Until recently, getting a mortgage with bad credit was a Herculean challenge. You’d be hard-pressed to find a major lender willing to offer you a small personal loan with bad credit so mortgages were well and truly out of the question.
Nevertheless, research suggests that some of the UK’s more dynamic lenders are beginning to acknowledge poor credit for what it is. Rather than turning down poor credit borrowers at the door, a growing network of lenders are introducing specialist bad credit mortgages and similar products.
Even with County Court Judgments (CCJs), Individual Voluntary Arrangements (IVAs) and discharged bankruptcies, it’s now perfectly possible to qualify for an affordable home loan.
Considering the fact that the subprime mortgage market barely existed a few years ago, analysts are predicting enormous growth for this dynamic sector. Around 52% of brokers predict subprime mortgage sector growth of at least £1bn within the next six months alone. As usual, it’s a case of growing demand spurring the introduction of more flexible and accessible loan products.
Not everyone has a flawless credit score and many have at one time or another had the occasional slip. While most major lenders continue to punish those who fail to keep their credit histories spotless, dozens of independent lenders are demonstrating far more understanding and lenience.
As long as you fit the criteria, there’s no reason why you can’t access a quality mortgage at a decent rate of interest.
Getting a Bad Credit Mortgage
As with all mortgages and loans, the first thing to do is assess whether or not you can afford it in the first place. While it’s true to say that subprime mortgage interest rates can be higher than the mainstream, they’re not as disproportionate as you might expect. In fact, just as long as you’re in a sound financial position, there can be very little difference between a conventional mortgage rate and a subprime mortgage rate.
While it’s technically possible to get a 90% mortgage or even a 95% mortgage with bad credit, most lenders require a deposit of at least 25%. The good news is that the larger the deposit, the more favourable the resulting interest rates and overall borrowing costs.
Getting a bad credit mortgage is not always about your financial past – it’s often about your financial present. Assuming your credit history doesn’t count you out of the running, you’ll be expected to provide evidence of your current financial position. This will include your income, your outgoings, your existing debts and so on.
Subprime mortgage lenders consider all cases by way of individual merit, and if successful you’ll be offered a deal in accordance with the lender’s assessment.
If you’re planning to apply for a mortgage with bad credit, a few helpful guidelines could increase your likelihood of qualifying for a good deal:
- Repair Your Credit. If you’ve time to play with, it’s worth working on your credit history. Take your time, invest at least some effort in improving your credit score and you may be able to access a better deal.
- Keep it Real. Be completely honest and open with your broker about your financial situation.
- Apply Strategically. More often than not, you’ll be wasting your time and putting your credit score at further risk by submitting applications directly to numerous major lenders.
Above all else, you’ll find it far easier to apply and qualify for a subprime mortgage with the help of an independent broker. Ensure a whole-of-market comparison is carried out on your behalf, in order to find the best possible deal from a panel of specialist subprime lenders.
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