Bad Credit Mortgages UK - What You Need To Know
Dealing with mortgages can be tricky, especially if you're also currently wrangling with a bad credit score. But fear not, there are a lot of mortgages out there that you can get approved for if you just know exactly where to look.
But first, let's make a few things clear- "bad credit mortgages" do not actually exist. There are no mortgages that are specifically catered towards borrowers with bad credit. What does exist are lenders who are willing to offer standard mortgages to people who might have otherwise be turned down by other lenders.
These mortgages that the former type of lenders offer to the general low-credit-score public are also known in the industry as "adverse credit mortgages" or "sub-prime mortgages." They can be a great way for people with sub-standard credit ratings and histories to get back on track.
How Do I Know If I Have a Bad Credit Score?
It's hard to transact with lenders and/or lending companies if you're personally not in touch with the extent of your credit issues.
But the thing is, credit score calculation varies a lot from one bank or credit firm to another. And even then, the score by itself will not make much an impact on lenders' decisions regarding your mortgage applications- it's your history and the different information stored in your credit file will.
With that said, here are some of the things that can contribute in lowering your "score" in the eyes of lending firms:
*Past declined credit applications
*Not being a registered voter
*Payday loan information, if any were availed in the past
*History of missing out on credit payments
*Existing court records, if any
*Records of bankruptcies, defaults, CCJs (county court judgment) and IVAs (Individual Voluntary Arrangement)
How Exactly Do Bad Credit Mortgages Work?
In most respects, sub-prime or bad credit mortgages are similar to standard mortgages. Their only difference is that these type of mortgages often have higher interest rates and bigger charges than norma.
But why? For one, lenders and loan providers aren't that inclined to give you larger loans if you have a sub-standard credit score (or if you credit history isn't that spectacular). This is the reason why bad credit mortgages also involve needing to shell out a deposit first before acquisition. The deposit's amount usually ranges from anywhere between fifteen to twenty percent of the property's total amount.
Lenders' risk are somehow mitigated by the higher interest rates and extra charges that come with the sub-prime mortgages.
How To Get a Mortgage When You Have Bad Credit
- Acquire your credit files to know exactly where you stand in the eyes of lenders.
- Get brokers who are reasonably-priced and know what they're doing. There are brokers out there who specialize in helping people with bad credit get their needed mortgages.
- Repair your credit score. If you want a long-term solution, make steps to improve your credit score. Pay your bills on time, close credit accounts you use, and generally just be a better borrower and you'll be set.