Bad Credit Mortgages
There is no real difference between bad credit mortgages and regular loans in terms of the way the products work. Both of them give you the chance to borrow a large sum of money over a long period of time to buy a property. Both can take different forms and can come with various introductory deals (i.e. fixed, variable and tracker rates). But, there are a couple of other major differences – whether/where you can get a loan and how much it will cost you.
If you have bad credit, you might not get approval from some high street lenders at all. If your problems are minor, you may be able to borrow if the lender takes a lenient stance but you may not qualify for the best deals. If you have to go outside of the high street to get a loan because you have bigger issues, then you might not have any choice but to find a lender that deals in the bad credit or sub-prime sectors. You may stand a better chance of approval, but you will pay higher interest rates most of the time.
Lenders will check out how you’ve managed your money in the past during the application process. This is all about how much risk they will take by letting you borrow. Most basically want to deal with people who have managed their money well, who have used credit responsibly and who have not had any hiccups (minor or major). If you don’t tick these boxes, you look like being more of a potential risk – who’s to say you won’t run into problems again? So, if your credit check throws up problems, your application may be denied or you may end up paying higher rates than you thought you would.
There are lenders who will buck this trend. A lot of this depends on the severity of the problems you’ve had. If you have had a significant problem in the past, such as bankruptcy for example, then your options may be limited to companies that specialise in the bad credit lending sector. If you’ve had minor blips, such as a couple of missed payments or something that you can explain away, then you may scrape into a mainstream lender’s good books.
Most sub-prime mortgages will come with higher interest rates to mitigate the additional risk you pose. If you think you may have issues affecting your credit (it’s always a good idea to look at your credit score before you start applying) then it might be worth talking to a professional to get advice specific to your circumstances.
What you don’t want to do is to apply for a high-street loan only to be turned down. This could affect how other lenders view you in the future. It’s not that they can see you’ve been rejected but they can see ‘footprints’ that other lenders leave. Too many of these can put some of them off. A reputable broker will be able to help you assess if you have issues that are likely to cause a problem and, if so, they may also be able to direct you to lenders who will help you regardless.
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