By admin 2020-10-15 11:41:55

Bad Credit Mortgages

Buying your own home has become a necessity, it is something that you probably plan to check off your bucket list. Everyone needs a home. If you have done your credit check and your credit score is not great. Well, the first thing you may ask yourself is whether you can get a mortgage approved with your poor credit score?

At the end of this article, you should understand how your credit rating affects your eligibility for a mortgage and be able to follow steps which could help you successfully apply for a home loan with your poor credit rating. As there are ways to show your lender that you would be able to pay off your monthly repayment charge or installments.

Most lenders rely on a good credit score in order for them to approve any loan or mortgage. If you have good credit, lenders see you as reliable to pay back your loans and of course if you have bad credit, they’re afraid to take a chance on you.

However there are mortgage lenders that are tailored for you, which are formally known as credit repair mortgages, and they help you improve your credit score. According to Moneyfacts, a comparison site, there are now 843 bad credit mortgages specifically aimed at people with poor credit scores, so trust that you are not alone.

How Do Bad Credit Mortgages Work? Pros and Cons

Bad credit mortgages tend to come with a much higher interest rate than for a good credit score applicant. The lender has an increased risk of the credit not being fully paid which are the reasons for the higher interest rates towards the applicant. Mortgages which focus on homebuyers who are at the extreme end of adverse credit include individual voluntary agreements (IVA’S), or bankruptcies.

While there is a rising number of mortgages specifically designed for people with bad credit, there are lenders that would give consideration to normal residential mortgages than to those with chequered histories. Depending on your reasons for financial difficulty or your individual circumstances. An example would be some lenders would view applications that are more favourable if illness, divorce or bereavement contributed to your difficulties.

Pros and Cons of Bad Credit Mortgages

Pros of Bad Credit Mortgages

  • Surprisingly more lenders are joining this market, which means you are more likely to find a deal that best suits your needs.
  • Provided that your credit is not severely damaged, you could recieve 95% to 100% LTV Mortgage.

Cons of Bad Credit Mortgages

  • A deposit of at least 35% will be needed if you have crippled credit history.
  • There are higher average rates on bad credit mortgage applicants.
  • A tendency of hefty fees.

Build Your Credit Score

Now that we know that lenders can consider providing you with a mortgage even with a low credit score, always remember your chances are even greater when you have a good credit score.

These steps can help improve your credit rating
  • Regularly check your current score. You can use platforms such as ClearScore, Equifax, Experian or Noddle, these platforms will help you understand and calculate your credit rating. Also make sure to check any errors and update your profile
  • Have a credit card with enough money. It will be used as a debit for monthly mortgage repayments. This could prove that you can be trusted to pay back your loans
  • Experian credit score offers you to pay rent via the Rental Exchange Scheme that will count towards it if you’re a rental payer.
  • Ensuring that you’re on the electoral roll will allow agencies to better track your history, quick and easy.
  • Applying for too much credit will alert your lenders that you’re in a financial difficulty.

Due to the COVID 19 pandemic, our lives have drastically changed and our finances. . According to Which? “on 15 July, the FCA confirmed how it wants the support to continue. From 17 July, credit firms must set out the following options to their customers experiencing financial difficulty due to COVID-19. Check if payments can resume: Firms should contact customers at the end of their first payment freeze to see if they can resume payments, and agree a plan on how to do so”. It’s important that you remember you signed a financial agreement when you took out a mortgage, and it is a major financial commitment. Should you fall behind your payment, your credit record will be greatly affected.Your home may be repossessed, so it is vital that you are sure that you can afford its repayments now and later in life.

Now that you know it’s possible to get the loan you need to buy a house, speaking to our credit experts at SmartMortgages UK can help you access our network of lenders who can consider you with your poor credit . Use our bad credit mortgage calculator and get a quote or speak to a credit expert today.

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