Applying for a mortgage can be stressful at the best of times, but even more so if you know you have a bad credit score and are likely to be rejected.
Credit scores are used throughout the UK to help lenders determine whether you are eligible for their products, if you can afford the repayment amount, and how likely they think you are to keep up with your repayment schedule.
Bad credit, or adverse credit, will influence your ability to be accepted for a standard mortgage.
Thankfully bad credit mortgage providers and products are becoming more and more commonly available in the UK, with many lenders now specialising in bad credit.
Can I Get a Mortgage With Adverse Credit?
Most bad credit mortgages come with higher interest rates than the standard mortgage rates you would find elsewhere.
However, you might have the opportunity to rebuild your credit score or wait for a past default to be removed and then have the option to refinance onto a more competitive rate.
You may require a larger deposit to secure your mortgage, at around 25%, higher than the average of approximately 15%.
Another factor to consider is that the total amount you can borrow on a bad credit mortgage is often lower than an individual applying with a good credit rating.
This consideration is worth bearing in mind to ensure you are not applying for a product you aren’t eligible for. There are also deposit support schemes and niche bad credit mortgages that may be more suitable than anything you can find through a mainstream lender.
What Factors Impact the Rates On a Bad Credit Mortgage?
An individual could have bad credit for countless reasons, and that may be because they haven’t used borrowing before, so they don’t have a credit score for a mortgage lender to assess.
Although bad credit is commonly due to defaults, a low credit score can be just as negative from a lender’s perspective, as they have no proof of consistency with payments.
There are mortgages on the market that could still be suitable because lenders look for varying things. Depending on the provider’s policy, some factors on your credit report have more of an impact than others.
For example, an IVA or bankruptcy is more likely to impact your mortgage application than a missed payment.
How Can I Find a Specialist Bad Credit Mortgage Lender in the UK?
Multiple lenders specialise in bad credit UK mortgages, so becoming a homeowner is more accessible than ever.
Previous market statistics show that the likelihood of getting a mortgage with bad credit has increased considerably within the last ten years, with more lenders specialising in adverse credit.
This news is fantastic for UK mortgage seekers who may have concerns about their credit scores.
The best way to highlight the right lender to apply to is to consult an independent broker – we can assess your circumstances, take a look at your credit history, and match your borrowing requirements with an appropriate mortgage provider.
How Can I Improve My Chances of Getting a Mortgage With a Poor Credit Score?
Lenders appreciate transparency and would rather know if you have credit issues that could impact your ability to be accepted for a mortgage, so providing this information on your initial application is always advisable.
It is also a good idea to save as large a deposit as possible – a higher deposit offsets the lender’s risk and means they’re looking at a lower Loan to Value (LTV) ratio.
You should also see whether there are any options to improve your credit file. Paying off as much as you can, closing unused accounts and registering on the electoral roll will boost your credit score.
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What Can a Mortgage Broker Do to Help Me Find a Bad Credit Mortgage?
A broker has the knowledge and experience to help you find specialist lenders and, in turn, reduce your chances of applying to the wrong lender and being rejected.
Multiple rejections can have a huge impact on your mortgage success, so getting support and guidance from the get-go is vital.
Our mortgage brokers team has years of expertise supporting bad credit applicants in even complex situations to help secure competitive mortgage financing.
Please give us a call on 0330 304 3040 or drop an email to email@example.com for more information or help to identify the right lenders to get your application underway.