Whether you’ve been late with payments with your credit card, have had an outstanding debt for a while, or have been awarded a judgment in County Court, there is still a way for you to get a mortgage if you would like to buy property. A bad credit mortgage is expressly for those who have problems with or have had problems with their finances, especially when it comes to their credit rating. This is a solution that not many people want to take advantage of, but it’s there, nonetheless – and it can help you if you really want to own property but are worried about your credit score and getting a mortgage in the ‘regular’ way.
What is it?
Basically, a bad credit mortgage is just as its name implies – it’s a mortgage given to individuals who may have difficulties getting approval for a standard mortgage due to their credit rating. A bad credit mortgage is technically referred to as an adverse credit mortgage or a sub-prime mortgage, and it can help those who have a low or poor credit rating and history get the home they want. What you should bear in mind, though, is that a bad credit mortgage may have a higher interest rate than other types of mortgages, and the charges may be higher as well. The good news, however, is that if you get a bad credit mortgage, there is a way to revert it to a regular mortgage after a few years of on-time and correct payments.
The important facts
There are other important facts you should know about bad credit mortgages. One is already mentioned; it will often have a higher interest rate and higher charges. Another fact is that the deposit required may be higher as well (normally at 15% of the value of the property but sometimes less). Furthermore, a bad credit mortgage may not be used in conjunction with government programmes or schemes such as Shared Ownership or Help to Buy. If you have been declared bankrupt in the last six years, your application may not be accepted unless you can show that your credit record is cleared and no longer has any defaults. Of course, you will still need to show evidence of regular income.
Do you know if you have bad credit?
Before you apply for a bad credit mortgage, however, you need to make sure that your credit is really impaired. If you have been bankrupt or you have missed a number of loan, mortgage, or credit card payments, then your credit score may be low. Additionally, if you’ve had a judgment from the County Court, as mentioned, then your credit rating may be affected as well. To confirm your bad credit rating, check your credit report; there are a number of organisations which can help you with this, and they charge a minimal fee.