Residential Mortgages for People With Bad Credit Profiles
Many homeowners coming to remortgage and budding first-time buyers believe that a bad credit rating will put an end to their chances of securing a new mortgage. However, while this may be true for many mainstream lenders using a credit score led underwriting process, the availability of specialist adverse or “bad credit” mortgages is on the rise and could be the answer you’re looking for.
Can I get a mortgage with bad credit?
Don’t let the prospect of an adverse credit rating stop you from pursuing the best mortgage deal for your individual circumstances.
Can I Get a Mortgage with a Bad Credit History?
While having bad credit can make securing a mortgage more challenging, it doesn’t necessarily mean that it’s impossible. Lenders have varying criteria for risk, and some are more willing to work with borrowers with less-than-perfect credit. Here are a few key points to consider if you have a bad credit history:
- Work on Improving Your Credit Score:
Before applying for a mortgage, focus on improving your credit score. This might involve paying off outstanding debts, ensuring you’re paying bills on time, and rectifying any errors on your credit report. It can sometimes take several months before you see a notable increase in your credit score, but most credit checkers will be able to provide you with insights as to which areas will offer the most improvement.
- Seek Specialist Lenders:
Mainstream lenders are generally less accommodating when it comes to adverse credit. You may have better luck with specialist mortgage lenders who are experienced in dealing with borrowers in your situation.
- Expect Higher Interest Rates:
Be prepared for the possibility of higher interest rates if you have adverse credit. Lenders may view you as a higher risk, which can result in a higher cost of borrowing.
- Larger Deposit:
Lenders may be more willing to work with you if you can provide a larger upfront deposit, which reduces the overall risk to them. Most mortgage lenders ask for a 10% deposit towards the value of the property for property, for mortgages where you are going to reside at the property, but if you can aim for 15-20% this greatly improves your chances of securing a mortgage. Buy-to-Let mortgages, the deposits generally start from 25% and usually the bigger the deposit percentage contribution, the cheaper the rate
- Mortgage Broker Assistance:
Enlisting the help of a mortgage broker such as Vincent Burch, who specialises in adverse credit cases is highly beneficial. They can match you with lenders who are more likely to approve your application.
How to Remortgage Your Home with Bad Credit
If you’re looking to remortgage your home with bad credit, the process can be somewhat more complicated than obtaining your initial mortgage. However, it’s not impossible, and there are steps you can take to improve your chances:
- Assess Your Current Financial Situation:
Firstly, you need to understand the severity of your existing bad credit. Gather all your financial documents and assess your income, expenses, and debts. Having a clear understanding of your financial situation going forward will help you determine which lenders may be willing to work with you.
- Work on Your Credit:
As with your initial mortgage, if your credit still isn’t in the best shape take further steps to improve your credit score. Pay off outstanding debts, ensure all your bills are paid on time, and rectify any inaccuracies in your credit report.
- Consult a Mortgage Broker:
A mortgage broker experienced in adverse credit cases can be invaluable. They can analyse your financial situation and credit history and recommend lenders who may be open to considering your application.
- Be Transparent:
When applying for a remortgage, be honest and upfront about your credit history and evidence that you are working to rectify it. Lenders may appreciate your transparency and willingness to address the issues.
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Credit history will always be part of the financial equation, so it pays to know your credit score and check that it accurately reflects your current circumstances.
Credit reference agencies such as Experian, Equifax and TransUnion will calculate your score for free, giving an indication of how the financial world will view you. It’s an opportunity to correct any errors and consider other simple ways to ensure your credit score is as robust as possible, such as:
- Registering to vote – this is used to confirm personal details
- Limiting new credit card applications – rejections impact your credit rating
- Allowing credit history to mature – create a financial pattern with the same card
- Setting up direct debits – avoid missing a bill payment by mistake
Taking these steps can help to improve your score, but how do you secure a buy to let mortgage if the numbers still don’t add up?
Find the Best Adverse Mortgage for Your Property Purchase or Remortgage
The best way to find the right mortgage for your specific set of circumstances is to speak to a mortgage broker. Be open and honest about your financial history and any financial concerns you have from the outset and take advantage of the knowledge and advice they can offer. A broker won’t judge, they will only try to help you.
At Vincent Burch Mortgage Services we take a flexible, tailored approach and have access to those lenders who offer specialist mortgages at competitive rates only through an intermediary. You won’t normally find impaired credit mortgages on the high street.
Whether you are buying your first home, or remortgaging to raise funds for home improvements we’ll work with you closely to find the best solution for you. Don’t let your plans stall, talk to our expert team today and we’ll get the facts of your financial situation. Whether you are in London, Liverpool or anywhere else in the UK our team operate are on hand to service your needs.
