Bad Credit Mortgage Pro's & Con's

When considering an application for a mortgage, lenders take many factors into consideration - including age, income and the risk involved.

Borrowers who have repaid previous loans, on time and in full, will have no problems finding future lenders who would be willing to accept their mortgage application. But those who have a history of missed loan payments and have multiple unpaid debts will find many of their applications being rejected.

The lenders that do consider bad credit cases tend to adjust their interest rates accordingly. This means you may have to pay higher interest rates on your mortgage. However on the positive side you get a home to live in or to let out that belongs to you, and if you repay you mortgage back as required by the lenders agreement, after three years your credit history will have benefited considerably.

It's all about climbing the ladder from bad credit history and no property at the bottom, to positive credit history and ownership of property at the top.

Why apply for a bad credit mortgage?

As with most things, there are different degrees of bad credit. Lenders will look into your credit file and place a rating on how seriously your past will affect the chances of your mortgage application being accepted.

The amount, and severity, of arrears defaults and CCJs contained within your file will determine which of the categories you are placed in, and therefore which type of mortgage you can apply for.

The categories, similar to school grades, range from A minor to D. Having accrued minor debts, usually totalling less than £500, will place borrowers in the A minor category. Although the services of a sub prime lender may still be required, people in this category should have no problem finding a bad credit mortgage, with their credit rating returning to normal after three years. At the other end of the scale the borrower who has consistently failed to meet repayments on time, have had their previous property repossessed and declared bankruptcy will find themselves rated as D credit. People in this category may find it extremely difficult to get a mortgage of any sort, and will pay high rates of interest.

Your home may be repossessed if you do not keep up repayments on your mortgage

The More Group Ltd is authorised and regulated by The Financial Services Authority
FSA Firm Registration Number: 300817