Is It Possible to Get a Good Mortgage Interest Rate with Poor Credit?
Every mortgage lender offers different rates, and these can change very quickly.
The best way to get a great interest rate is to understand the criteria of the lender you're looking to apply to - including both their eligibility and affordability requirements.
Once you are assured that you meet the requirements, you can apply for a mortgage in confidence and be in a strong position to negotiate better terms.
Revolution Brokers work with thousands of clients who have a low credit score or adverse credit history. We analyse your circumstances, recommend the lenders we know will be happy to lend to you and submit your application documents to meet all the criteria.
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, has increased dramatically. This means there is now a much better chance of securing a low-interest rate than ever before.
There are also specific 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?
The best lender for you depends on your circumstances, borrowing requirements, and the property you wish to purchase.
Every lender has different criteria, and the terms you might be offered will change significantly depending on whether you have some minor credit score issues, a clean credit rating, or multiple problems on your credit file.
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 is to work with a whole-of-market broker such as Revolution Finance.
We work closely with 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 mortgage lending you need at the lowest rates.
What Deposit Do I Need for a Mortgage with a Low Credit Score?
Typically, the larger your deposit, the better the 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.
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 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% with minor credit rating 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.
By offering the maximum deposit you can offer, the lower the risk to the lender, and usually the better the interest rates you will be provided.
How Do Different Credit Issues Impact My Bad Credit Mortgage Interest Rates?
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 mortgage lending.
Revolution Brokers work with a broad network of specialist 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 mortgage lending 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 Mortgage, Does the Type of Bad 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 of these bad credit ratings will be considered, 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 an underwriter may be able to consider that.
How Does the Time Elapsed Since My Adverse Credit History Impact My Mortgage Application?
The length of time since adverse credit history reports on your credit score makes a significant difference when applying for a mortgage.
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 with 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.