Can you Get a ‘Bad Credit Mortgage’?


Regardless of whether you’re a first time buyer, looking to move homes or you wish to remortgage, having bad credit may make it seem like it’s an impossible task. 

In this guide, we’ll talk through what a bad credit mortgage is, how to get one and how your credit can have an impact on your mortgage application.

Can you get a mortgage with bad credit?

Yes, you can get a mortgage even if you have a bad credit score despite many thinking and saying otherwise. Although it is harder to get a mortgage with bad credit, it isn’t impossible. 

When we talk about bad credit, it essentially means you have a low credit score. You can get a bad credit if you have:

What is a bad credit mortgage?

A bad credit mortgage is the same as a regular mortgage, except they come with higher interest rates and there could be a limit to how much you can borrow. Some lenders will also ask for a higher deposit of at least 20-25% rather than the standard 10%. This is because lenders will see you as a higher risk candidate.

Lenders won’t usually offer a bad credit mortgage as a product; instead, they’ll review applicants on a case-by-case basis once they have all the information they need on an applicant’s personal circumstances.

Why is it harder to get a mortgage with bad credit?

When you have bad credit, mortgage lenders become cautious as they will have worries that you cannot afford to pay the mortgage back. 

Your credit rating is one of the first things a lender will check when you apply for a mortgage, and a poor score can be an instant red flag for many lenders when assessing your affordability. 

Does having bad credit make your mortgage more expensive?

Having bad credit can make your mortgage more expensive as lenders will introduce higher interest rates for those who they deem “high risk”. 

To find the most affordable mortgage, you should be using the help of a mortgage broker who will look at your options and calculate which one would be the most financially sustainable. 

How to get a mortgage with bad credit

In order to get a mortgage with bad credit, there are a few steps you can take in the months before you apply to increase your chances of being accepted. 

Organise your finances 

Ideally you should postpone applying for a mortgage until you’re in a stronger financial position. In the meantime, you should build your credit rating back up by making repayments for loans, bills and credit cards. 

You should be aware that this is not a short term solution and it could take months, if not years to repay any debts. However, this will also give you time to save small amounts for your deposit and give you access to better mortgage rates in the future.

Save for a bigger deposit 

The higher deposit you have, the better your chances you have of finding a mortgage you’re eligible for. 

If you have bad credit, lenders will likely ask for a higher deposit of around 20%. This can be tricky to save for, but putting a small amount of your income away a month is a good place to start. 

Accept help from family 

If saving a larger deposit is a struggle, most lenders will accept a gifted deposit from family members. This can be a loan with no obligation to repay the money back. 

Speak to an advisor 

Our mortgage advisors will help you find the right mortgage product for your needs and help with your application. We have access to lenders and products that you may not be able to get as a direct borrower, with some specialist lenders offering specific products for those with bad credit. 

How do ‘bad credit’ mortgages work?

As we’ve mentioned, bad credit mortgages work exactly the same as regular mortgages. However, they do come with higher interest rates and lenders will likely expect borrowers to provide a larger deposit than normal. 

It is possible for those with poor credit scores to take out a mortgage with higher interest rates, with the aim of switching to a cheaper deal in the future once their credit score has improved. 

What can mortgage lenders see on a credit report?

Mortgage lenders will usually see the following on your credit report:

  • Your address and past addresses 
  • Financial credit agreements, such as loans and credit cards. This includes any missed or late payments
  • Public records, such as CCJs and bankruptcies
  • Financial associates 

Data on your credit report does not include your employment history, savings accounts, criminal records, medical records, ethnicity, religions or any political affiliations. 

How far back do mortgage lenders look at credit history?

Mortgage lenders will be able to see the last six years of your credit history, including any missed payments or defaults. 

Generally speaking, lenders are less likely to rely on older data and pay more attention to how you’ve managed your money over the past few years. 

What documents do you need to apply for a mortgage with bad credit?

Gathering all of your documents will help to speed up your mortgage application and beat any avoidable delays. 

Lenders can ask to see any of the following:

  • Your payslips for the past 3 months, or if you’re self employed, the last 2-3 years of business accounts or tax returns
  • Your bank statements for the past 3 months
  • ID documents, such as passports and driving licences
  • Proof of address through things such as utility bills

Pros and cons of a bad credit mortgage

Like every other type of mortgage product, ‘bad credit mortgages’ come with their own set of advantages and disadvantages. 

Pros of bad credit mortgages:

  • It could improve your credit score – Showcasing that you can manage your finances is vital when looking to organise any new large finances. Owning a home and being able to keep up with the repayments can help to improve your credit score and assist with any future borrowing needs. 
  • You’ll become a homeowner sooner – Opting for a bad credit mortgage can help you get on the property ladder sooner than if you were to wait and pay back your debts. 
  • You may be able to get a better mortgage rate when your credit score increases – If your credit score improves, when you are ready to remortgage, you will likely be able to secure a better rate.

Cons of bad credit mortgages:

  • You’ll need a larger deposit –  Lenders will usually want to see a higher deposit of around 20-30%.
  • You will likely have higher interest rates – In the eyes of the lender, you are a high risk borrower, resulting in higher interest rates.
  • Your choice of mortgage lenders is reduced –  There are less lenders who are willing to offer to high risk borrowers.
  • If a lender turns you down, it may cause your credit score to decrease further – This could make things much harder for you to build your score back up again.

Can you increase your chances of getting a mortgage if you have bad credit?

Yes, there are a few different ways to increase your chances of getting a mortgage if you have bad credit. 

  1. One of the first ways is to get a mortgage with a guarantor. Your guarantor must be able to meet your mortgage repayments if you can’t. However, this can be risky as if your guarantor is unable to meet the repayments, their home or savings could be at risk. 
  2. Another way to increase your chances is by speaking to our expert mortgage advisors who will help you to find the best mortgage for you. We will approach a range of different lenders who offer products for those with bad credit scores and find one that is most likely to accept you given your circumstances. 

You can get in touch with our mortgage advisors today to find out more on how we can help you.

Can you remortgage with bad credit?

Yes, it is possible to remortgage even if you have bad credit. Mainstream lenders do prefer those who have good credit scores, but there are specialist lenders who will approve people with all types of credit history in a variety of different situations.

About the author 

Gary Oxborough

Gary is the Founder and Director of Barlow Irvin Financial Services Ltd. He has been in the Finance industry for over 20 years and has specialised in Mortgages since 2003. As well as running the firm, he is still actively involved in advising clients.

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