Mortgages for bad credit

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Which credit issues will mortgage lenders accept?

These tables are based on experience and expert opinion regarding what’s possible in the current market. Whether you are actually eligible for a mortgage depends on your personal circumstances. ‘Yes’ or ’maybe’ = it is possible, it DOES NOT say that if you have any of these issues you are in any way guaranteed a mortgage, as applications are based on a number of factors and interpretations by lenders. Please only use this for reference – if you want to know what mortgage you are eligible for specifically, then please fill out an enquiry form and an adviser will be in touch.

The impact of payday loans on your mortgage application

Payday lending has received a lot of press recently and the market has simmered down somewhat since the review and subsequent measures placed on lenders. There has been little coverage other than here on OMA, to indicate the ongoing impact payday loans can have on mortgage applications, with many wrongly suggesting that such borrowing improves your chances of approval. It doesn’t and in fact, recent payday loan use is one of the single biggest blockers to approval across the board. Find out more about how payday loans cause mortgage declines and what to do about it.

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Other options for your home loan

Sometimes there just isn’t a mortgage lender who can do what you need. When you are looking to raise further finance, perhaps to consolidate debts or for home improvements, don’t give up hope. Second charge loans, also known as secured loans, may offer the solution you need. For those with restricted credit due to a chequered credit history, it may be possible and more appropriate than a 1st charge mortgage designed for borrowers with adverse credit, to look at the option of a second charge loan. These loans can be more flexible in certain situations, therefore there are some lenders who may be willing to lend on a second charge basis when a first charge mortgage is not possible. Find out more about when a second charge loan may be more appropriate than a remortgage.

Best bad credit rating mortgages:

To get the best rate you need to find all the lenders most likely to approve your circumstances. To do this, you need to know what you’re doing, and for the most part, be able to navigate a landscape that sadly most brokers don’t understand how to handle. Either read our article for the best adverse credit mortgage rates, or simply make an enquiry and one of the specialists will be in touch to match you with the best deal possible.

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How to improve your credit for a mortgage

1) Check your credit reports – all of them. In order to establish if a lender would consider your application, you’ll need to know what they are looking at. Every lender is different in who they use to reference an application – some use Call credit, some Experian, some Equifax. As the agencies don’t always share their info they are often different, and it can be that you are declined because of something on a report you don’t know about. Sign up for your free trials here…

2) Be an active borrower If you don’t have a credit card, get one and spend then clear your balance every month. You should avoid paying any interest doing so within the 30 days period, and  it really helps prove you can borrow and repay. If you have struggled to obtain a credit card, try the Luma card by Capital One here… Top Tip: One of the things you can do to increase your credit score is to obtain an adverse specific credit card, and spend and repay in full on a monthly basis – this helps to prove you can borrow and live within your means at the same time, and you’ll notice your score improve over the coming weeks and months. There are 2 options here, the first is a standard credit card specifically for those with bad credit, the second is for those who are declined for standard cards and need a guaranteed-acceptance card (usually used by those who have had more severe and more recent adverse credit). Apply for the Card by Aqua here. Apply for the Mastercard Cashplus gold here.

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How mortgage lenders for bad credit borrowers have improved over time

Back in 2009 the credit crisis wiped out almost every one of the bad credit lenders in the market, and only those with squeaky clean history could find a mortgage. Since then, the market has made an overwhelming recovery, and with interest rates so low at the moment, rates of borrowing have never been better.

This causes a problem with lenders however, who have been involved in a race to the bottom to compete for market share, slashing rates to increase lending volumes. The other way to increase lending is to open criteria up to borrowers that may be considered riskier business, which of course includes those who have missed payments, defaults and CCJs, right up to IVAs and bankruptcies. The attractiveness of specialist lending continues to gain momentum, with more and more bad credit mortgage lenders coming to the market in 2016 and 2017, with more applying for permissions and set to join in 2018.

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Bad credit remortgage lenders

Remortgaging with adverse credit can be far simpler than for a purchase, namely because you have 2 options: either a full remortgage of your debt, or taking a secured loan/second charge mortgage, which can be even more flexible in terms of criteria. Often if you are declined for a main mortgage but need to raise capital for consolidating debt, home improvements, or any other legal purpose, there may well be a second charge mortgage lender offering a secured bad credit loan who’ll accept you. They tend to have a higher tolerance for adverse credit issues, and most notably, affordability. It’s not unheard of for a borrower to obtain a loan up to 10x annual income, whereas main first charge bad credit mortgages are usually capped at 4x or 5x income.

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Bad credit mortgage lenders (UK)

Most mortgage companies for bad credit applicants will only secure finance against properties in the UK, for borrowers domiciled in the UK. If you are living abroad for more than 3-6 months a year, then it’s likely you’ll be considered an expat, and therefore only eligible with expat lenders. If your property is abroad and you are in the UK, then you’ll only be eligible with overseas/international lenders, and the info in this article is more than likely not applicable. We do have specialists who work with overseas mortgage companies for applicants with bad credit, so make an enquiry and we can refer you across to get you the most relevant information.

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Who we’d deem are the best lenders for bad credit mortgages entirely depends on your situation. Each lender specialises in different issues, so a customer with defaults would be best placed with a completely different range of lenders to a borrower in a debt management plan or with a bankruptcy, for example.

The best bad credit mortgage lender also varies for different income types, and loan to values. If pressed, who we’d consider to be in the top 10 bad credit mortgage lenders would be those that offer the best rates, at the highest loan to values, to borrowers with the most adverse of credit files – the thing is, this changes every day! Lenders are constantly changing their policy and procedures, and when one day they may decline a certain group of customers, the next they accept them. Therefore, it’s so important to use a broker working in the market every day, who has their finger on the pulse!

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Are there any bad credit mortgages with guaranteed approval?

As with anything in the mortgage world, sadly nothing lenders claim to offer is guaranteed. There are however, lenders who accept a huge and severe range of credit issues that often stems far past what most borrowers believe to be possible. This includes defaults and arrears as recent as last month borrowing up to high loan to values, right through to previous repossessions or bankruptcies a year ago, with discharge of 3 years previous being able to borrow up to high loan to values. Bear in mind that mortgage approval comes in 2 stages: an initial agreement in principle (AIP) and a full application approval. Once the initial application is submitted, the underwriter will still need to sign off your application with a full assessment of your documentation and reasons for the credit issues, to establish if you’re likely to be at risk of defaulting in future. For this reason, it’s important to not view an AIP as a guarantee, and to wait until the mortgage has been underwritten and signed off in full before packing your things into boxes! Inexperienced brokers who approach lenders without reviewing a credit file, and without discussing the case with an underwriter are at serious risk of getting declined, or worse, obtaining a false accept in the AIP – this can lead to being declined at full application, often after valuations have been carried out, which can result in wasted money and time spent chasing an approval that was never going to come. The absolute best way to get guaranteed approval with a bad credit mortgage lender is to have a specialist review your credit files (all of them) and match you with the best lender who’ll accept the issues on record. Before even approaching the lender formally, the specialist can establish your exact situation, and then discuss the case with the lender directly to get a verbal acceptance before proceeding. This way, when the case passes the AIP stage you can be far more confident in the decision, as the likelihood of it going through at full application stage is much higher.

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High street lenders bad credit customers

Contrary to popular belief, it is sometimes possible for high street mortgage lenders to accept bad credit applications, but only in the right circumstances when applied for in the right way. Many high-street lenders will never accept your application if issues are severe enough (such as bankruptcy / repossession), however if such issues are historical enough some can be more flexible.

Typically, any issues will need to have fallen off your credit file to fit with these lenders, but it is sometimes possible for a specialist to present the back-story and justification of issues to a lender in the right way, so if they have an appetite to lend they may consider going outside their usual policy by exception. This is far more likely if your case is strong in all other areas, for example you aren’t borrowing a large amount compared to your income, and you have a large deposit (65% loan to value or less is often the tipping point).

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Specialist bad credit mortgage lenders

“Specialist” is the more acceptable (and probably more P.C.) way of saying “sub-prime” which is the old word for a borrower who doesn’t fit mainstream criteria. Historically this means those with severe adverse credit and/or those wanting to self-certify their income. If you are looking to find subprime mortgage lenders for bad credit borrowers, then these are the same as specialist adverse credit mortgage lenders. As lending in the high-street continues to move toward the more mainstream “vanilla” borrower (someone with no history of credit issues and very straightforward and stable income, with large deposit), more and more customers fall outside this remit and are considered “niche” or “specialist”. This has seen increased demand for specialist advice, and increased competition by lenders in these markets, hence the fantastic rates now available. For an up to date review of how you can get approval with one of the mortgage lenders with bad credit, use our menu to visit one of the niche-specific pages related to each issue individually. Here you will find all the info you need to establish if it’s worth making an application.