Definition
A bad credit mortgage refers to a type of mortgage loan that is specifically designed for individuals with a poor credit history. Having bad credit means that you may have a:
- Arrears: Missed mortgage or loan payments impacting credit history. Find out more ..
- Payday Loans: Short-term, high-interest loans often seen as a negative factor by lenders. Find out more …
- Default: Failure to repay a loan, resulting in negative credit reporting. Find out more …
- CCJ/Decree: County Court Judgments issued for unpaid debts, affecting creditworthiness. Find out more …
- Debt Management Plan: An agreement to repay debts at a reduced rate, impacting credit score. Find out more …
- Repossession: Losing property due to non-payment of the mortgage, significantly harming credit. Find out more …
- DRO (Debt Relief Order): A formal debt solution for those with low income and assets, affecting credit for six years. Find out more …
- IVA (Individual Voluntary Arrangement): A legal agreement to pay back debts over time, impacting credit history. Find out more …
- Bankruptcy: A legal status for those unable to repay debts, severely affecting credit rating. Find out more …
Obtaining a mortgage with bad credit can be challenging since most lenders prefer borrowers with a good credit score. However, there are specialised lenders who offer bad credit mortgages to help individuals with a less-than-perfect credit history.
Specialist Lenders
Traditional high street banks may be less likely to approve a mortgage for someone with bad credit. It is advisable to seek out specialist lenders who specifically cater to individuals with adverse credit.
Higher Interest Rates
Bad credit mortgages typically come with higher interest rates compared to standard mortgages. This is because lenders view borrowers with bad credit as higher risk. You may need to budget for the higher monthly repayments.
Larger Deposit
Lenders may require a larger deposit for a bad credit mortgage. While the standard deposit requirement is around 5-10%, some lenders may ask for a deposit of 15-25% to offset the perceived risk.
Credit Assessment
Lenders will assess your credit history, including your credit score and credit report, to determine your eligibility and interest rate. It is important to review your credit report beforehand to identify any errors or discrepancies that can be rectified.
Mortgage Broker
Working with a mortgage broker who specializes in bad credit mortgages can be beneficial. They have access to a range of lenders and can help you find the most suitable options based on your circumstances.