Want to know if can you can get a mortgage with bad credit or how to do so? Our aim is to make it easier for you to find a mortgage regardless of your credit score or history.

We understand that it can be difficult to find a lender willing to provide a mortgage in these circumstances, but with help from our specialist advisors, you can get access to a potential mortgage with minimum fuss.

Mortgage help for applicants with bad credit

There are a few things to understand before we get started.
  • Missed payments
  • Late payments
  • Debt management plan
  • Discharge bankruptcy
  • Defaults
  • CCJs
  • IVAs

Put simply a bad credit mortgage is described as a mortgage which is arranged with a specialist lender for someone who has previously experienced financial difficulties.

Typically, a bad credit mortgage for someone who has had debt problems will be offered at a slightly higher rate than that found from your usual high street lenders and may also require a slightly bigger deposit or a larger amount of equity.

In our experience however, it is not necessarily the case for everyone that, just because they have experienced problems in the past with their credit, they will need to go down the route of getting a bad credit mortgage from a specialist lender.

The market has evolved over the last few years and some mainstream lenders are now considering elements of adverse credit, and those eligible can still obtain standard interest rates.

Our expert advisers are fully qualified and following an initial discussion and sight of your credit report should be able to ascertain which route you may have available.

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    Keep reading to find information on the home buying process and for answers to some of your main FAQ’s.

    You can also learn about the different types of mortgages and interest rates in our guide.

    Bad Credit: Frequently Asked Questions

    It can be more challenging to obtain and secure a mortgage with a bad credit history; but don’t be discouraged it’s not impossible for everyone. It’s worth noting that there are things that you can do along the way to help improve your chances of being accepted for a mortgage.

    How to improve your credit for a mortgage:

    1. Get started right away by considering/doing these three easy things:
    • Get registered on the electoral roll, if you aren’t already.
    • Request a copy of your credit report.
    • Close any accounts you don’t use (e.g. credit or store cards).
    1. The next few steps are:
    • Make a helpful list of all your sources of income and all regular outgoings you have. This will help you understand the money flow in and out of your account/household. Creating these lists will help you visualise the money transactions; and you will be able to use this to work out a realistic budget, and most importantly be able to stick to it.
    • Once you’ve got your credit report back, check that the information they contain is accurate. If anything is wrong or looks suspicious, get in contact with the correct authority/business to investigate or get it corrected.
    1. Longer term actions:
    • If you’re still struggling with your budgeting take a look at the figures again. It maybe a case that your circumstances have changed or that you haven’t noted down enough for a regular payment such as food shopping or you forgot something off your list.
    • You can have multiple savings accounts – it could be worth your while to open an additional savings account and put something into it every month. It doesn’t matter how small of a sum it is, it could be £5 but it will still help.

    For further information on bad credit mortgages, contact our team. We have plenty of experience in helping with these specialised mortgages and have access to exclusive deals you might not necessarily find yourself on the high street.

    The criteria for assessing a mortgage application will vary from lender to lender, and their approach to your application will differ according to the current level of perceived risk and the nature of your bad credit issue.

    Usually, you will need to approach a lender who specialises in mortgages for people with bad credit, but, with the mortgage market continually evolving, some mainstream lenders have been known to accept some elements of adverse credit and you may not need the services of a specialist lender.

    As a general rule, the lesser the adverse credit event and the more time that has passed since it occured, then the more favourable a mortgage lender will be. For example, an uncleared CCJ within the last 12 months will be a far greater issue than a few missed payments on a store card three years ago.

    However, the main deciding factor will be that, whatever your previous money problems, if you are able to show you are now on a firmer financial footing in the long term and have taken steps to improve your credit score, then you will stand a far better chance of being accepted.

    We understand that no two applicants are the same; and once we’ve gone over your individual circumstances and analysed where you currently stand, we’ll be able to recommend the best path to take to successfully obtain a mortgage on reasonable terms.

    If you have bad credit, there is legally nothing to stop you from getting a Help To Buy equity loan, but you may be subject to extra checks and assessments of your financial situation – your income, outgoings and any other existing commitments – in order to make sure you will be capable of paying back the loan over the course of time, just as with a mortgage.

    In the past, if you had certain bad credit issues, you may have also had problems trying to access the government’s Help To Buy scheme in order to purchase a new home. However, Recent changes to the Help To Buy scheme have made it more accessible to customers with a less than perfect credit history. People can now be accepted for Help To Buy mortgages if:

    • They have been discharged from a bankruptcy for a year

    Once a bankruptcy is discharged, it is viewed that there are no more claims against you from the previous debts, and the year’s grace period allows you to show a new history of responsible borrowing and repayments.

    • They have a current IVA

    As this is a voluntary arrangement, and not a legal ruling, your capacity for other borrowing is not restricted – although you will need to establish that the mortgage repayments will be affordable to you on top of your debt repayments through the IVA.

    • They have no mortgage arrears in the past 12 months

    A year is the period of time viewed as evidence that you are now on a firmer financial footing and thus able to service the new loan or mortgage, even if you had arrears previous to this.

    In these cases, where an adverse credit event was comparatively recent, it’s common for customers to be expected to put down a 10% deposit on the property they are looking to buy, rather than the typical 5%. Aside from the added security for the lender, this will show a commitment to the mortgage and act as proof of an applicant’s ability to set by a decent amount of money from their income to service their home purchase.

    There are many misconceptions when applying for a mortgage after a CCJ, one of which is that  people believe they would have to wait longer than five years to apply for a mortgage. The reality is many lenders are able to offer competitive mortgages to customers who have been registered with a CCJ as little as 6 months ago.

    Records of judgments remain on the Register of Judgments, Orders and Fines – and therefore also on your credit report – for six years.

    The good news here is that this is not the case, all bad credit marks are removed from your credit file in the end and you do not even have to wait for this to happen before being considered for a mortgage. With the right expertise and guidance it may be possible for you to get a mortgage sooner than you might have expected.

    As we mentioned above, if you pay the debt in full (including any interest and court fees) within one month of receiving the judgment, you will not even have a CCJ recorded against you. If you clear the debt more than one month after receiving the judgment, it is marked in the CCJ register as ‘satisfied’, so people will know you have paid.

    When it comes to a missed or late payment for a loan, credit card or mortgage, for example, even if it was due to a genuine oversight, it shows up as an adverse event. There’s no distinction made between deliberate and accidental – so how will it affect you?

    Since the credit crunch, lenders have tightened up their criteria considerably. Any missed or late payments are likely to have an impact on your credit score and what might seem like a minor issue to a borrower might carry much more weight for a lender.

    Obtaining a mortgage for those that have late or missed payments will likely be more difficult than for applicants who have a clean credit history. What the payments relate to and the time of when they occurred will also likely have an impact on if a mortgage can be arranged. Typically the more historic, the better the chances. If the applicant’s credit history is purely an occasional missed or late payment rather than a registered default or CCJ then the chances of success are increased. However this may not necessarily be the case should for example, the missed payments relate to a mortgage that will be viewed in a more severe way than a small default on a mobile phone account.

    Defaults on a credit file are one of the most common reasons for mortgages to be declined but, generally speaking, they are not as damaging as certain other types of adverse credit events, such as Individual Voluntary Arrangements (IVAs) or bankruptcies, for example.

    Having said that, the likelihood is that if you have a default on your credit file, your mortgage application will be automatically turned down by the high street banks and building societies. However, as all lenders’ criteria are different, one size certainly does not fit all, and with a specialist broker’s knowledge of the market, a deal with a mainstream lender may still be available. Alternatively, there are still plenty of specialist lenders out there that are willing to consider an application for a bad credit mortgage with defaults.

    If, in addition to one or more defaults on your credit report, you also have other adverse credit issues, then getting a mortgage will be that bit more difficult. What the other issues are, and when they occurred, will be important factors in the decision-making process.

    Considering some of the adverse credit events you might have on your record, IVA and bankruptcy will have the greatest impact, whereas late payments on unsecured debts is likely to have the least. Mortgage arrears and CCJs sit somewhere in the middle.

    A word to the wise – always try to avoid taking out payday loans, as they are judged to be a warning sign that you cannot manage your finances month to month.

    Depending on your particular circumstances, it should still be possible to remortgage your property with defaults on your credit record, as it is with a standard mortgage.

    It will depend on the size of the previous default, the length of time since the default occurred, whether it was for mortgage payments or for another loan, and whether it was settled. Default notices within the last 18 months will matter most, and if you also have other black marks on your credit record, this might make the process more difficult.

    Some lenders are more flexible than others when it comes to defaults on your credit history, and there are a number of specialist lenders who will cater to applicants with a bad credit record. However, these lenders only consider applications made via a professional mortgage broker such as ourselves. A quick chat with our advisers will reveal which providers have products that could meet your needs, and what steps you will need to take next.

    If you are currently on a debt management plan (DMP), or have completed a debt management plan in the past few years, it will, of course, affect your ability to get a mortgage. However, it does not necessarily mean that you will not be able to obtain finance to buy a new home or be able to remortgage your existing property.

    There are many lenders in the market who specialise in providing mortgages designed for people who have had credit problems, so even if you have been turned away by high street banks and building societies, do not give up; it may still be possible to get a mortgage from a more specialist lender.

    When assessing a DMP mortgage application, in addition to the usual criteria – such as evaluating your income and expenditure (including your monthly DMP payment) to calculate affordability – the lender will also take account of the severity of any other credit problems, and how long ago they occurred.

    While a previous mortgage repossession will very likely reduce the number of lenders open for you to apply to, people with a mortgage repossession in their credit history can and do go on to get new mortgages. While most mainstream lenders will be reluctant at the mention of any major bad credit event in your past, there are specialist lenders on the market willing to consider applications from people in a wide variety of situations, with all kinds of financial histories.

    Getting a competitive deal on a repossession mortgage is very much a possibility – it all depends on how long ago the mortgage repossession took place, and what has changed in your financial situation since then. If you have taken positive steps to put yourself on a firmer footing that will allow you to afford the mortgage repayments, then a specialist lender will take a more flexible view.

    Our mortgage advisers can offer free, no-obligation advice to help you find the right deal for your circumstances; get in touch now to arrange a consultation and find out what your options could be.

    When applying for a mortgage a lender will make an assessment using many factors of your personal circumstances including your past credit history. If a record of a bankruptcy is declared this indicates to the lender that the applicant has historically had debt problems and as such likely to represent a higher risk.  When assessing this risk it may be deemed too high for some lenders and as such they will decline an application.

    You will also likely find that certain borrowing restrictions are imposed upon you during the bankruptcy period. The good news however is that following a discharge from the bankruptcy, that is typically after 12 months, although it will still have an influence over your options it may now be possible to obtain a mortgage.

    Whilst some lenders in the market will refuse an applicant who has been made bankrupt in the past regardless of the circumstances and time frames involved, the good news is that this does not apply to the whole market.

    Virtually all lenders will consider an applicant after 6 years of discharge, however this is something best discussed with a mortgage broker to assess your specific circumstances and needs.

    Finding a competitively priced mortgage with an IVA can pose some problems and, realistically, it is likely to cost you more than if your credit history had a clean bill of health. However, there is no reason why someone with an IVA cannot apply for a mortgage, and there are specialist lenders out there who will be able to help secure the most favourable deal possible.

    The problems you will encounter when trying to secure an IVA mortgage are caused by the impact the IVA has on your credit rating. All mortgage lenders carry out credit checks to help them assess the risks involved in their lending decisions. Most mainstream and high street mortgage lenders will decline an application when they see an active IVA on your record. Fortunately, there are some specialist bad credit lenders that are prepared to offer mortgages to people in an IVA, although higher interest rates may apply and the deposit size for IVA borrowers is likely to be bigger.

    So, there are lenders out there that will consider your application and, in theory, it is possible to obtain a mortgage agreement with an IVA. Bear in mind, however, that each application will be assessed on a case by case basis on its own individual merits.

    Generally speaking, lenders will require you to have a good credit profile when considering your application for a bridging loan. Having a good credit profile will put you in the best position to secure the most competitive rates that are available.

    If you have a bad credit profile and try to get a bridging loan, it does not instantly mean that you cannot secure a bridging loan. The most likely outcome to this situation will be that you will end up paying higher rates than if you had a good credit profile.

    At The Residential Mortgage Hub, we receive many enquiries from would-be borrowers who find themselves in an unfortunate position where they have been turned down for a mortgage due to some credit difficulties in their past.

    As a whole-of-market mortgage broker, we have the right experience and training in this area of lending. Our team also has the ability to recognise whether a bad credit mortgage is genuinely required, or where a standard lender could still be available and the best option to meet your circumstances.

    It’s not uncommon for people with bad credit to have problems obtaining a mortgage themselves directly from the well-known high street lenders. The mainstream providers tend to accept only those applicants with the cleanest of credit records who fit into a standard template, so they minimise their exposure to perceived risk and the process to application and lending is as simple as possible. Anyone outside of these narrow parameters is unfortunately likely to be declined, and so you will be best advised to approach a specialist mortgage broker to help you locate the mortgage to meet your needs.


    Bad credit mortgage advice

    At The Residential Mortgage Hub, we have access to over 11,000+ mortgage products from over 90 lenders. Our Mortgage Advisers will always endeavour to find the most suitable mortgage for you based on your specific circumstances. Call us to see how we can help.

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