Some borrowers have more complex borrowing needs. These are some of the more specialist mortgages that are available.
Bad Credit Mortgages
Although getting a mortgage with bad credit can be difficult – especially if you have defaults, individual voluntary arrangements (IVAs), county court judgments (CCJs), or a bankruptcy in your credit history – it is possible.
All lenders will conduct a credit check on anyone applying for a mortgage. Many high-street banks may refuse to offer a mortgage if you have a bad credit history, but there are specialist bad-credit mortgage lenders who will be more flexible when assessing your mortgage application. However, the mortgage offered may mean you need to put down a larger deposit and be prepared to pay higher- than-average interest rates.
Alternatively, you may want to consider trying to improve your credit score before applying for a mortgage, in order to increase your chances of being accepted for a standard mortgage.
It pays to be cautious about applying for a mortgage if you think you might be rejected. This is because every time you apply for credit it is likely to be recorded on your credit history and unsuccessful applications can bring down your credit score.
An impartial mortgage adviser can make recommendations based on your own individual situation.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.
Expat Mortgages
Lenders generally consider expat mortgages to be higher risk due to the difficulty in assessing your financial stability. As a result, your choice of lenders and products will be restricted, and you should expect to pay a higher rate of interest than for a standard mortgage.
If your main source of income is earned overseas, it can be difficult for a lender to assess this accurately, due to fluctuating exchange rates. The lender may also find it hard to get relevant information to establish how secure your income is.
When applying for any type of mortgage, lenders will look at your credit score. For expats who may have lived abroad for some time, a credit history may not be available. The lender will therefore need to undertake other checks and you should be prepared to provide additional documentation.
It’s therefore important to get specialist advice if you are looking for an expat mortgage or expat buy-to-let mortgage.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up the mortgage repayments. The Financial Conduct Authority does not regulate some forms of Buy-to-Let mortgages.
Foreign National Mortgages
If you aren’t a UK citizen, you might still be able to get a mortgage,, although your choice of lenders and products will be restricted.
As is the case when applying for a standard mortgage, the lender will check your credit history, so you should try and build up your credit score by opening a bank account, registering to vote and paying bills on time. If you have recently moved to the UK, it might take a while to build up a sufficient credit score before a lender will consider your application.
Post-Brexit, EU citizens are no longer treated the same as British citizens. You will normally need to have lived in the UK for at least two or three years, have a UK bank account and a permanent job in the UK.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.
Ltd Company Buy-to-let
Many landlords now operate as a limited company for the purposes of buy-to-let (BTL). Operating in this way will have some financial benefits but is likely to restrict the choice of mortgages available.
With a reduced range of products, you need to choose the mortgage that is best for you. This isn’t just a question of opting for the lowest interest rate and cheapest monthly repayments. Like residential mortgages, buy-to-let mortgages need to be compared in terms of any extra fees that may be applicable, as well as additional benefits they offer.
Consulting an experienced, impartial mortgage adviser is advisable as they can provide expert advice on which product is best for your needs.
A Buy-to-Let mortgage will be secured against the property. The Financial Conduct Authority does not regulate commercial Buy-to-Let mortgages.
Portfolio Buy-to-Let
If you are a landlord letting out more than four properties, lenders will consider you to be a ‘portfolio landlord’
New affordability rules were introduced in 2017, which mean that portfolio landlords need to meet specific affordability rules for all properties they own, rather than the overall affordability of their portfolio, when applying for new finance.
However, some lenders use a method called ‘top-slicing’ when assessing your application. This allows the lender to take into account any additional income you have, apart from rental income, when they calculate what they are willing to lend you. Top-slicing is unlikely to be appropriate if you have little in the way of disposable income or savings and therefore do not have income to cover unforeseen events.
If you are already a portfolio landlord or you are aiming to grow your property portfolio, you could consider a portfolio mortgage which allows you to have the whole portfolio under one mortgage.
A Buy-to-Let mortgage will be secured against your property. The Financial Conduct Authority does not regulate some forms of Buy-to-Let mortgages.
Sharia Mortgages
Home purchase plans which comply with Sharia law allow you to buy a home without paying interest.
The lender buys the property on your behalf and is the legal owner. You then make monthly payments to the lender which are a combination of rent, charges, and capital repayment. No interest is payable.
At the end of an agreed fixed term you buy the property from the lender for
the purchase price they paid initially; you then become the sole owner of the property.
There are two types of Sharia mortgage:
Ijara or Ijarah
The monthly rent and capital payments are held by the lender to purchase the property at the end of the term, so your share of the property remains constant throughout the term.
Diminishing Musharaka or Musharakah
You and the lender own the property jointly, with separate stakes. The monthly rent and capital payments go to purchase more of the lender’s share. As your stake in the property increases and the lender’s decreases, your rental payment decreases.
Sharia mortgages are complex products that advice and since 2014 any lender offering these products must offer you an advised service. This involves an assessment of your finances and recommendation of a product only if is suitable and affordable. The advice also must assess whether a conventional mortgage is more suitable.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.