Bad credit mortgages are for people having a problem getting a loan or a mortgage to purchase property due to poor credit issues such as a credit record blemished with frequent late payments, inability to pay off debts on time, bankruptcy, court judgments, criminal cases etc.
Bad credit mortgages are also known as sub-prime mortgages, adverse credit mortgages, or non-status mortgages and are intended for people who are not able to qualify for traditional mortgages.
This type of mortgage is becoming common in today’s market and many of the mortgage Lenders are now offering very competitive mortgage products to cater for this competitive market.
In the current environment, a bad credit rating is not the obstacle it once was; since 1 in 4 people in the UK are now estimated to have a bad credit rating, many Lenders are having to adjust to accommodate these consumers and bad credit mortgages are the answer.
Bad credit mortgages are available for both purchasing and re-mortgaging property. The amount the Lender approves for you to borrow will depend on your current financial situation and the value of your property; the Lender will also check how much existing debt you have and your monthly expenditure in comparison to your monthly income. Many impaired credit Lenders are not willing to advance more than 75% of the property value.
Lenders who specialize in bad credit mortgages are able to offer better service to people with bad credit. Your credit score is used to determine whether you are eligible for a bad credit loan. A higher interest rate is charged for bad credit mortgages as compensation for the risk they take.
Not everybody can meet the requirements for a regular mortgage from a mainstream Lender, most Lenders tend to turn away borrowers who’ve experienced problems in the past or are self employed. Bad credit mortgage Lenders on the other hand will find a solution for you even if you’ve had CCJ’s, IVA, Bankruptcy, self employed or had mortgage arrears.
Basic requirements for most bad credit mortgage Lenders are: You are a resident in the UK, over the age of 21 and have an income. There are many different bad credit mortgages available from various sub-prime Lenders aimed at helping people with bad credit get a foot on the property ladder.
These may vary depending on the circumstances, location, and severity of the bad credit.Interest rates on bad credit loans are set based on the time between credit problems and mortgage application. Interest rates are normally higher than for regular clean credit mortgage products, but because of the level of competition in the Lender market they’re not overbearing.
Borrowers should assess each bad credit mortgage offer based on its overall cost and not just the rate of interest that they will pay in the first few years.
Before approaching abroker, be sure that you have a bad credit rating, some rogue Mortgage Brokers may try to sell you expensive bad credit mortgages even though they know you could have been accepted for a normal mortgage.
Bad credit mortgages are also a way to boost your credit rating; after about 3 years of paying into a bad credit mortgage, you will have repaired your credit rating. You will then be in a position to re-mortgage with a mainstream Lender and get a better deal.