The good news is that you are able to get a mortgage with bad credit. Bad credit mortgage rates are also becoming more competitive. This is due to the rise in lenders who have an appetite for this kind of lending. The rates for bad credit mortgages vary depending on what kind of bad credit you have and how long ago it happened. These circumstances will also dictate which lenders are likely to consider your application. Your specialist mortgage advisor will be able to work out the best route for you and find potential lenders willing to review your application.
Many high street lenders will automatically decline your application if there are any adverse credit events on your credit file. Getting your credit reports is essential for your broker to assess and ensure all of your details are correct before submitting your application to a potential lender.
What will affect your rate?
If you have had bad credit then there are several factors that will dictate the rate a lender is willing to lend at. Simply put a bad credit mortgage will have a higher than average interest rate. This is due to the additional risk that the lender is taking. The higher the risk the higher the interest rate and deposit will need to be to secure a mortgage.
If you have had bad credit in the past it will stay on your credit report for 6 years. After 6 years the adverse credit event will drop from your credit report. Providing you have a good income and a steady job you should be able to get market leading rates and lenders will not be able to see your past adverse credit.
If your bad credit was in the last 3 years high street lenders are more than likely going to decline your application if you have had anything more than a late payment. With the amount of borrowers applying to the main banks they can pick and choose who they lend to. High street banks are looking for the lowest risk stable customers and if you have had an adverse credit event you will fall out of their criteria and be declined. This is where your specialist broker will come in, they have partnerships with specialist lenders who are more willing to lend to people with bad credit. Even with the specialist lenders the amount and details of your bad credit history will determine whether you get your application approved and what rate you can get.
How could I get a better rate?
There are several things to consider when applying for a mortgage with bad credit. The rate you are likely to get is going to be higher than average, this isn’t a bad thing but it does mean that you will pay more interest on your mortgage. This will mean higher monthly payments or a longer term to make the payments more manageable. If you have saved a good deposit then this shouldn’t put you off as you will be able to work on your credit rating while being a home owner, when you are in a better position and adverse credit events have dropped off your credit file then you can remortgage and get a better rate. By this time you will also have more equity in your home which will help with ensuring you can get the best rates.
It is important to check your credit reports so you know all of the details that are on their. If you are close to your adverse credit events dropping off then your broker may advise you to wait for this to happen. Once this happens it will open up the amount of lenders willing to consider your application. You will also be seen as a lower risk which means you will get a better rate and also be able to have a higher LTV sometimes even up to 95%.
Your deposit size will also have an impact on the number of lenders who will consider an application with bad credit. In general, the larger the deposit the less risk you will be. IF you have a 30% deposit with a few missed payments over 3 years ago you should be able to get some competitive rates. If you have a low deposit and your broker finds lenders are not willing to lend you will need to continue saving to build a larger deposit.
We can help
Fill in a contact form or give us a call today, then your specialist broker will analyse your credit reports and circumstances to find you the best rates on offer for your particular circumstances.