Adverse Credit Mortgages

When it comes to borrowing, especially for a mortgage loan, your past credit problems can prove to be a huge obstacle.

Your credit rating indicates to the mortgage lender whether you're capable of paying back the loan or not, it is what they use to gauge the level of risk you pose.
Credit ratings are based on your credit history, a credit history can derive from something as simple as a mobile phone bill; missed payments can ruin your credit rating or contribute to it.

If you have adverse credit due to past credit problems such as CCJ's, a bankruptcy, IVA, mortgage arrears or others, you will most likely get rejected by mainstream mortgage lenders.
You needn't give up however; you can still get a mortgage with bad credit because there is a relatively large group of lender willing to provide adverse credit mortgages.

In the past it would have been hard to find a mortgage if you had adverse credit, lenders were few and far between. Today however, an increase in the number of people with adverse credit in the UK has forced even the big players to open divisions to cater for adverse credit mortgages.

This is important because; the more competition in the market, the better for the consumer, it's now much easier to get a mortgage with bad credit, it also means better deals on adverse credit mortgages. Better however does not mean the same as standard mortgages:

What to expect of adverse credit mortgages

Deposit
Some lenders require that you put down about a 10% deposit, some offer 100% mortgages. However, as someone with adverse credit, it is better to have some money to put down as a deposit, the more you put down, the less the mortgage will cost you overall. Also the lender will take you more seriously if you're willing to put some money down.

Interest
Often in mortgage loans, the interest rate is set according to the risk the lender believes you pose. As a person with adverse credit, you should expect to pay a higher interest rate than on a standard mortgage.

That shouldn't scare you off adverse credit mortgages however, because like other mortgages, adverse credit mortgages are adjustable; over time, your credit rating will improve and it may be good enough to qualify for a normal mortgage, at which point you should think about a remortgage which would give you a better interest rate.

How to get a mortgage with adverse credit

Adverse credit mortgages are invariably sold by mortgage brokers who are intermediaries with access to hundreds of lenders, mortgage brokers tend to charge for their services however, and since you're already facing high interest rates, it would make sense to save yourself some money by going directly to the lender.

Should you choose to go directly to a lender, you should try the one recommended above as they can help people in most circumstances.

When applying for an adverse credit mortgage, you should ultimately look upon it as a short-term solution to get onto the property ladder: Most lenders will cut the interest rate if you keep a good payment record.

Work on improving your credit rating, after three years, you might be able to switch to a standard mortgage.


Related:
Mortgages for people with bad credit - Bad credit remortgage - loans for people with bad credit - IVA mortgage - adverse credit remortgage - credit cards for people with bad credit