Getting a Joint Mortgage when One Has Bad Credit
Looking for a mortgage with bad credit? Read our guide or get started with a bad credit mortgage specialist for the right advice first time
By Pete Mugleston | Mortgage Advisor Pete has been advising on bad credit mortgages for over 10 years and is regularly quoted in both trade and national press
Updated: 27th February 2020 *
Getting a joint mortgage can be difficult if you or the person you’re applying with has bad credit. Some lenders will approach your application with caution while others might decline it outright.
But getting a good deal is possible under these circumstances!
Our guide to joint mortgages with one bad credit applicant covers the following topics...
- Will bad credit affect a joint mortgage application?
- Can you get a mortgage if one spouse has bad credit?
- Getting a joint mortgage with bad credit history on both applicants
- Can one person get approved for a joint mortgage?
- Adding a partner to a joint mortgage if partner has bad credit
- Mortgage when a partner has no credit
- Can I gift deposit to my clean credit partner?
- What happens if your partner suffers bankruptcy and you have a joint mortgage?
- The impact of bad credit on joint mortgages
- Speak to an expert
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Will bad credit affect a joint mortgage application?
Yes. It can make things less straightforward as some lenders will decline your application or offer unfavourable rates, but keep in mind that it’s still possible to find a good deal on a joint mortgage when one of the applicants has bad credit.
With the right advice and the help and knowledge of the whole-of-market mortgage brokers that work with us, it may be possible to find a specialist lender that considers husband and wife credit scores and looks at the overall strength of the application.
Many of these mortgage providers also have the flexibility to take the age, severity and reason for the credit problem into account when making their lending decision.
What types of bad credit can affect a joint mortgage?
The following credit issues are likely to impact a mortgage application:
- Late payments
- Joint mortgage with default
- County Court Judgements (CCJs)
- Debt Management Plan (DMP)
If any of the above have been on your credit history, the lender will need more detailed information such as:
- What is the type of credit issue?
- What type of account/debt the issue was relating to (loan, card, mortgage etc)
- Why did it occur and was it a one-off?
- How long ago did it happen?
- How much was the debt for?
- Whether or not the debt has been repaid or a repayment plan is in place.
Alongside this, most mortgage lenders will want to know certain things before a decision to lend can be made. This would normally include:
- Marital status (single or married),
- How old the applicants are.
- Term of the mortgage.
- Will it be in single or joint names?
- First time buyers or homeowners.
- Are applicants employed or self-employed.
- The level and type of income.
- The amount of any outstanding credit commitments.
- Amount of deposit.
- The applicant's credit history.
Let’s now consider in more detail the issues listed above, and how they can impact lending decisions for single and joint applications, such as getting a joint mortgage with bad credit.
Can we still get a mortgage if my partner has bad credit?
Yes. When two people apply for a mortgage together it is treated as a joint application, and the number of approachable lenders will be fewer if one of them has bad credit. Every mortgage provider has its own policy on what's acceptable, both in terms of the credit issue in question and whether they would consider an application from just one of the two parties.
Whether your joint mortgage application is successful might ultimately come down to the age, severity and cause of the credit issue in question.
Most lenders will want both applicants to be named on the deed, and will judge the application based on the worst credit profile. This means that if one person has a good credit score but one has bad credit, the perfect credit record is often trumped by the poor credit.
However, it’s important to know the difference between “credit score” and “credit search”.
The majority of high-street lenders will perform a credit check for a joint mortgage and will score the mortgage application jointly, so borrowers must meet a joint credit score needed for the mortgage to be approved. Some, however, don’t apply a combined credit score to a joint application. They will search the applicants’ credit history and look for issues that fall outside of their policy – if there are none then it will most likely be accepted, assuming the rest of the criteria is met.
Credit issue examples:
If there are defaults registered in the last three years, most lenders will decline an application, but if it was registered over three years ago, lenders will likely accept. Some lenders expect five years, others four, a minority two and some even say six months! Some have limitations on the number of defaults, others on the monetary amount they were for.
Although it’s true that joint credit “scores” can improve if one applicant has a perfect score, most types of recent credit issue are likely to cause a decline with the majority of high street lenders.
Late payments can occur for a variety of reasons; perhaps missing a payment on a credit agreement or loan, credit card, mobile phone or a utility bill. The lender may want an explanation as to why it happened and will look to see if this is a regular occurrence or just a one-off.
This type of credit issue could be an indication that a borrower is struggling to manage their finances and keep up with payments. The more frequent and recent these are, the higher the risk. Some lenders require a completely clean history for the last six years, others the last three, some two, some 12 months, and there are even some who are happy to consider applications where the borrower is currently behind on payments.
A default occurs when a borrower has failed to keep up repayments on a credit agreement and the lender considers the relationship at an end before the balance has been cleared. This is often after six months of missed payments but can happen at any time.
If a mortgage applicant has defaults, some lenders accept them whether they are repaid (satisfied) or not. The main criteria lenders will want to know about the default:
- The date when they occurred/were registered (if more recent then considered higher risk. Some lenders want a clean history for 3 or 4 years, others are happy to consider defaults registered as recently as this month!)
- The type of account the default was on (If the default occurred on an unsecured credit agreement like a credit card, or on a secured agreement like a mortgage or secured loan. Secured defaults are considered much more serious and thus higher risk).
- The monetary amount of the default - (Some lenders impose a limit on the amount of the default to a maximum of say £150 for example, where others have no limit).
- The amount of equity/deposit (The more recent or severe, the more deposit it required). Currently it’s possible to get approved with defaults up to 95% LTV, depending on the type and registration date.
County Court Judgements (CCJ)?
CCJs are issued by courts to people who have failed to keep up payments on an agreement. A plan is usually put in place detailing how the borrower is to repay the monies owed. In terms of applying for a new mortgage, some lenders are happy to consider applicants with county court judgements but typically they will want to know:
- How long ago it was registered.
- Why it happened.
- How many CCJs there were.
- The £ size of the CCJs registered.
- Have they been satisfied or not.
Every lender is different in what they do and don’t accept. Some will be happy to accept up to two satisfied county court judgements so long as there have been none in the last three months, but impose a limit in terms of the debt owed to, say, a maximum of £150 or £3,000.
Other lenders have no limit on the monetary amount and don’t care if they are satisfied or not, but stipulate none are registered in the last 24 months.
Deposit requirements can vary from lender to lender. Some require much larger deposits than others. For instance, certain lenders will only consider borrowers with CCJs if they have 25% deposit, some 15% deposit, and there are some specialists happy to lend up to 95% loan to value (LTV), in the right circumstances.
We work with the experts who successfully arrange mortgages for people who have had CCJs on a daily basis, so make an enquiry and they’ll let you know how much deposit you need.
Debt Management Plans (DMPs)
Here an agreement has been made between the borrower and their unsecured creditors to pay all of the outstanding debt by making a regular affordable payment until the debt is cleared. This can be arranged by the individual, but is usually conducted by a debt firm or charity/organisation. Some lenders will accept active DMP’s with a minimum deposit of 5%, depending on the circumstances. The main information required is:
- The start date of the DMP
- How payments have been made to date
- The size and number of creditors in the DMP
With a lot of accepting lenders, the DMP does not need to be repaid when the new mortgage is completed. Lenders will generally treat DMP payments as a monthly commitment and as such will include them in the affordability calculations. In the majority of cases the DMP must have been in place for a period of at least twelve months and the lender will require proof of payments. Normally twelve months’ worth of bank statements is acceptable evidence, although some lenders want to see official DMP statements if conducted via a debt company / organisation.
Individual Voluntary Arrangements (IVA)
An IVA is a formal arrangement between the person and their creditors to repay a percentage of the total outstanding debt over a period of time at an affordable amount.
In the case of applying for a new mortgage it is important to note that the IVA stays on a person’s credit file for a period of six years from the date it is registered. This can be significant in the case of applying for a new mortgage as some lenders will insist that there is a period of three years after the IVA has been satisfied, whilst some lenders can accept current IVA’s.
Depending on your circumstances, when the IVA was registered, satisfied, and if the payment conduct is acceptable, a deposit of between 15% and 35% will normally be required.
A bankruptcy is the result of a court issuing a bankruptcy order where the individual doesn’t have enough money or assets to pay off all outstanding debts. In terms of applying for a new mortgage after bankruptcy, lenders will want to know:
- How long the person has been discharged from bankruptcy (usually you are discharged 12 months after the court made you bankrupt. Some lenders will consider the application but will require that you have been discharged for a minimum of one year.
Others will require a longer period of say six years).
- Your credit record following bankruptcy will also need to show a good payment record.
- How much the bankruptcy was for.
- Are there any restrictions after the bankruptcy?
- What the reason for the bankruptcy was.
It’s typically required for the borrower to have between a 5-35% deposit depending on how long it has been since the bankruptcy was discharged.
A repossession is when a mortgage company takes back the property if the borrower is unable to meet the mortgage payments for a sustained period of time. Having had a property repossessed doesn’t necessarily mean that you won’t be able to obtain a new mortgage in the future. The lender will want to know:
- How long ago the repossession occurred (Typically lenders will want a period of between two to three years after repossession before a person can apply for a new mortgage, however there are some lenders considering less than this in the right circumstances)
- What were the circumstances?
- Was it the person’s main residence or as part of a property portfolio?
- Is there a shortfall on the loan / are there any legacy repayments still to make? (generally lenders require there to be no shortfall following repossession, or at least there has to be a repayment plan for the shortfall in place.
Typically lenders will offer a range of mortgage products depending on the time since the repossession, ranging up to 5% deposit for more historical events.
Getting a joint mortgage when both applicants have bad credit
If you’re applying for a joint mortgage and both applicants have bad credit records the lender will want to make a full assessment of the individual’s circumstances. Here they will look at the ‘worst case scenario’ when making a decision to lend but will add up all adverse credit events for the case to ensure that as a whole, it meets their policy.
For example, if applicant one has had some late payments and applicant two has had a CCJt registered against them, then the lender will assess the case and apply their underwriting criteria based on BOTH of the adverse credit events on the case. If they accept the CCJ but not the late payments as they were too recent, then the case would be declined.
One of the first things lenders will check is both of your credit scores through a credit search. We explain these in more detail:
A credit score is the score which the main credit reference agencies assign to your credit report based on your financial conduct. This will help a lender to assess whether you are considered a ‘good risk’ or not and that you will be able to repay what you borrowed.
There is a difference between credit score and credit search. To determine an applicant’s credit score they will look at your credit report and will add points for each piece of information included in it.
They will then calculate the overall points total to give you a credit score. If the score fits with their lending criteria, then a decision to lend is made. There is no universal score and decisions vary from lender to lender so it’s worth speaking to a specialist broker who can guide you through the process and gain the best options for you.
Sometimes known as a credit check this is where a lender will look at your credit report to find out about your credit history. There are typically two types of credit searches that lenders use. These are called ‘soft search’ and ‘hard search’.
A soft search is where the lender will carry out an initial check on your credit file but not see all of the report. The advantage of doing this is that it doesn’t record a search on your credit file and therefore won’t leave a negative impact. Only you can see the search if you obtain a copy of your credit file.
A hard search is a full search of your credit file and will be noted on your credit report. It will be visible to all parties including any lenders that you approach for credit and yourself. It can have a negative impact on your credit score if you were to make multiple applications for credit say over a short period of time.
Can joint married applicants apply in sole names?
Most mortgage lenders require married applicants to apply in joint names and combine husband and wife credit scores for a mortgage, which makes it tricky for those where one applicant is clean credit and would otherwise get a high street deal were it not for the second applicant. This also applies if applying for a mortgage where the wife has no credit, or a mortgage where the husband has bad credit.
Thankfully, some lenders will accept a mortgage application in a sole name where the applicant is married and the spouse will be living at the property, so long as it is deemed affordable in that one applicant’s name. However they will need to know that the reason for doing so is fully justified.
It could be that the couple wish to keep their financial affairs separate. Perhaps they have remarried and wish to keep the mortgage separate. In each case the lender will assess the case individually and will want to carry out an affordability check based purely on the sole applicant’s income and expenditure as well as any financial commitments they may have.
Adding a partner who has bad credit to an existing mortgage
Generally lenders are happy to consider an application to add a partner to an existing mortgage, this is typically considered a remortgage and also transfer of equity (into the joint names, if this is the case). For this reason, the lender will request full information regarding the individuals’ circumstances, for example credit history, employment status, age etc.
If there is a history of adverse credit it can make things a little more tricky, as your current lender might decline to add your partner to the mortgage.
To add someone to a mortgage there are usually additional costs involved, such as solicitors’ fees to conduct the transfer of equity into joint names, register the new partner at land registry and lender administration fees. In the case of a remortgage there may also be valuation, arrangement fees, other conveyancing costs and any redemption penalties from the existing lender to consider.
Getting a mortgage when your partner has no credit history
Having no credit at all is at times damaging to an applicants’ credit score, as having never borrowed, lenders have no way of assessing payment conduct to establish whether they are a good borrower or not!
As mentioned above, some lenders will use “credit scoring” when considering a mortgage application, and others use a “credit search” model. Often when a borrower has no credit and fails a lenders’ “score” it’s useful to remember that lenders have no score to pass, so long as the details of their credit profile matches the lending policy. In the case of getting a mortgage where a partner has little or no credit it may be necessary to choose a lender that adopts a credit search approach.
Thankfully, the specialist mortgage brokers that work with us fully understand the different lenders underwriting criteria and are best placed to match you with the best lenders.
Can you leave a partner with bad credit off a joint mortgage?
Normally lenders will want all applicants living at the property to be on the mortgage application. However, if one of the applicants has a bad credit history some lenders will consider the other applicant who has a clean credit record in their own right subject to deposit and affordability criteria.
One thing that can make this more complex however, is the issue of deposit source. Generally, if a person is gifting deposit then it is based on them having no interest in the property and not requesting the deposit back. This is of course hard to justify if they are then also living in the property, as its difficult to evidence a lack of interest in it if you have given cash for its purchase and live there at the same time!
Thankfully there are some lenders that are happy to consider a gifted deposit to a partner with a clean credit record, providing they are happy to sign the appropriate paperwork to waive rights to the property in event of repossession.
Applicant one has a clean credit record but applicant two has previously had County Court Judgements. Applicant one is now applying for a mortgage in their name only but applicant two will be living at the address and is gifting the deposit to applicant one. Whilst some lenders would be happy to consider this situation others will impose some restrictions.
The lenders happy to consider the mortgage for applicant one on their own require the applicant to evidence they can afford the mortgage on their sole income, but will often request that applicant two signs a gifted deposit letter and a waiver of rights to the property.
What happens to your joint mortgage if one of you goes bankrupt
The first thing to note is that generally, secured debt is not included in bankruptcy proceedings unless the mortgage is in default. If you are still making payments to the mortgage, then this won’t usually be repossessed.
If one of you goes bankrupt on a joint mortgage, then the official receiver in charge of setting up the initial stages of the bankruptcy will conduct a review of your assets to determine your beneficial interest in the property. The equity is essentially assessed based on the person’s SHARE of the equity, which does not impact the other party on the mortgage, who’s share is safe from the bankruptcy.
However, the Official Receiver must force the bankrupt person to release the equity to settle some or all the debt. If this cannot be done by raising the funds, then a recommendation would be made to put the property up for sale.
If there is little/no equity then generally, it’s possible for someone to stay in their home. This may be restricted for 3 years, at which point the property is revalued and equity share assessed again to establish whether the property has increased in value.
If there is sufficient equity, one option would be to explore raising capital against the property to pay off all the debt and effectively annul/undo/reverse the bankruptcy. There are some lenders that can consider this as a shorter-term loan that gets refinanced onto a normal mortgage after the bankruptcy is removed.
The impact of bad credit on joint mortgages
Depending on the type of bad credit, this will have an impact on how the lender views your joint mortgage. Lenders will use a sliding scale when considering the case and will offer a range of products including Fixed Rates, Discounted and Variable products etc. with varying interest rates.
Often the rate that you pay for the mortgage can be slightly higher than high Street lenders rates and is sometimes referred to as a ‘Credit Repair’ mortgage.
A lender may have a range of products catering for applicants with different credit issues or complex scenarios, perhaps charging more interest and slightly higher fees for those deemed higher risk. This can vary from lender to lender but typically between £0 to £3000+. In some cases this can be added to the loan.
Also, the amount of deposit /equity a lender will require can differ depending on the level of bad credit, depending on your circumstances this can range from 35% up to 5%.
Speak to an expert
If you’re applying for a joint mortgage and either you or your partner has bad credit, it’s vitally important to get the right advice. Being paired with the best possible lender for your needs and circumstances could be the difference between getting a favourable deal and ending up paying higher rates than necessary.
Call us today on 0808 189 2301 or make an enquiry and we’ll introduce you to a bad credit mortgage broker who specialises in cases just like yours. We won’t charge a fee and there’s no obligation to act on the advice you’re given.
*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 info 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.
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background. Pete's presence in the industry as the 'go-to' for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course! Read more about Pete here...