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What Deposit Do I Need for a Bad Credit Mortgage?

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

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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 August 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 a bad credit history, whether in the past, or more recently. Even if your credit issues were considered to be very severe, there are still lenders who will be willing to lend to you, with the right level of deposit.

When you have a bad credit score, how much deposit you’ll need will depend on some key factors, which we'll explain in this article.

We've helped many homeowners onto the property ladder, regardless of their credit score or size of deposit. To make life just a little bit easier, we've collated everything you need to know about getting a bad credit mortgage and how much deposit you’ll need.

Read on to find out:

If you're short on time and simply want to find out what deposit you'll need for a mortgage based on your own specific bad credit history, call 0808 189 2301 or make a quick online enquiry

We'll match you with a mortgage broker experienced in successfully arranging bad credit mortgages for people in similar circumstances to yours. 

They'll be happy to answer all your questions and let you know what you might expect when it comes to getting the mortgage you want. The service is entirely free and there's no obligation.

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 the way it impacts their willingness to lend to you will vary 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

Whether or not you have ‘bad’ credit is subjective because each lender uses a different set of criteria to calculate and assess someone’s risk and ability to repay their mortgage.

Because of the inconsistency of the way lenders approach your credit rating, one lender may approve you while another rejects you, regardless of any ‘bad’ credit you may have.

Likewise, you may find some lenders more flexible depending on the severity of the adverse credit. For example, bankruptcy is a bigger deal than a missed bill payment. In general,  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. But you may find lenders' require a larger deposit if your debt is severe or recent.

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. As well as this, 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 scores and no deposit as well as mortgages with a big deposit.

Make an enquiry or call 0808 189 2301. We'll match you with a mortgage broker with thorough knowledge of all the lenders across the UK who arrange mortgages for customers with bad credit ratings. 

They'll be able to answer all your questions and find those mortgage lenders who may be willing to lend to you based on the specifics of your own credit history.

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're fairly old debts which you have under control, lenders are more likely to take your current financial circumstances into consideration.

If the debt is settled

This isn’t essential but, in most cases, 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? Each lender has a different set of criteria to determine someone’s affordability but where there's 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've helped people get mortgages for bad credit and a low deposit despite them having a low credit score or no credit history at all. So whatever your circumstances, if you want to know what you might be able to expect if you want to get a mortgage, call 0808 189 2301 and chat with one of the brokers we work with. We'll match you with a broker experienced in arranging mortgages for customers with bad credit.

The chart below gives you a rough idea of the deposit requirements based on the type of adverse credit you may have.

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%

How deposit size affects your mortgage application when you have a bad credit rating

A 100% mortgage with no deposit requirement may be ideal when you're looking for a mortgage with a bad credit history, but getting a mortgage with no deposit is really difficult, and usually only possible for borrowers with very good credit.

Although a few lenders who provide adverse credit mortgages to borrowers will accept deposits as low as 5%, usually you would expect to need a deposit of at least 10% or 20%.

10% deposit

The size of the deposit you require will usually depend on the reason behind your bad credit rating, as well as the severity of your bad credit situation.

For example, if you simply have no credit history some lenders will consider you for a mortgage if you have 5% or 10% deposit.

Similarly, you could find lenders happy with a 10%, or sometimes 5%, deposit if your poor credit rating is not considered severe and is a result of:

  • Low credit score
  • Late payment
  • Missed mortgage payments
  • Default payment

20% deposit

Most lenders will look for a deposit of 20% if your bad credit rating includes either of the following:

  • CCJ
  • Debt management schemes

If your bad credit situation is considered very severe, or is due to bankruptcy, repossession or multiple credit problems, the majority of lenders would require a mortgage deposit of at least 30% or 40% of the value of the property you wish to purchase.

To find out what sort of mortgage deposit most adverse mortgage lenders would prefer you to have based on your own situation, call 0808 189 2301 or make a quick enquiry to talk to a mortgage broker experienced in arranging mortgages for borrowers with bad credit history.

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.

Joint mortgage deposits

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.

If you, or your partner, have bad credit scores the far-reaching decisions you make because of it means it's always a good idea to seek expert advice.

Why completely rule out the idea of a joint mortgage because it feels like an easier option when your partner's bad credit history might not actually make too much difference to the way a lender might view your mortgage application? Especially if applying in a sole name could result in a significantly smaller mortgage amount.

For more information on applying for a mortgage with a partner with bad credit, make a quick online enquiry or call 0808 189 2301.

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 who will even offer mortgages for bad credit with a 5% deposit.

Such lenders may look at other factors, including:

  • Whether the applicant’s debt has been satisfied.
  • How long ago the debt was accumulated.
  • 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, but you may find there are fewer lenders willing to accept applicants with this need. Which is why talking to a whole-of-market broker, with access to all the mortgage lenders in the UK is a good idea when you're after a mortgage and have a poor credit rating.

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 might even be able to get 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. If you and the person who is helping you out meet the lender’s other eligibility requirements, your adverse credit may not be a deal-breaker 

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

Affordability checks with a bad credit rating

No responsible lender will offer you a mortgage unless you pass their affordability checks, regardless of how healthy your credit rating and deposit size are.

Every 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. Any other significant commitments such as loan repayments or insurance will be offset against your income.

Borrowers with high income and minimal outgoings are generally seen as lower risk to lenders, so your 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 be willing to take the following factors into consideration 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 lender 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 timber frame, or 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 a bad credit rating 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 can be a huge advantage. The mortgage advisors we work all have access to the all the lenders across the UK and know which lenders might be more likely to view your application for a mortgage favourably.

Make a quick enquiry or call 0808 189 2301 and we'll match you with an advisor who has the right experience to help you get the mortgage you want.

The service is free, there's no obligation and advisors only get paid if you get the mortgage you want. And, because advisors are paid on commission, it still won't cost you a penny.

Will my location affect me getting a mortgage with bad credit and 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 expert brokers we work with will research both the market and lenders available and present you with the most appropriate and affordable options for you.

Get in touch and see how the right advisor can help you.

Buying a buy-to-let property with bad credit

Borrowers with bad credit looking for a buy-to-let mortgage (or BTL mortgages) can be deemed as people with a having a greater risk of defaulting on their mortgage.

If you want a buy-to-let mortgage and have a bad credit score you'll most likely need to approach more specialist lenders since high street banks and lenders can have stricter and less flexible rules on BTL mortgages for customers with bad credit.

Interest rates may also be higher if you have poor credit.

Many lenders have a minimum income requirement of £25,000 per year and some prefer borrowers with prior landlord experience. If you meet these eligibility requirements, 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 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. While there are definitely fewer lenders willing to consider applicants with bad credit, with a deposit of 20% or 30%, applicants can be approved.

Also, there are other specialist lenders who, depending on your circumstances, might even ask for lower deposits between 15% and 20%.

Sometimes, the type of credit and the date of the missed payment or default can influence the chances of approval.

How to apply for a mortgage with bad credit

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 answer your questions help you find lenders you should consider and take you through the whole application process. There's no obligation, there's no additional marks on your credit rating and the service is entirely free, so it won't cost anything to get expert advice from an experienced and reliable advisor. 

Speak to a bad credit deposit expert today

If you have questions about what sort of deposit you might need for a mortgage or want to know what you might expect with your own bad credit situation, call 0808 189 2301 or make an enquiry.

We'll match you with an expert broker with knowledge and experience of successfully arranging mortgages for customers with bad credit history. The service is entirely free and there's absolutely no obligation or marks on your credit rating.

Updated: 28th August 2019
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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.