As far as most mainstream lenders are concerned, bad credit mortgages are out of the equation. Unfair and counterproductive it may be, but it’s nonetheless the stance adopted by some of the biggest banks on the High Street.
Hence, you could argue that qualifying for a mortgage with a poor credit history can be tricky. Nevertheless, this doesn’t mean that bad credit mortgages don’t exist. Nor does applying for a poor credit mortgage necessarily mean being dealt a bum deal.
Credit History Vs Eligibility
Despite the fact that a mortgage is technically a secured loan, they tend to be issued using the same basic criteria as an unsecured personal loan. In order to qualify, you’ll not only need to provide conclusive proof of income, but also pass an intensive credit check. Unless the latter of the two is relatively pristine, you can forget about it.
At least, that’s how it works with most major lenders.
Maintaining flawless credit has become increasingly difficult (if not impossible) for millions of households across the UK. An unfortunate reality of modern life that’s been comprehensively ignored by most High Street lenders. A few rudimentary blemishes on your credit report may have little influence on your eligibility, but anything more and it’s game-over.
Subprime Mortgage Applications
Highlighting a slight silver lining in all the doom and gloom, the market for subprime mortgages in the UK is well and truly open for business. Evidence suggests that fewer major lenders are offering subprime mortgage products than ever before, but set your sights beyond the High Street and it’s a different story entirely.
As the name suggests, subprime mortgages are specialist home loans for individuals and couples with imperfect credit. This applies to those with poor credit scores and applicants with no credit history whatsoever. In both instances, the loan is considered ‘higher-risk’ on the part of the lender, though doesn’t automatically count the applicant out of the running.
Instead, subprime mortgages typically attach slightly higher rates of interest and overall borrowing costs. Far from a binary ‘black and white’ issue, each application is considered by way of individual merit. Where the applicant’s credit history is imperfect but far from tragic, they’ll still be offered a great deal. If it’s quite the opposite, higher interest rates and borrowing costs will apply.
Even in instances where applications have been turned down by multiple High Street lenders, it’s still perfectly possible to access a competitive bad credit mortgage. It’s simply a case of knowing where to look, which may involve enlisting the help of a specialist broker.
Getting a Good Deal on a Bad Credit Mortgage
As with all home loans, there are steps that can be taken to ensure you get a good deal on a bad credit mortgage. Rather than simply accepting your lot, a proactive approach could save you a small fortune long-term.
Effective options to consider include the following:
- Seek expert advice from an independent specialist broker
- Organise a whole-of-market product and lender comparison
- Consider increasing your initial deposit payments
- If possible, begin addressing your credit issues ASAP
- Explore the possibility of a guarantor loan
- Discuss alternative secured loan options with your broker
Roughly summarised, the answer is yes – a bad credit history can and will affect your mortgage application. But that’s assuming we’re talking an application for an everyday mortgage with a typical High Street lender.
By contrast, extend your search beyond the High Street and you’ll find it far easier to qualify for a mortgage. Consult with an independent broker to explore the available options and you could be onto a great deal in no time.
Article by iConquer Ltd
