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Bad Credit Mortgage

Subprime mortgages - property financing for those with a bad credit score

Understanding What a Subprime Mortgage Means for You

It’s important to be able to access a good deal on a mortgage, whatever your situation. This can be difficult for people who have poor credit history. If you have minor issues with your credit history or yet to establish a good record of credit, you may encounter difficulties when attempting to get a mortgage. You can however, potentially get a mortgage with specialist subprime lenders.

  • CCJ, bankruptcies, IVA, missed payment
  • Terms from 3 to 40 years
  • First time buyers
  • Freehold & leasehold
  • England, Wales, Scotland & Northern Ireland
  • Self-employed with 1 year’s figures accepted
  • Free legal fees
  • Free valuation fees
  • Up to 95% LTV
  • Interest only options available
  • Soft credit searches available

Bad Credit Mortgage Options

These days it is perfectly possible to secure a subprime mortgage – aka a ‘bad credit mortgage’. These specialist type mortgages enable borrowers with a bad credit history to access the loans they need to purchase homes. When a person has a bad credit history they are considered a ‘higher-risk’ applicant in the eyes of lenders resulting in the terms and conditions governing bad credit mortgages being stricter than those of a conventional home loan.

Bad Credit Mortgage Borrowing Costs

Subprime loans typically have higher interest rates and elevated overall borrowing costs. There may be higher fees payable to get the deal up and running in the first instance due to the way the lender will seek to mitigate any potential risk due to the imperfect track record. All of which may sound negative but nonetheless adds up to an open and accessible option for poor credit applicants in need of a mortgage.

Subprime mortgages are riskier for both the buyer and the lender. It’s understandable that certain precautions will be put in place to protect the lender in case things go wrong along the way. Most people who seek bad credit mortgages understand that exceptional deals and market-leading rates are out of the question. The best rates on the market are almost always reserved for borrowers with strong credit scores.

Subprime Mortgage Lenders

When dealing with bad credit mortgage providers it is still important to ensure you get the best deal. You could find yourself in a good position if you can get an interest-only loan allowing you to repay only the interest charged on the loan for several years, without paying the principle loan amount. An interest only mortgage can be a good option for poor-credit applicants who may be unable to qualify for other types of mortgages.

With so many options to explore it’s important to seek the advice of an independent mortgage broker. Bad credit mortgage lenders typically operate away from the UK High street which can make it difficult to track down a good deal without expert support. Discuss your requirements and your credit history with an experienced broker to find the best possible deal on your next home loan.

Subprime Frequently Asked Questions

Below we have listed the most common queries we get asked by bad credit mortgage applicants.

Can I get a mortgage with bad credit?

Depending on the level of adverse history you should be able to get a bad credit mortgage. The sub prime lender may charge you a higher rate as they see it as them taking a higher risk in lending you the money. It is also dependent on whether you are able to easily explain the cause of the arreas / poor credit. Once again depending on when the arrears occurred or what the amounts are, they can also be ignored.

What is considered bad credit?

You may be considered to have a poor credit score if you have failed to meet any formal payment obligations in the past. Everyone has their own unique credit score and lenders having their own criteria regarding credit scores. Bad credit mortgages are engineered specifically for poor credit applicants or those that have yet to build any credit at all.

Will I get a mortgage with a poor credit score?

This will depend on what has caused the poor credit rating. You would need to check your credit report and if the poor credit is not due to missed payments or is from a while back, it is possible that the sub prime lender will ignore it or offer you a slightly higher priced mortgage.

How does bad credit affect mortgage eligibility?

Your credit rating will affect your eligibility for a home loan with the vast majority of major banks and lenders. This doesn’t mean you won’t qualify for a specialist bad credit mortgage. It’s simply a case of directing your applications at the right lenders, most of which are not on the High Street.

Where can I apply for a bad credit mortgage?

Applying for a bad credit mortgage can be simplified by working with an independent broker. Due to the nature of a bad credit mortgage, it is important to ensure that you compare as many deals as possible from an extensive panel of specialist subprime lenders.

Where do I get a mortgage if I have bad credit?

A lot of specialist lenders will ignore some level of adverse or bad credit. It is best to contact a broker who has a range of subprime lenders on their panel and will be able to find you a lender based on your level of adverse.

Is a bad credit mortgage more expensive?

It depends on the lender and the mortgage products you apply for. While a bad credit mortgage can sometimes attach higher borrowing costs than a traditional mortgage it isn’t always the case. Your bad credit mortgage broker will help you secure the best deal.

Can I still get a good deal with a bad credit mortgage?

Yes. It’s simply a case of directing your applications at the right lenders rather than the High Street banks. If you’re in a strong financial position and can comfortably afford the monthly repayments, you can definitely get a good deal on a bad credit mortgage.

Can I get a mortgage with CCJs?

Yes. There are a number of mortgage providers happy to lend if you have CCJs on your credit record. Much will depend on how recently your CCJs were registered and how many you have. Typically it’s much more straightforward to find a lender for CCJs registered 2 or more years ago. The size of your deposit will also be a factor both in terms of eligibility and the deals available to you.

How much deposit will I need?

For lower level bad credit, such as CCJs, defaults on cards / bills etc, typically a minimum of 15% deposit is required. For settled IVA’s and ex-bankruptcy you will need 20-25% as a minimum deposit. As ever, more deals and better rates are available if you can raise a larger deposit.

Do you run a credit check?

There’s no initial credit check. Your advisor will usually be able to confirm if you will qualify for a mortgage just by looking at your credit report. A further credit search will only be carried out if and when you are happy to proceed to a full application to the lender.

Will my mortgage cost more?

Historically mortgages for people with bad credit have been more expensive. However as more lenders have entered the adverse credit mortgage market in recent years, competition has increased. Which means it’s now possible to achieve highly competitive terms similar to high street deals, depending on your circumstances.

I’m an ex-bankrupt, can you help?

In some circumstances, yes. Much will depend on how long you’ve been discharged, and the amount of deposit you have available. You will need to have at least 20-25% to put down.

Can I get a mortgage if I’ve settled an IVA?

Unfortunately we are unable to help if you’ve been or are going through an IVA.

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Last Updated: Nov 2, 2020 @ 2:53 pm
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