The Lowdown on Bad Credit Mortgages

If you’re pondering how to get a mortgage with bad credit, then you should skip the larger high street banks and instead look into the deals offered by specialist bad credit mortgage lenders and building societies. They are sometimes called adverse credit or subprime mortgages and work in basically the same way as traditional mortgages. Lenders will study your credit record and evaluate your ability to cover repayments on the mortgage by looking at your income, outgoings and overall financial situation.

For consumers who are curious as to how to get a mortgage with bad credit, it’s a good idea to compare as many deals as possible to identify the cheapest rates. This bad credit mortgage comparison lists a number of specialist mortgage providers that may be prepared to accept you. Speaking to a broker or financial adviser could boost your chances, since many bad credit mortgages are only available through them. Use this form to identify a mortgage broker. Remember that your credit record will affect the cost of the mortgage.

Unfortunately, bad credit means you will almost certainly have to pay more to get a mortgage. Specialist lenders that are willing to accept you will typically charge more due to the perceived risk of you missing payments in future. These higher costs include a higher interest rate (APR), higher fees for taking out the mortgage at the beginning, as well as extra fees charged by the broker if you decide to use one. If you’re struggling to secure a mortgage, it’s advisable to wait for a few months before you apply again. In the meantime you can work on improving your credit rating.

Since the 2008 recession it has become harder for consumers with bad credit to obtain a mortgage. To improve your chances of acceptance, you could try saving for a bigger deposit (bad credit mortgages can require a 20-30% deposit instead of the usual 5-10%). Many lenders will accept a deposit that is gifted from a relative, but it cannot be a loan. The relative will need to sign a form declaring the conditions under which they’re extending you the money – for instance, whether they plan to reside at the address in future, or if they want to own a share of the property.

If you’re struggling to obtain a mortgage due to bad credit, a family member may be willing to be named as a guarantor. This is a serious move, since you and your guarantor will be tied to each other financially for some time – and it could have repercussions for both of your credit ratings. The guarantor would have a charge fixed against their own property, meaning that if you default on your regular payments then the guarantor could be held liable. Finding a guarantor doesn’t remove the need to be credit checked either.

Identifying the right mortgage deal when you have credit problems may be tricky, so it’s always a good idea to speak to an adviser. Get in touch with Mortgage Experts Online and we will see what we can do for you.

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