arrowright roundtick plus plus house 66 . 7 % cornercurve

Don't let a mortgage get in the way...

What deposit do I need for a bad credit mortgage?

Everything you need to know about getting a mortgage with bad credit

Get Started
continue to article
  • Home
  • Deposits
  • What deposit do I need for a bad credit mortgage?

By Pete Mugleston   Mortgage Advisor

Last updated: 6th February 2019 *

For people with bad credit, the thought of ever owning a home can be really daunting and frankly seem impossible.

Thankfully, there are numerous specialist lenders happy to lend to those who have had credit issues, either small or severe, historic or recent. How much deposit you’ll need will depend on some key factors, explained below.

We have helped many homeowners onto the property ladder, regardless of their credit score or size of deposit. To put your mind at rest, we have collated everything you need to know about getting a bad credit mortgage and how much deposit you’ll need below:

  • Which types of bad credit can I get a mortgage with?
  • Can I get a mortgage with bad credit and a big deposit?
  • Other factors that affect the deposit size
  • Are some types of bad credit more acceptable?
  • Applying for a mortgage with a partner with bad credit
  • Can I get a mortgage with bad credit and no deposit?
  • Buying a Buy to Let property with bad credit
  • How to apply for a mortgage with bad credit
  • Speak to an adverse credit mortgage expert

Which types of bad credit can I get a mortgage with?

Bad credit or ‘adverse credit’ is a term used to describe a less-than-perfect record of repaying credit commitments. Mortgage lenders consider credit issues as an indicator of risk, but to varying degrees depending on what the issue is, and when it was registered.

Depending on your circumstances, it may be possible to get a mortgage on a property even if you’ve had bad credit.

In general, this is the order of perceived severity with most lenders (least to most severe):

  • No credit history
  • Low credit score
  • Late payments
  • Missed mortgage payments
  • Defaults
  • CCJ’s
  • Debt management Schemes
  • IVA’s
  • Repossessions
  • Bankruptcy

Furthermore, whether or not you have ‘bad’ credit is subjective because each lender has a different set of criteria that they use to calculate and assess someone’s risk and ability to repay their mortgage.

Therefore, one lender may approve you while another rejects you, regardless of any ‘bad’ credit you may have. Some might be flexible depending on the severity of the adverse credit - bankruptcy is a bigger deal than a missed phone bill payment, for instance - and how long it has been on your file. The older the credit issue, the better.

Can I get a mortgage with very bad credit but a big deposit?

As with any type of bad credit, bankruptcy, repossession and multiple credit issues can cause real problems with many mortgage lenders and can often result in an application being declined.

That’s not to say buyers with a more severe bad credit history are unable to get a mortgage. It’s just that in instances where the debt is severe or recent, a larger deposit may be required.

For example, someone who needs a bad credit mortgage but has a good deposit of 40-50%, is more likely to be approved for a mortgage than somebody with adverse credit and a small-to-medium-sized deposit.

This is because a big deposit on a bad credit mortgage offsets the risk posed to a lender. With a large deposit, the buyer would own more equity in the property and would therefore need a smaller mortgage. Furthermore, a smaller mortgage could be seen as more affordable for someone who has previously had financial problems.

There are also specialist lenders who have specific experience with mortgages for people with bad credit and no deposit as well as mortgages with a big deposit.

Make an enquiry to be connected with an expert in bad credit large deposit mortgages who can help you find a lender that specialises in them.

Other important factors that affect deposit requirements

There are other factors that can affect whether a bad credit mortgage is approved and the amount of deposit a buyer will have to put down.

Severity of debt

Some forms of debt are deemed as higher risk by lenders and therefore a larger deposit will likely be required to outweigh the risk for the lender.

Examples of the more severe forms of debt include DMPs, IVAs, Repossessions, and Bankruptcy.

The date the issue was registered

Some issues like late payments on loans are acceptable with a 5-10% deposit if they are recent. More severe issues generally need a larger deposit but if they are fairly old debts, lenders can take you current financial circumstances into consideration.

If the debt is settled

This isn’t essential in most cases but some lenders will only lend if debts are settled.

Are some types of bad credit more acceptable?

We’re often asked, how much deposit do I need for a mortgage with bad credit? Lenders each have a different set of criteria to determine someone’s affordability but in cases where there is bad credit, a larger deposit is often required to offset the risk to the lender.

The good news is that some forms of bad credit are not deemed as severe as others.

Some specialist lenders currently offer incredibly competitive rates and will consider mortgages for bad credit with a 5% deposit, even for someone who has had credit issues in the past.

We have helped people get mortgages for bad credit and a low deposit despite them having a low credit score or no credit history at all.

Adverse credit type Severity Deposit needed if registered recently
No credit history Not considered as severe 5 - 10%
Low credit score Not considered as severe 5 - 10%
Late payment Not considered as severe 5 - 10%
Missed mortgage payments Severe 10 - 15%
Default payment Severe 10 - 15%
CCJ Severe 15 - 20%
Debt management schemes Severe 15 - 30%
IVAs Severe 25 - 30%
Bankruptcy Very Severe 30 - 40%
Repossession Very Severe 30 - 40%
Multiple credit problems Very Severe 30 - 40%

Applying for a mortgage with a partner with bad credit

When applying for a mortgage with a partner or friend, both of your credit scores and financial histories could be taken into account.

This can be beneficial in some instances as two applicants can often mean that two incomes can be taken into consideration and therefore a larger mortgage can be approved.

Even if one applicant has a good credit score, a partner’s bad credit can affect the chances of approval as well as the interest rate on a mortgage.

Lenders may also ask for a large deposit on a bad credit mortgage to offset the risk of providing a loan to someone who may have previously had financial difficulties. High street banks can be more stringent on this but there are lenders who will be more flexible when assessing a unique situation.

Could applying for the mortgage alone help?

Some applicants decide that they will apply for the mortgage in a sole name, in order for the person with bad credit to not be considered on the mortgage application.

Although this can avoid the issue of having poor credit against the application, borrowers should consider that applying alone, with just one income, can result in a smaller mortgage amount.

Essentially, the higher the income, the larger the loan.

Mortgages for bad credit with 10% deposit

The example below demonstrates the loan amount available to a buyer applying for a mortgage with a 10% deposit alone vs a couple applying together. If the couple wanted to buy a house to the value of £300,000 and they had £30,000, they would need a mortgage of £270,000.

Lenders usually provide a mortgage amount of 4x the applicant’s annual income and in some cases up to 5x with very good credit history. There are also a minority who will offer 6x, under the right circumstances.

Applicant applying alone with good credit:

Annual income 4 x income 5 x income
£40,000 £160,000 £200,000

Applicants applying together with good credit and bad credit:

Combined annual income 4 x income 5 x income
£70,000 £280,000 £320,000

If the couple were to decide that only the person with good credit would apply for the mortgage, it could result in them only being able to buy a cheaper property.

Therefore it is always best to seek advice before completely ruling out a joint mortgage application as applying in a sole name could result in a smaller mortgage amount.

For more information on applying for a mortgage with a partner with bad credit, make an enquiry.

Can I get a mortgage with bad credit and no deposit in the UK?

We’re often asked ‘Can I get a mortgage with poor credit and no deposit?’

A desirable situation for some people with bad credit would be to get a 100 percent mortgage with no deposit, however, obtaining a mortgage without a deposit is difficult in most circumstances and is usually only available to people with very good credit.

There are adverse credit mortgage lenders who will ask for just a 10% deposit and some that will even offer mortgages for bad credit with a 5% deposit.

Such lenders may look at other factors including the whether the applicant’s debt has been satisfied, how long ago the debt was accumulated and the severity of the debt. They may also use the applicant’s income and current financial situation to judge whether they pose a high risk as a borrower.

Mortgages for bad credit with no deposit or a low deposit do exist, there may just be fewer lenders out there who are willing to accept applicants with this need.

How do I get a mortgage with no deposit and bad credit?

One way you could potentially get a mortgage with poor credit and no deposit is by having a family member or friend agree to act as a guarantor.

If you’re fortunate enough to have somebody in your life who’s willing to do this, and they tick the other boxes on the lender’s eligibility checklist, you may be able to land a mortgage with a bad credit rating and no deposit.

With a guarantor mortgage, the friend or family member must do one of the following…

  • Allow the lender to secure the loan against a property they own
  • Place a lump sum in a savings account held by the lender. They cannot withdraw from this pot until a certain amount of the mortgage has been repaid.

Some guarantor mortgages are offered at 100% LTV, and your adverse credit may not be a deal-breaker if you and the person who is helping you out meet the lender’s other eligibility requirements.

The specialist advisors we work with are experts at finding no deposit mortgages for people with bad credit such lenders and will be able to help you find an affordable mortgage deal based on your circumstances.

Affordability

No responsible lender will offer you a mortgage, regardless of how healthy your credit rating and deposit size are, unless you pass their affordability checks. The mortgage provider will take the following into account when assessing this…

Your income: The more of it the better - some lenders will offer you a mortgage that’s 4x your salary, others x5 and a minority x6. Specialist lenders may be required for those who supplement their earnings with bonuses/commission, benefits and other ‘non-standard’ sources, as well as self-employed borrowers.

Your outgoings: Lenders will also assess your outgoings and any other significant commitments such as loan repayments, insurance etc will be offset against your income.

Borrowers with high income and minimal outgoings are generally seen as lower risk to lenders, so you chances of securing a mortgage in these circumstances may increase, regardless of whether you have black marks on your credit file.

What else impacts my eligibility for a bad credit mortgage?

If you have adverse credit on your file, it will always help if your mortgage application is straightforward in other respects, from the lender’s perspective. They may will also take the following factors on board when calculating eligibility…

  • Your age: Some providers won’t lend to those under 21 or over 75. If neither of these caps applies to you, your choice of lenders will be wider.
  • Property type: Specialist lenders may be required if your property has any non-standard construction elements, such as a thatched roof or timbre frame, or it is a listed building. You’ll have access to more lenders if it’s a regular property made from bricks and mortar.

Can I buy a second home if I have bad credit?

Technically it’s possible, but having bad credit will restrict the number of available lenders, since you technically fall into two niche categories (bad credit and 2nd home buyer). The same will apply if you’re a bad credit customer who’s hoping to take out a 2nd charge loan on a property you already have a mortgage on.

These lenders can be difficult to find, which is why having access to the entire market is recommended. The advisors we work with have exactly that, so make an enquiry and they will connect you with the best provider for somebody in your circumstances.

Will my location affect me getting a mortgage with bad credit no deposit?

We’re often asked by people living in rural areas including some parts of Scotland and Northern Ireland if their location will affect them getting a mortgage with bad credit and no deposit.

The answer to this is potentially yes. In some parts of the UK where there are less properties and a lower population, there may be fewer lenders, particularly specialist lenders offering mortgages with bad credit and no deposit.

This could result in fewer options for a buyer when considering interest rates and could also mean they have to take a mortgage out with a lender who requires a deposit.

If this applies to you, you may be asking yourself, “where can I get a mortgage with bad credit and no deposit?” Even in rural areas, the brokers we work with will research both the market and lenders available and present you with the most appropriate and affordable options for you.

Buying a Buy to Let property with bad credit

Borrowers with bad credit who are looking for a Buy to Let mortgage can be deemed as people with a greater risk of defaulting on their mortgage.

They will most likely have to approach more specialist lenders too, as high street banks and lenders can have stricter and less flexible rules on BTL mortgages and bad credit. Interest rates may also be higher for people with poor credit too when comparing mortgage rates against people with a more favourable credit history.

Many lenders have a minimum income requirement of £25,000 per year and some prefer borrowers with prior landlord experience. If you meet other eligibility requirements such as these, your chances of securing a BTL mortgage with bad credit will increase.

What is the maximum Loan to Value on Buy to Lets?

Despite the loan to value limit for buy to let mortgages slowly increasing over the last couple of years, we haven’t seen the same level of lending we used to. Certain lenders are currently offering lending up to 80% of the value of the property as a first charge; however some more specialist lenders are offering second charges and loans over and above this.

How much deposit will I need for a Buy to Let mortgage with bad credit?

That’s not to say it’s impossible to find a lender for a Buy to Let mortgage if you have bad credit. Yes, there are fewer lenders who will consider applicants with bad credit but sometimes a with a 20 to 30% deposit, applicants can be approved.

There are also other specialist lenders who will ask for lower deposits between 15 and 20%, depending on the circumstances. Sometimes the type of credit and the date of the missed payment or default can influence the chances of approval.

Find a trusted broker

Applying for a mortgage with bad credit is best done via a broker with access to all the lenders across the UK.

If you ask a good broker how to get a mortgage with bad credit and no deposit, they should be able to find you the best deal, based on your circumstances, from all the lenders that would consider you. If your credit history is severe and a deposit is needed, the broker will research each of your options and present you with them to compare.

An adviser should always make things clear to you and gain your agreement before proceeding with any actual applications.

The brokers we work with are experts and can find out how much deposit you’ll need for a mortgage. They will be more than happy to help you, without obligation or leaving marks on your credit rating.

To get a quote from one of the specialists we work with get in touch.

Speak to a bad credit deposit expert today

If you want to apply for a mortgage, as a question or you’d like to know more, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 6th February 2019
OnlineMortgageAdvisor 2019 ©

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 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.