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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 28th May 2021*

In this guide, we look at how a specialist mortgage broker can help you secure a bad credit mortgage, the types of adverse they’ll accept, and how brokers find the best lenders for your credit rating and circumstances.

The following topics are covered below…

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Are there mortgage brokers who specialise in bad credit?

Absolutely. Mortgage brokers can specialise in different areas of the market, so the ones who specialise in bad credit will have the knowledge and experience to find the most suitable lenders for your needs and circumstances. Bad credit mortgages can be more complex than standard ones, so a broker who understands the lending criteria could save you time, money and hassle.

Unlike a bank where they may be restricted with what they can offer you, a mortgage broker works independently and has unlimited access to the UK mortgage market. This is a database of lenders who brokers use to find you the best deals from lenders – and they may even have access to deals that aren’t available to the general public.

Brokers specialising in bad credit can help applicants find a provider who can accommodate the following credit issues:

If you’ve been turned down for a mortgage (or fear that you might be) due to any of the above, a specialist bad credit mortgage broker can introduce you to a provider who will take into account the severity of the credit issue, how long it has been on your file, and how closely you meet their other eligibility requirements. It is still therefore possible to get a mortgage with a CCJ, IVA or even get a mortgage with defaults.

For example, if you have adverse credit through outstanding credit card debts that you intend to repay within three months, many lenders will ignore this (so long as there is a payment plan in place).

However, if you have a poor credit history with a current and unsatisfied debt management plan in place, it will have a larger impact on your application. Many lenders would require a confirmation/statement from your debt management provider that last 12 months payments have been made in full before they would consider you for a mortgage.

How to find a bad credit mortgage broker

You can use our free broker-matching service to find the right expert for your needs and circumstances. We can pair you with an advisor whose expertise are the right fit for your case. For instance, if you’re looking for a mortgage after a bankruptcy, we will match you with a bankruptcy specialist. And if late payments are the issue, we’ll pair you with a broker who helps customers find a mortgage with them on their file every day.

A reputable bad credit mortgage broker should have the following qualities…

  • Whole of market and independent
  • Reasonable and fair fee structure (should only charge on success)
  • Gives you access to direct deals
  • Has exclusive products
  • Has links with commercial finance
  • Is whole-of-market for insurance
  • Has years of experience
  • Has plenty of happy customers

You should be wary of poor credit mortgage brokers where the following applies…

  • Is limited to a few lenders
  • Only offers broker products
  • Charges big non-refundable fees
  • Has no exclusive deals
  • Gives up if it’s not straightforward
  • Lacks market knowledge
  • Is restricted to one or two insurers

The mortgage companies for bad credit customers that we work with tick all of the boxes on the first list and none of them on the second. We are selective about the brokers we work with and require them to pass a professionally recognised, 25-module course before they gain our approval.

In other words, if you make an enquiry with us, you can rest assured that you will have access to the best mortgage brokers for bad credit in the UK.

Can a broker help me if I have bad credit and no deposit?

It’s usually the case that bad credit mortgages require a higher amount of deposit to offset the risk that the lender is taking on, but there could be options to consider if you only have a small deposit, or even none at all.

While you cannot borrow the total value of the property you wish to purchase (known as a 100% loan-to-value mortgage), you might be able to get a ‘no deposit’ mortgage of sorts. A broker can establish your eligibility and recommend/find you a different type of mortgage to suit your needs. For example, a guarantor mortgage with a gifted deposit, or a scheme like Help to Buy or Shared Ownership could be the answer for customers with a small deposit.

What fees do bad credit mortgage brokers charge?

The maximum justifiable charge a broker will ask for their services is 3% of the loan amount. For example, if you were borrowing £100,000, your broker fees would amount to £3,000, though you won’t necessarily be hit with the highest rates. Deals with rates of 1% and under are available for some customers.

The percentage you’re billed at may increase or go down depending on how complex the deal is. For instance, if you have multiple adverse credit issues, it will likely take the broker longer to find a favourable deal, and they will, therefore, charge more for their services.

The typical amount charged by the mortgage brokers for borrowers with a bad credit history could be around £499, due upon completion.

Mortgage brokers should only be paid upon success, so be wary of deals with high upfront fees.

Can a mortgage broker help me remortgage with bad credit?

Yes, mortgage brokers can help applicants remortgage their property even if they have bad credit. Technically speaking, the deals available to remortgage customers are often the same as those for house buyers, the lenders will still take into account the same factors.

If you’re looking to borrow against the equity in your property (a debt consolidation remortgage, for example), it’s certainly possible, depending on the loan-to-value (LTV) ratio.

Getting the best remortgage deal is a case of finding the lender best positioned to cater for a borrower with your needs, circumstances and specific credit issue(s). Lenders will also want to know how you’ll go about repaying the loan over a specific period, for example, if you’re remortgaging into your retirement.

For more information on how to remortgage with bad credit, read through our in-depth guide.

How do mortgage brokers check a borrower’s creditworthiness?

Brokers can check your credit history from the main three credit reference agencies in order to determine what kind of deals you’re eligible for. Providing a credit report to a broker won’t leave a ‘hard’ credit check on your credit file – this will usually only happen when an application for credit is made with the lender.

However, you can also check your own credit scores from these three agencies before you even speak with a broker. You’ll be able to see your scores, spot any negatives, and even request to change any inaccuracies. By doing this, you could speed up your mortgage application by presenting these to a broker first so they know which lenders to approach from the get-go.

It’s important to note that not all lenders take your credit ‘score’ into account when assessing you for a mortgage. Some of them simply credit ‘check’ to see if there is any adverse against your name. A specialist low credit score mortgage company may consider pairing you with a lender that will do a credit check for a mortgage rather than ‘scores’.

What else will a mortgage specialist want to know?

Many other factors can impact whether you will qualify for mortgage approval, and the more of them that are going in your favour, the better chance you’ll stand of landing a favourable deal despite your adverse credit history.

To establish which mortgages you could qualify for, the broker will want to know…

How much income you have and how you’re employed:
Typically, the more you earn the better, and some lenders prefer customers to be employed in a full-time, permanent position. A specialist lender may be required for self-employed mortgages and those who supplement their earnings with other sources.
The minimum deposit requirement you will find for a residential property in the UK is 5% or 15% for a buy to let. However, putting down more than the minimum can often yield better rates, and the lender might even insist on this if you have bad credit on your file.

Your age:
Some lenders won’t lend to anyone over 75, others go up to 85, and a minority lend to customers of any seniority, as long as they are confident they can pay the mortgage during retirement.

The property type:
A specialist lender may be needed if the property you’re seeking a mortgage for includes any non-standard construction elements (i.e. thatched roof, timber frame).

Your outgoings:
Other significant outgoings such as loans or dependent children could affect the amount you’re eligible to borrow.

How many applicants there are:
Bad credit mortgages aren’t limited to solo applicants. It may be possible to get a joint mortgage with one bad credit applicant,  though speaking to a broker is recommended as the presence of any adverse credit could affect the overall strength of the application.

Why seeking bad credit mortgage advice is so important

If you need help getting a mortgage with bad credit, it’s important that the broker you turn to has access to the entire market and specific knowledge of adverse credit and the implications it can have on a mortgage application.

The key to getting the best rates and deals is finding the mortgage companies that are best positioned to offer finance to a borrower with your needs, circumstances and credit specifics, and the experts we work with can help you find the right provider for someone in your niche situation.

What types of credit issues will mortgage lenders accept?

Lenders often base their decision on the severity, age and cause of the issue. Some adverse credit issues are more severe than others (e.g. a recent bankruptcy or recently registered IVA is more severe than a missed phone bill payment) and the longer it has been on your file, the better, although some providers are more flexible than others.

Those with multiple credit issues may be asked to put down more deposit to offset the risk, but it depends on what those issues are. The tables below will give you an idea of the types of adverse credit issues most UK lenders might accept and how long you will likely have to wait to apply for a home loan with them on your file.

Secured Finance (where your debt is secured against a property/asset)

Credit Issue Mortgage approval after 0-12 months likely? Mortgage approval after 1-2 years likely? Mortgage approval after 2-3 years likely? Mortgage approval after 3-4 years likely? Mortgage approval after 4+ years likely?
Mortgage Arrears Yes (Usually max 3 late) Yes (Any number) Yes (Any number) Yes (Any number) Yes (Any number)
CCJs Unlikely Maybe (If good LTV) Yes (Any value) Yes (Any value) Yes (Any value)
Defaults Unlikely Maybe (If good LTV) Maybe (If good LTV) Yes (Any value) Yes (Any value)
Repossessions Unlikely Yes (With 25% deposit) Yes (With 25% deposit) Yes Yes

Unsecured Finance (where debt is not secured against a property/finance)

0-12 Months 1-2 Years 2-3 Years 3-4 Years 4+ Years
Late Payments Yes (any number) Yes (Any number) Yes (Any number) Yes (Any number) Yes (Any number)
CCJs Yes (any value) Yes (any value) Yes (Any value) Yes (Any value) Yes (Any value)
Defaults Yes (any value) Yes (any value) Yes (any value) Yes (Any value) Yes (Any value)
Debt MGBT Yes (If credit file is unaffected) Yes (If credit file is unaffected) Yes (If credit file is unaffected) Yes (If credit file is unaffected) Yes (If credit file is unaffected)
IVA Possible with 25% Deposit Possible with 25% Deposit Possible with 20% Deposit Possible with 20% Deposit Possible with 10% Deposit
Bankruptcy Possible with 25% Deposit Possible with 25% Deposit Possible with 15% Deposit Possible with 5% Deposit Possible with 5% Deposit

FAQs

Here, you’ll find some of the most frequently asked questions we hear regarding mortgage brokers who specialise in bad credit.

Which credit referencing agencies do mortgage lenders use?

It will depend on the lender as they may use all, some, or none. Bad credit mortgage brokers in the UK will be keen to know how each of the main reference agencies (Experian, Equifax and Callcredit) rates your credit, to give them a clear idea of which lenders you will meet the eligibility and affordability requirements with.

Because the main reference agencies will rate your credit differently, and because mortgage brokers will know the agencies each lender uses, they could match you with a lender you’ve scored the best with.

That said, some lenders don’t use all three agencies and your credit rating may differ across them all. It’s also important to remember that some mortgage providers aren’t concerned about your credit ‘score’ – they simply ‘check’ for any adverse credit on your file.

Can a bad credit mortgage broker help me if I have an IVA?

Yes, an IVA is just one of the credit problems a broker could help you with if you’re wanting a mortgage. Although some mortgage providers may turn you away if you have an IVA, there are others who will consider your application if you’re able to stump up some extra deposit, which is why it is so important to get expert advice.

Get matched with a bad credit mortgage broker today

If you have questions and want to speak to an adverse credit mortgage advisor, call us on 0808 189 2301 or make an enquiry. We’ll then match you with an expert, independent broker for a free, no-obligation chat about your circumstances and bad credit mortgage options.

Our broker-matching service will make sure you’re paired up with the perfect mortgage broker for you, someone with the exact expertise you need. Using our service won’t cost you a penny, but could save you time, money and marks on your credit report in the long run.

Updated: 28th May 2021
OnlineMortgageAdvisor 2021 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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