Mortgages for Poor Credit

Having no equity is an issue for lenders because if you don’t repay the mortgage, they have to try and sell the property to get their money back, and if your loan was 100k and the house 100k (100% LTV) the chances of them getting full price and then covering their costs are nil. In fact, at 90k (90% LTV), the chances of covering all costs are slim.

When you are getting a mortgage with bad credit, income rules are the same on normal applications, and it needs to be adequate to show you can easily afford the mortgage now, and into the future. It’s not always based on the monthly payments, which is at times frustrating especially for those consolidating debts from £2000pm to £1200pm for example, where the £1200 is deemed affordable even though the borrower was keeping on top of the £2000! Usually, a borrowing limit of 4x salary is a common figure, so if you earn £20k, you could borrow £80k, although some lenders go to 5x, and at times more for higher earners.

Personal factors effecting mortgages for poor credit criteria include: age, number of applicants, application type (right to buy/ family purchase etc) and more.

To get mortgages with bad credit, if you have other assets, such as equity in other properties, businesses, investments, savings, then these can show a lender you have other means to support yourself and their loan, should you fall into trouble.

Some lenders have different takes on non-standard property, so if you’re buying or remortgaging a thatched cottage, concrete property, or maybe a property with an annexe, it can effect a lending decision.

For mortgages with a bad credit score, it’s important to remember that although most lenders will give you a score, some don’t. The ones that do will limit your borrowing, your LTV or decline you if you’d don’t have a high enough score. But the specialist bad credit mortgage lenders that don’t score will assess your credit file understanding that at certain times in life, things happen, and if they aren’t too severe or there is a good explanation, they may well approve your loan. Note: Mortgages with bad ‘credit rating’ relate to the same thing as ‘credit score’.

Mortgages for people with bad credit history are most impacted by the type, amount and date of the credit issues. The more recent the issue, the worse it looks, and the more serious the issue (in terms of £ and the type of credit the issue was with) the worse it looks. So, a mobile phone default of £100 is better than a secured loan default of £100. A CCJ for £5,000 is far worse than a CCJ for £50.