Even if you have a bad credit rating, you may be pleasantly surprised to know that there is a whole sector catering specifically for you. There are brokers who specialise in clients with adverse credit, and can help you find a mortgage deal.
You will probably find that you will have to pay more interest than you would on other mortgages – if you have a poor credit history you represent more of a risk to the lender. Ironically, this is the reason why the ‘bad credit’ sector is flourishing – there are a lot of people who wouldn’t fit the stringent criteria applied to most traditional mortgages, and there’s good money to be made in commissions and on higher interest rates.
Tread Carefully
Unfortunately, there are many disreputable lenders out there trying to capitalise on the unwary borrower. Some will charge you just to make an application – and you are likely to find the deals on offer less than wonderful. A good way to find a reliable lender is by word of mouth – or check www.mortgagesorter.co.uk for suggestions. www.yourmortgage.co.uk also offer information on credit impaired mortgages, along with some providers who will consider lenders who’ve been turned down in the past.
Recently, some of the mainstream banks and building societies have taken a closer look at the bad credit market, and realised they could be missing out on custom. There are subsequently around a dozen lenders that offer ‘sub-prime’, ‘credit impaired’ or ‘complex prime’ mortages. Yet another term is ‘non-conforming’.
Complex prime deals are tailored more for unusual cases that do not fit the normal requirements for a mortgage – some businessmen or pensioners who receive an income from shares or pensions for example, would be turned down by a mainstream lender and may have to look for a complex prime deal. You should still be able to find a choice of the usual deals, such as fixed rate, capped, or discounted mortgages.
Your credit rating can be classed as light, medium or heavily adverse – depending on the type of problem and the amounts owed. Debts that affect this include defaulting on loan payments, mortgage arrears, bankruptcy and CCjs.
The good news is that after around three years of sticking with a sub prime mortgage deal, your credit rating is likely to have improved. You could then remortgage in the mainstream market, finding a lower rate.
Joseph Kenny writes for the Loans Store who can offer cheap loans to UK residents and other loan types including secured loans.
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