Bad credit & specialist lending
Don’t worry if you have a less-than-perfect credit score – there are still bad credit mortgage options available to you.
If you’ve been turned down by a bank or another mortgage adviser, My Mortgage Finder is here to help. Start rebuilding your credit score today while still achieving your dream of homeownership.
Having a bad credit history doesn’t define you. Our goal is to make the process of obtaining a bad credit mortgage as smooth as possible.
Looking for something else?
What is a Bad Credit Mortgage?
A bad credit mortgage is a term for mortgages designed for those who have a poor credit history. ‘Bad credit’ can look very different depending on the person.
Bad credit mortgages function just like the regular kind – however, the interest rate is typically higher and a lower limit on what you can borrow may be a factor.
That being said, with the contacts and lenders that our experienced mortgage advisers have at their disposal, costs can be dramatically reduced. In fact, many of our clients have been surprised by just how little a bad credit mortgage can cost.
Who is a Bad Credit Mortgage for?
A low credit score isn’t the only reason why you might need a bad credit mortgage. As a general rule, these types of mortgages are for whoever doesn’t qualify for the traditional kind.
Whether you’re a first-time buyer, looking to remortgage, employed or self-employed, you may benefit from a bad credit mortgage if you have any of the following:
- Missed or late payments
- Low credit score
- Defaults
- Involuntary arrangements
- County Court Judgements
- Repossessions
- Payday loans
- Debt management plans
- Bankruptcies
FAQs: Your questions answered by our experts
The short answer is yes. ‘Bad credit mortgages’ are becoming increasingly common with more and more lenders understanding that past financial mistakes and problems are part if many people’s life.
There is a select number of specialist lenders who can offer mortgages to people who have ‘bad credit’ in the from of any of the following areas:
- Missed / late payments on unsecured credit agreements (credit cards, loans etc)
- Low credit scores
- Arrangements to pay
- Payday loans
- Defaults
- County Court Judgements (CCJs)
- Debt management plans (DMPs)
- Missed / late mortgage payments
- Involuntary arrangements (IVAs)
- Repossessions
- Bankruptcies
The severity and recency of the bad credit will generally determine the interest rate you can expect to pay. The interest rate you pay will usually be higher than you find on a typical high street mortgage. However, you may be surprised by some of the interest rates that a specialist mortgage adviser can secure even when the applicant has a history of bad credit.
A soft credit check is a credit check that doesn’t affect your credit score in any way and is not recorded on your credit file. This means that when you check your eligibility through us, you can review your finance options as often as you like without it harming your credit score.
A “Bad Credit Mortgage” is a general term for any mortgage that will allow some incidents of “Bad Credit”. This could be something as small as a late payment on a credit card or something as severe as a Bankruptcy.
Many of our happy clients have been surprised at just how little a “Bad Credit Mortgage” can cost.
Yes, interest rates are usually higher on a “Bad Credit Mortgage” than they are on a “Mainstream Mortgage”. This is because the lender would normally view their money to be at more risk if there has been a history of “Bad Credit” on a mortgage application.
That being said, with the contacts and lenders that our specialist advisers have at their disposal costs can be dramatically reduced by approaching the lenders who offer the best rates and products available in these circumstances.
How can you improve your eligibility?
Even within bad credit mortgages, not everyone is eligible. In really extreme cases, such as recent bankruptcy, your chances of securing a mortgage may be reduced.
A general rule for being accepted is that the longer ago the bad credit incident happened, the higher your chances are. Your credit score will naturally improve with time, providing you keep on top of your future payments. There are also a number of tips you could try to proactively boost your credit.
How much deposit do you need?
It may be possible to get a bad credit mortgage with as little as 5% to 10% deposit if the bad credit is less severe. However, as a general rule, bad credit mortgages require around a 15% to 25% deposit of the property value. In some severe cases, some specialist lenders may require a higher deposit of up to 30%. The particular amount of deposit required depends on a range of factors:
- How recent the instance of bad credit was.
- How severe the bad credit is.
How a Bad Credit Specialist can help you to secure a mortgage
Getting a specialist adviser is key when applying for a bad credit mortgage. At My Mortgage Finder, our specialists know the ins and outs of mortgages and have strong relationships with lenders.
During your free consultation, we’ll keep it totally jargon-free. We’ll advise you on:
- If you qualify for a bad credit mortgage
- How much your monthly repayments are likely to be
- How much mortgage lenders are likely to offer you
- How much deposit you need to put down
- Potential costs that come with this type of mortgage
Understanding an Agreement in Principle
Firstly, what is an agreement in principle (AIP)? It is a preliminary indication from a mortgage lender of how much they are willing to lend to you.
After your chat with one of our specialist advisers, they will go away and do research to identify the most appropriate lender – usually the one with the lowest interest rate and lowest associated costs.
After your adviser has come back to you and presented their findings, they will then apply for an agreement in principle on your behalf, which will also include a certificate that you have passed all initial checks and meet the eligibility criteria for that specific bank or building society.
An AIP is not a formal mortgage offer but a pre-approval document that gives you an idea of how much you can borrow and how much your mortgage will cost. This is based on your financial circumstances, such as your income, whether it is a steady income, and your credit history. Estate agents typically request your AIP – it is a sign that you’re serious about buying and are in a good financial position to buy a property.
Getting started with My Mortgage Finder
Ready to get started? If you’ve had an offer accepted on your new home, it’s time to start the formal application for a mortgage. Here is how the process goes:
- Contact us to get your free consultation – our friendly team will get back to you straight away to start the process.
- After your initial 15-20 minute consultation, we’ll go away and create an action plan for you. This will increase your chances of approval for a mortgage.
- We’ll research what mortgages you’re suitable for and apply on your behalf.
- Depending on the type of bad credit mortgage you’ve applied for, there is documentation and supporting information you need to provide during the application stage.
What documentation do you need?
Getting a specialist mortgage requires a little more documentation than a mainstream one. Our specialist advisers will often ask for:
- Documentation to support the income eligibility requirements
- Photographic identification
- Proof of your deposit and how this has been accrued
- Personal and or business bank statements
- Proof of address, such as utility bills
- Questions about your personal circumstances including income and expenditure
- Explanations of any incidents of ‘bad credit’
After your mortgage application is approved and a satisfactory property appraisal is completed, a mortgage offer will be provided. Your appointed conveyancer will then handle the mortgage completion and property purchase finalisation.
Frequently Asked Questions
Equity is the difference between the value of an asset and the amount of debt owed on that asset. When it comes to mortgages and real estate, equity refers to the value of a property that is not subject to a mortgage.
For example, if your home is valued at £500,000 and the mortgage on the home is £300,000, the equity in your home would be £200,000.
Remortgage is the process of taking out a new loan to replace an existing loan, often with better terms or lower interest rates. Remortgaging with additional borrowing is a type of mortgage refinancing in which a homeowner refinances their existing mortgage with a new mortgage that has a higher loan amount. The difference is then paid out to the homeowner in cash at closing.
Yes, buildings insurance is a mandatory condition of any mortgage.
It is also highly recommended by many advisers and lenders that you take out relevant insurance policies that cover the risk of death, serious illness or injury that may occur during your mortgage term.
For more information about this, check out our insurance services.
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