tailored advice on the most suitable joint mortgage options for you.
How to improve your chances of getting a mortgage with Bad Credit:
Organise your Finances
It will be more beneficial to postpone buying a property until you are in a better financial position. During this time, you can rebuild your credit score by making repayments for bills and credit cards on time and allow you to save up more money for a deposit.
Even though this could take some time to do, it will give you access to better mortgage rates and save you money in the long term.
Even though this could take some time to do, it will give you access to better mortgage rates and save you money in the long term.
Check your credit record
There are a lot of services out there like Experian that allow you to view your credit report and see when you have had missed payments or CCJ’s. You can also see your credit score through these services, although this will just give you an overall idea of your creditworthiness. Each mortgage provider will score you differently against their own eligibility criteria
Boost your credit score
Once you have identified your credit problems, you can work on repairing them. Any incident from a single missed payment to bankruptcy can impact your ability to get a mortgage. You should start improving your credit score long before making a mortgage application by repaying all bills and credit on time.
Save up for a bigger deposit
Mortgages with low deposits often have stricter acceptance criteria. The higher the deposit you can provide, the better chance you will have of finding a mortgage that you are eligible for. Lenders will likely request a higher deposit if you have bad credit, for example a 20-30% deposit rather than 5-10%.
Speak to an adviser
Expert mortgage advisers, like our team at Finance Advice Centre, can help you find the right products to suit your circumstances and help you with your application. This will give you a better chance of finding a mortgage that you are more likely to be accepted for with past bad credit issues
Credit issues that could be overlooked
The most severe types of adverse credit you can have on your file are repossessions and bankruptcies which a lot of lenders will take note of. However, smaller issues like missed phone bill payments are problems some lenders could be willing to overlook when considering your application. Specialist lenders often take a more flexible approach than high street banks and building societies and can offer a lifeline to applicants with:
Low credit score
No credit history
Late payments
Missed mortgage payments
Defaults
CCJs
IVAs
Debt management plan mortgage
Repossessions
Bankruptcy
Payday loans
Multiple credit problems
These lenders typically base their decision to lend on the cause and severity of the adverse credit, the age of the issue, and how closely you meet their other eligibility and affordability criteria. For instance, if you are looking to get a mortgage with a CCJ, it is more likely to be approved than a mortgage for an applicant with multiple credit issues.
Low credit score
No credit history
Late payments
Missed mortgage payments
Defaults
CCJs
IVAs
Debt management plan mortgage
Repossessions
Bankruptcy
Payday loans
Multiple credit problems
These lenders typically base their decision to lend on the cause and severity of the adverse credit, the age of the issue, and how closely you meet their other eligibility and affordability criteria. For instance, if you are looking to get a mortgage with a CCJ, it is more likely to be approved than a mortgage for an applicant with multiple credit issues.
Can you get a mortgage with bad credit?
For someone who has a low, bad, or poor credit score a poor credit mortgage is still available. Mortgages are not split into a good mortgage and bad mortgage, so the term “bad credit mortgage” is only descriptive of the loans someone with bad credit is more likely to be approved for. Poor credit history should not stop you from getting a mortgage. Often, these mortgages come with higher interest rates or more restrictions on the person borrowing the money. There could be age requirements or the lender might require a co-signatory on the loan. They might also require a larger deposit on loans taken if applications are for poor credit home loans.
We are ready to help you...
Choosing a financial product or service, such as a mortgage, remortgage, loan or insurance can be daunting and your choice is a decision you need to get right. For this reason, it is vital that you get impartial advice fr om competent and qualified advisors. Whether you are a first-time buyer, looking to remortgage, hoping to remortgage or even buy a property to let, needing a loan or insurance this is where our advisers excel.
Be reassured that our aim is to guarantee reliable financial advice appropriate to any individual that makes contact with us. Through our network of contacts, we have access to thousands of financial products, from mortgages to loans to insurance, so we are confident that we’ll find one to suit you.
We specialise in the following types of suitable mortgages:
County Court Judgements (CCJs)
Many people have a CCJ on their credit file. This is more common than most people think, we work with lenders that can consider all types of scenarios. Even recent CCJ’s are considered and in some cases, the lender will overlook them if they believe the person will be able to make their payments on a new loan even with a poor credit history, this should not stand in the way of you getting a mortgage.
Most high street banks don’t offer mortgages to people with CCJs, but specialist banks and lenders often have specific deals for working with CCJs. As Finance Advice Centre has access to “whole of the market”, we are able to work with these lenders to get the best deals for people with CCJs.
A few things to keep in mind if you are applying for a loan with a CCJ:
Most high street banks don’t offer mortgages to people with CCJs, but specialist banks and lenders often have specific deals for working with CCJs. As Finance Advice Centre has access to “whole of the market”, we are able to work with these lenders to get the best deals for people with CCJs.
A few things to keep in mind if you are applying for a loan with a CCJ:
- Your CCJ is unlikely to have an effect on your mortgage application if you managed to repay your debt within 30 days or if you successfully appealed your CCJ – even though it may still appear on your credit history.
- The biggest factor for the lender is whether your CCJ has been paid, settled, or is still outstanding.
- You are unlikely to be approved for a mortgage if you have an outstanding CCJ so it is always best to try and pay these off as soon as possible
- If your CCJ has been taken to court then you are less likely to receive a mortgage
- A CCJ is removed from your file 6 years after payment, but that does not mean you can’t be considered for a loan in those 6 years. Many lenders require the CCJ to have been settled for at least a year, but some will consider applications with more recently cleared CCJs
- The amount on your CCJ has bearing on your application. If your CCJ was for less than £2,500 then you have a better chance of getting a better mortgage
- Your CCJ is likely to influence the deposit amount your lender requires. Depending on your CCJ, this could mean a deposit of anything between 15% and 35% of the property value
- The higher your deposit, the better your chance of securing a mortgage. Keep this in mind when looking at houses and saving the deposit for your new house.
Defaults
Defaults on your credit file is the most common adverse credit we see. We have helped many clients and work with lenders who will consider all types of circumstances including recent Defaults. In some cases, they will ignore them if under a set amount.
Not all defaults are the same and lenders will look differently on mail-order accounts to the way they view defaulting on a previous mortgage. With that in mind, different lenders will have different options for different types of applications and defaults. That’s why it is important to use a service like ours to find the best lender. We will be able to locate the best rates as well as advise you on how to save money throughout the process of applying for a mortgage.
A default will stay on your credit history for 6 years, but the further you are away from it, the higher your chances of getting a good mortgage rate and deal.
If you have still not settled your debt, speak to one of our advisors. Although it is usually best to pay back your debts quickly and in full, there are times when mortgage applications have different requirements. Bad credit mortgages often don’t look at credit scores alone and look at when debts were registered rather than when they were paid off. This can be a tricky path to navigate, which is why our advisors are perfectly placed to help you sort out previous debts while applying for your mortgage. Be as honest with our advisors as possible and we will be able to get you the best deal possible.
Not all defaults are the same and lenders will look differently on mail-order accounts to the way they view defaulting on a previous mortgage. With that in mind, different lenders will have different options for different types of applications and defaults. That’s why it is important to use a service like ours to find the best lender. We will be able to locate the best rates as well as advise you on how to save money throughout the process of applying for a mortgage.
A default will stay on your credit history for 6 years, but the further you are away from it, the higher your chances of getting a good mortgage rate and deal.
If you have still not settled your debt, speak to one of our advisors. Although it is usually best to pay back your debts quickly and in full, there are times when mortgage applications have different requirements. Bad credit mortgages often don’t look at credit scores alone and look at when debts were registered rather than when they were paid off. This can be a tricky path to navigate, which is why our advisors are perfectly placed to help you sort out previous debts while applying for your mortgage. Be as honest with our advisors as possible and we will be able to get you the best deal possible.
Missed Payments
We work with lenders that have a flexible approach to missed payments; the dates and amount of missed payments would be key to the options available to you. Some lenders manually underwrite your application so may not fit on the high street. However, it may pass with some specialist lenders. We have access to these lenders and can help you get a specialised mortgage.
The biggest factors lenders look at when considering applications for home loans from people with missed payments are what the loan was for, how much the payment was, and how long it took to repay the debt. Lenders want to know if the payments were missed on secured loans (like mortgages or car payments) or unsecured loans (like mobile phone contracts). If you have missed a payment on an unsecured loan, then you can probably still get a reasonable mortgage deal. If you have missed payment on a secured loan, those chances decrease.
If you have missed payments on your credit history, you can still be considered for a mortgage. Missed payments disappear from your credit history after 6 months, but they also matter less as time passes. If you have recently missed payments then you are likely to need a larger deposit to satisfy your lender’s requirements.
The biggest factors lenders look at when considering applications for home loans from people with missed payments are what the loan was for, how much the payment was, and how long it took to repay the debt. Lenders want to know if the payments were missed on secured loans (like mortgages or car payments) or unsecured loans (like mobile phone contracts). If you have missed a payment on an unsecured loan, then you can probably still get a reasonable mortgage deal. If you have missed payment on a secured loan, those chances decrease.
If you have missed payments on your credit history, you can still be considered for a mortgage. Missed payments disappear from your credit history after 6 months, but they also matter less as time passes. If you have recently missed payments then you are likely to need a larger deposit to satisfy your lender’s requirements.
Individual Voluntary Agreement (IVA)
If you are currently in an IVA your options may be limited and would need to be settled as part of the application. You’ll also need to provide a good-sized deposit. When you have satisfied the IVA and the discharge date becomes older, there are more lenders that would consider your application. If your IVA is older than 6 years it will drop off your credit history, however, some lenders might still ask if you have had one and an old IVA may still factor into their decision.
The advantage of a completed IVA is that you can prove you did pay off your debt, if you have managed to rebuild your credit score slightly since paying it off that also looks good to potential lenders. This puts you in a much better position than you are at the start of an IVA. Either way, our advisors can help you find lenders who are most likely to accept your offer and consider you for a mortgage.
If your IVA was settled within the last 4 years then you will probably need a deposit over 15%, but if the IVA was settled more than 4 years ago you might be able to get a mortgage with a deposit as low as 5%.
The advantage of a completed IVA is that you can prove you did pay off your debt, if you have managed to rebuild your credit score slightly since paying it off that also looks good to potential lenders. This puts you in a much better position than you are at the start of an IVA. Either way, our advisors can help you find lenders who are most likely to accept your offer and consider you for a mortgage.
If your IVA was settled within the last 4 years then you will probably need a deposit over 15%, but if the IVA was settled more than 4 years ago you might be able to get a mortgage with a deposit as low as 5%.
Debt Management Plans
We deal with lenders that would consider lending to clients that are currently in a debt management arrangement as well as clients that currently have payment plans set up with creditors. In some cases, the arrangement or debt management can stay in place and does not have to be cleared as part of the application.
Most lenders will want to look at your income, loan-to-value, affordability, and credit score before making a decision. You are also far more likely to get a favourable decision from a speciality lender than a high street bank. Your advantage will come from having an advisor who knows which speciality lenders to look at and who has access to the whole of the market. Being declined by a lender can look bad on your credit score, so leaving it to your advisor to find the right deal for you is hugely important.
As with most marks on credit history, the longer ago the debt management plan, the better your chances of a good mortgage and low deposit. If you are currently in a debt management plan there may still be mortgage options available to you, but you will probably need a larger deposit and be charged higher interest rates.
Most lenders will want to look at your income, loan-to-value, affordability, and credit score before making a decision. You are also far more likely to get a favourable decision from a speciality lender than a high street bank. Your advantage will come from having an advisor who knows which speciality lenders to look at and who has access to the whole of the market. Being declined by a lender can look bad on your credit score, so leaving it to your advisor to find the right deal for you is hugely important.
As with most marks on credit history, the longer ago the debt management plan, the better your chances of a good mortgage and low deposit. If you are currently in a debt management plan there may still be mortgage options available to you, but you will probably need a larger deposit and be charged higher interest rates.
Bankruptcy
Bankruptcy is an area we have helped many people in due to the lender products we have available. We work with lenders that would consider a bad credit mortgage application from the first day you are discharged. As the bankruptcy discharge date gets older, there are more options available. After a few years of rebuilding your credit score, you may be able to move your mortgage to a different bank with lower rates. Lenders do offer specialist bad credit mortgage (adverse credit mortgages for people with bad credit).
Speciality lenders will still consider you if you have declared bankruptcy in the past, but be prepared to offer a deposit anywhere between 20-40% of the value of the property. Keep in mind that in the long run, this may still work to your advantage – if you are able to move to another lender after a few years, you will have a lot less to pay off, meaning interest repayments will also be lower.
Speciality lenders will still consider you if you have declared bankruptcy in the past, but be prepared to offer a deposit anywhere between 20-40% of the value of the property. Keep in mind that in the long run, this may still work to your advantage – if you are able to move to another lender after a few years, you will have a lot less to pay off, meaning interest repayments will also be lower.
Repossession
A mortgage after a previous repossession is possible. The date of the repossession and also if there is any debt outstanding will be key to your options available. If your repossession was less than a year ago you are unlikely to be eligible for any mortgage, but thereafter it is a possibility providing you have a specialised lender and are able to put up around a 35% deposit.
Our advisors will look at the reasons for repossession, the value of the property, and how long ago it happened. These will all be major factors for potential lenders. With access to the whole of the market, we can find lenders who specialise in bad credit mortgages for people with a history of repossession.
Our advisors will look at the reasons for repossession, the value of the property, and how long ago it happened. These will all be major factors for potential lenders. With access to the whole of the market, we can find lenders who specialise in bad credit mortgages for people with a history of repossession.
Finance Advice Centre Ltd is an appointed representative of Finance Advice Group Ltd, which is authorised and regulated by the Financial Conduct Authority in respect of mortgage and insurance mediation activities only. Finance Advice Group Ltd is entered on the Financial Services Register https://register.fca.org.uk/ under reference 624517.
Some types of buy to let mortgages are not regulated by the Financial Conduct Authority.
As a mortgage is secured against your property, it could be repossessed if you do not keep up the mortgage repayments.
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