How Many Mortgage Lenders Offer Bad Credit Lending?
Over the past few years, the market for lending to low credit score applicants, or those with bad credit mortgages, has increased dramatically. This means there is now a much better chance of securing a low-interest mortgage with a poor credit rating than ever before.
There are also specific bad credit mortgage products for low credit score borrowers, designed to be lower-risk and affordable.
Some of the most significant changes to bad credit mortgage interest are:
- Applicants with any number of CCJs can now secure a higher loan to value (LTV) ratio.
- Those with a discharged bankruptcy also have a wider choice of higher LTV lending.
- Homebuyers with minor credit issues can usually secure interest rates comparable with those available on the high street.
Which are the Best Lenders for Bad Credit Mortgages or a Mortgage With a Poor Credit Rating?
The best bad credit mortgage lender for you depends on your circumstances, borrowing requirements, and the property you wish to purchase.
Every lender has different criteria, and the bad credit mortgage terms you might be offered on a mortgage with a poor credit rating will change significantly depending on whether you have some minor credit score issues, a clean credit rating, or multiple problems on your credit file.
Bad credit mortgage lenders don't just consider credit scores, but also look at:
- Earnings - how much you earn, whether you are a PAYE salaried employee or self-employed. Specialist lenders will also consider non-regular income such as dividends, commission, benefits and bonuses.
- Age - some lenders are happy to lend to borrowers of any age, whereas others have a maximum age of 75 and others of 85. Niche lenders are happy to lend to applicants of any age provided they can demonstrate affordability.
- Property - standard properties are always easiest to borrow against. Non-standard houses, such as those with a thatched roof, or a timber frame, are best mortgaged through a specialist lender.
- Deposit - the higher the deposit, the more lenders you can apply to. Bad credit lenders will usually require a higher deposit than mainstream lenders.
How Can I Get a Low-Cost Mortgage With a Bad Credit Score?
The best way to get a cheap mortgage with a poor credit rating is to work with a whole-of-market broker such as Revolution Finance.
We work closely with bad credit mortgage lenders to have an in-depth understanding of which applicants they will lend to, and what other criteria apply.
If you can meet all of, or most of, those criteria, you have a much better chance of a successful outcome.
Contact the Revolution team today, and we will get the ball rolling to secure the bad credit mortgage lending you need at the lowest rates.
What Deposit Do I Need for a Mortgage With a Poor Credit Rating?
Typically, the larger your deposit, the better the bad credit mortgage interest rates you will be offered. A lower LTV ratio means that the lending is lower risk, and therefore a lender can extend an offer of a lower rate on a mortgage with a poor credit rating.
LTV means the size of the borrowing as a proportion of the value of the property.
So, for example, if you want to purchase a property costing £100,000 and have a £25,000 deposit, you are looking for a mortgage with a 75% LTV ratio.
Average LTVs on a mortgage with a poor credit rating tend to be around:
- 95% as a maximum for a residential mortgage.
- 85% as a maximum for a buy-to-let mortgage.
- Sometimes the maximum LTV is higher for a bad credit mortgage.
Generally, your deposit requirements will be:
- 5-10% for a bad credit mortgage with a poor credit rating but minor credit issues, particularly if they are small, happened around 2-3 years ago, and you meet all other criteria.
- 15% or above for more serious credit score issues, such as lots of defaults, CCJs, or credit which is significantly in arrears. Sometimes if these issues occurred several years ago, they will have less of an impact on your bad credit mortgage terms.
By offering the maximum deposit you can offer, the lower the risk to the bad credit mortgage lender, and usually the better the interest rates you will be provided on a mortgage with a poor credit rating.
How Do Different Credit Issues Impact My Bad Credit Mortgage Interest Rates?
Bad credit mortgage lenders consider some types of credit problems more severe than others. Below are the most common low credit score problems, listed from the least serious to the more severe.
- Having no credit history at all - never having used any borrowing
- Low credit score
- Late payments on your credit file
- Mortgage arrears against past borrowing
- Defaults or CCJs
- Debt management plans
- IVAs, bankruptcy or property repossessions
Should you have a more serious adverse credit history, you can still achieve bad credit mortgage with a poor credit rating lending.
Revolution Brokers work with a broad network of specialist and bad credit mortgage lenders who are used to lending to applicants with low credit scores or bad credit history.
Give us a call on 0330 304 3040, and we will be happy to walk you through the best options.
Is There a Limit on How Many Credit Issues You Can Have to Get a Mortgage?
This depends on what sort of issues you have experienced, and how long ago they were.
It is undoubtedly easier to secure a mortgage with a poor credit rating if you have few bad credit marks than if your credit file shows multiple adverse credit issues.
Usually, the more poor credit history you have, the larger a deposit you will be asked to put down, or the higher the interest rates offered to offset the risk.
When Applying for a Bad Credit Mortgage With a Poor Credit Rating, Does the Type of Credit History I Have Make a Difference?
It does, yes - credit reports look at the history of all borrowing over the last few years. The circumstances will matter if you need a mortgage with a poor credit rating, for example:
- Multiple credit issues that happened at the same time but have since been resolved indicate a one-off event.
- If you had a clean credit score beforehand, and have kept up to date since, this demonstrates an ability and commitment to avoid such issues recurring.
- Where there are extenuating circumstances that caused the credit issues, these should be explained, as a bad credit mortgage underwriter may be able to consider that.
How Does the Time Elapsed Since My Adverse Credit History Impact My Bad Credit Mortgage Application?
The length of time since adverse credit history reports on your credit score makes a significant difference when applying for a bad credit mortgage with a poor credit rating.
In some cases, if a bad credit issue occurred more than six years ago, it will be outside of the scope of the credit report and won't be considered at all.
Many high-street lenders will automatically reject any applicant looking for a mortgage with a poor credit rating and a history of bankruptcy. In contrast, others will set a minimum time that has passed to be able to consider the application - in some cases, this is three years, and in others as little as one year.
Can I Apply for a Mortgage With a Poor Credit Rating and Ongoing Issues?
You can, although the interest rates offered on a bad credit mortgage would depend on any outstanding credit issues that have yet to be resolved.
Revolution Brokers work with bad credit mortgage lenders who will consider lending to applicants with bad credit, but only when outstanding issues have been settled. If there is a relatively short period still outstanding, it is preferable to wait until old accounts have been cleared to apply for a new bad credit mortgage.
Ongoing issues will also impact the value you can borrow through a bad credit mortgage with a poor credit rating since the repayments will affect the affordability assessment.
For example, if you have defaulted on your credit file against accounts to the value of £10,000, this will be deducted from your income to arrive at disposable income in the same way as if you have a £10,000 credit card loan outstanding.
We work with niche bad credit mortgage lenders who are less concerned with whether credit issues remain ongoing, than in when the debt was initially registered. If, since the problem began, you can demonstrate having kept up with repayments, then the adverse credit history may be disregarded in the offer made.
Bankruptcy and repossessions are perhaps the most serious of adverse credit issues since these will usually be considered dependent on the discharge date.
Many lenders will require any outstanding debts to be repaid before they will consider a new mortgage application.
What Will the Interest Rates Be if I Need a Mortgage With a Poor Credit Rating?
For bad credit mortgage applicants with adverse credit history, the best lending is always going to be through a specialist lender who is experienced in dealing with this sector.
However, applicants with an excellent credit score who have not experienced problems with their credit score may have an application rejected - this can be for any number of reasons, such as:
- Not having any, or a sufficient, credit history if they haven't used borrowing before.
- Having a high debt to income ratio where other borrowings or living expenses are considered too high.
- An uncertain income through self-employment, a varied work pattern, working irregular hours or being in a new job.
- Having moved multiple times and had several different addresses in the last few years.
- Not being registered to vote on the Electoral Roll.
A lot also depends on the appetite for lending from the particular bad credit mortgage provider. Each has their eligibility criteria, so if you apply to the wrong lender, an application may be refused immediately that another would have been happy to consider.
For help finding the best bad credit mortgage rates whether you have a low credit score or have been rejected for a mortgage because of any of the circumstances above, contact Revolution Brokers on 0330 304 3040.
