What are Bad Credit Mortgages?
To put it simply, for borrowers trying to get a mortgage with bad credit it's going to seem like a very steep, uphill task. But we’re here to reduce that incline! Read on to find out what a bad credit mortgage is, how you can get one and if it’s the right option for you.
While having a bad credit score isn’t the best position to be in, it is something you can work with and improve. We’re going to show you what a bad credit mortgage can do for you, how you can budget for one and ultimately whether it they will be possible for you to get.
What actually is a bad credit mortgage?
A bad credit mortgage is fairly self-explanatory. It’s basically a mortgage that you get if you have a bad credit score. If you’ve got a bad credit history then the likelihood is that you may have had problems repaying any loans or debts in the past or you’ve previously been bankrupt. As a result, this may also mean that it is harder for you to take a loan out or borrow money at a suitable interest rate.
If you’re inexperienced in the whole house-buying process, pretty much all lenders have to conduct a credit & affordability assessment before they accept your mortgage application. While different lenders have different methods and take into account different factors when conducting this assessment, checking the credit history of the borrower is a core part.
What will a bad credit mortgage involve?
Bad credit mortgages operate like loads of other mortgages do, the only real difference being that they accept those who have a bad credit score. The most important thing to realise here is that your interest rate will be higher than if you had a good credit score. Why you might ask? You have to remember that if you have a poor credit score then you may pose some risk to lenders who are willing to put their faith in you and give you a mortgage. So, think of this as their way for compensating for that.
You may also be asked to pay a higher deposit or have more equity than you would be if you had a good credit score. Normally, the standard deposit that you put down on a property starts at 5% of the property’s valuation. With a bad credit score, you could be asked for a 20% deposit. This is again because the lender needs extra security to cover the additional risk of taking on someone with bad credit.
How can you apply for a bad credit mortgage?
Most mortgage lenders will only be concerned with those who have a decent credit score. While this is a bit of a kick in the teeth it’s important if your application for a mortgage is rejected you don’t apply for as many as possible thinking that you’ll eventually get lucky. Basically, what we’re trying to say is that you should be measured in your approach. Why? To be frank, having loads of rejected mortgage applications rejected isn’t good. What’s even worse is that it will probably damage your credit score even further and make you look far less ‘attractive’ to other lenders.
But enough doom and gloom, for now, you’re coming to us for a solution! The best way to get the ball rolling with a bad credit mortgage is to first explain your situation to an independent mortgage adviser who can assess what the likelihood is that your application will be accepted & with who without doing any harm to your credit record.
At Mortgages Online we know that getting a bad credit mortgage isn’t easy. That’s why we offer, free, impartial advice through our website. If you’re struggling to make head or tail of which deal is the best one for you or if one offer you have is quite simply too good to be true, then come to us. We can do the ground work for you and compare the deals offered by different lenders to find the right one for you. Our team of experts will be able to tell you which lenders are also more likely to accept your application given your situation and thus make your quest for a mortgage that bit easier.
Any other ways to make getting a bad credit mortgage easier:
Of course, there are! When lenders are conducting their affordability assessment you can use this as an opportunity to demonstrate that you are financially responsible. Making sure that you have sufficient income to maintain payments for the amount you are applying for can easily do this. Another great way of showing this will be demonstrating that you have never missed payments on things like utility bills, credit cards or regularly use your bank overdraft. Also, try and show that you do not have any expenses on things that you can cut out. So, if you don’t mind cutting out things like that overpriced coffee before work this doesn’t have to be a difficult procedure!
Whilst credit ratings are ‘everything’ to some lenders, some may consider you for a mortgage even if you have bad credit. Try making sure you pay off credit cards and other debts, to better your chances for mortgage applications in the future. Good credit means good mortgage deals.
Mortgages Online offer life insurance quotes too! Yes, after you’ve finished your mortgage application, we can give you a free life insurance quote.