Key Highlights:

  • You will have to increase your deposit size to improve approval rate.
  • Not all lenders will entertain your application despite a higher deposit size.
  • Broker matching service will help you get the best deal.

Getting a mortgage with poor credit rating is quite challenging undoubtedly. A mortgage is a very big amount. A lender cannot afford to sign off on your application if your payment record is not up to the par. Mortgages do not act like short-term loans – you will put your property against the loan.

Considering your affordability is the prime concern, otherwise you will lose your home. Of course, lenders give priority to your good credit standing, but it does not mean that you cannot apply for a bad credit mortgage.

To get a foot onto the property ladder, you need to have a deposit size amounting to 5% that goes up to 25% in case you have a poor credit rating, and the introductory period with fixed interest rate will be between two and five years.

How to get a mortgage with poor credit

When your credit score is not up to the par, the first question that pops up in your mind is “Is it possible to get a mortgage with impaired credit standing?” If yes, how to get a mortgage with bad credit.

  • Wait for taking out a mortgage

Blemishes on your credit report will lower down your chances of approval, but their impact becomes less serious over time, especially when your financial situation has improved.

Better financial circumstances generate hopes among lenders that you could afford to pay off. Previous defaults will keep showing up on your report for two years even if you have settled all your dues. At the time of applying for a mortgage, make sure that those blemishes have been two-years-old.

  • Examine your partner’s debt

A joint mortgage will increase the chances of your mortgage approval. Make sure that your partner’s credit report is better than yours. However, it does not mean you will not make efforts to ameliorate your credit  rating.

If your ex-partner have been linked to you financially and now you have nothing to do with them, get all your accounts de-linked. Your ex-partner’s late payments and misdemeanour can wreak havoc on your credit report.

Inform credit bureaus of your disassociation. Get your credit report to see your ex-partner’s defaults are not the bane of your financial life.

  • Convince your lender

Convince your lender that you have a good financial condition to pay down your mortgage. Lenders generally see your condition overall, not just your credit rating. If they find it good enough on balance, they will not turn down your application.

Bad credit mortgage carry higher interest rates despite a higher deposit. Therefore, you should talk to a mortgage broker who will match you with a lender that suits your budget.

  • Arrange a higher deposit

A higher deposit size will whittle down your loan-to-value, which means you will save money on interest and it will be much more manageable. Lenders generally want a deposit size between 20% and 25%. As you know your credit report is not stellar, you should start stashing away money.

  • Try to cut back on your regular expenses.
  • Pay all your bills always on time.
  • Do not apply for cash advances.
  • Stay away from overdrafts.

What if you have a CCJ?

Different lenders have different polices. As far it is about CCJ, the chances for approval are bleak. If any lender allows you to borrow money against your property, they will want it to be settled. Grounds for acceptance will vary from lender to lender. For instance:

  • Some will accept if a CCJ is at least one-year-old.
  • Some will consider if a CCJ is at least three-years-old and not more than £2,000.
  • Some will accept unlimited CCJ provided it is at least two-years-old.

Bad credit mortgage interest rates

You will have to search through the market to avail best interest rates. Of course, it will be higher than those with a good credit standing. Try to consult a reputed broker who will arrange a lender offering interest rates that suit your needs. Make sure that you choose a broker who does not charge fees.

It is possible to apply for a mortgage with a bad credit. Loss of poor credit rating can be compensated with a strong financial situation. If you are planning to apply for a mortgage, make sure that you have a higher deposit size, your credit score is not very poor, and try to convince your lender that you have the potential to afford a mortgage.

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