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Complete Guide to Mortgages |
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Adverse Credit Mortgages
Area range of
specialist products designed to help people with poor
credit history to get on the property ladder as if you've
previously incurred mortgage or loan arrears, had a County
Court Judgement (CCJ) issued against you for unpaid debts
or been declared bankrupt, you may struggle to find a
conventional mortgage.
Formerly only available through specialist lenders, more
lenders are now offering adverse credit mortgages in
recognition of the fact that having had financial
difficulties in the past is no indication of your ability
to repay a mortgage today.
The
Market:
There are
varying degrees of poor credit and the adverse credit - or
sub-prime - market reflects this. Different lenders have
different terms for these kinds of specialist mortgages
but impaired, sub-prime, non-conforming and adverse all
mean essentially the same thing but rates vary according
to the severity of your previous credit problems.
For example, light adverse mortgages are designed for
people who are just on the edge of the adverse credit
market. The rates and LTV are consequently lower than for
those with poorer credit histories to reflect the
differing level of risk to the lender.
Rates
and costs:
Interest
rates do tend to be higher for adverse credit mortgages
because the lender is taking on a higher risk with someone
who has had previous financial problems.
Competition between the increasing number of lenders that
have joined the market means that rates are getting closer
to the standard variable rates but adverse rates aren't
ever likely to be wholly competitive. Equally, redemption
penalties still exist but are gradually coming into line
with high street products.
You will, however, need to put down a bigger deposit than
with a conventional mortgage - 30% and 35% deposits are
quite common requirements for heavy adverse credit
mortgages but we may get you a deal with 5% and 10%.
Assessment:
Most
adverse credit lenders employ specialist underwriters
rather than an automated credit scoring system to assess
your case individually. What they are concerned about is
assessing whether you can afford the repayments in the
future - rather than being hung up on you not affording
them in the past.
They will also look at the reasons for your poor credit
history and take these into account. For example,
if you fell behind with your payments because of a divorce
and then got yourself back on track, you are more likely
to receive a favourable reception than if you consistently
run up large debts.
You will be asked to provide full details of your finances
as well as proof of income and some proof of recent loan
or mortgage repayments that will help the lender to assess
the severity of the credit problems and any potential risk
involved.
Credit
repair:
if you
have stayed with your lender for a period of time (usually
around three years), successfully made your mortgage
repayments over that time and have no outstanding defaults
or CCJs you should have 'repaired' your credit rating.
In effect what this means is that you should be able to
remortgage to a standard mortgage through your existing
lender or another provider - obviously allowing for any
tie-ins and redemption penalties. Generally, this should
be as simple a process as remortgaging from any standard
product to another.
Some lenders offer credit repair mortgages that help you
to improve your credit status and reward regular
repayments. Over a period of years, your annual interest
rate is reduced and ultimately reverts to the lender's SVR,
providing you have maintained a spotless credit record
throughout that period.
Who
qualifies?
You don't
have to have CCJs against you to run into problems with
even simple credit checks and then be refused a
conventional mortgage; it can be very minor and
commonplace things. Some of the other reasons for refusal
can include:
Not having your own credit record if you have
lived abroad for a number of years or are recently
divorced
- Running into financial problems as a student
- Paying a bill late
- Failure to appear on the electoral roll
- Incomplete work or income history
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Whatever Your Circumstances.....
We Can Help. Apply Today, why delay?
Your home is at risk if you do not keep up repayments on a mortgage or
other loans secured on it. Written quotations available on request
subject to status.
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respected companies.
Mortgage-Plus is a licensed credit broker.
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