Bad credit mortgage broker
Bad credit spells bad news for lenders and even worse news for anyone looking to get a mortgage and sometimes if you have bad credit, most lenders won’t touch you with a 10-foot pole. If they do look your way, the interest rates on poor credit mortgages will be higher than someone with good credit.
The only way to get a competitive deal is through an expert bad credit mortgage broker. Loan Corp has access to specialty UK mortgage lenders who offer bad credit mortgages and are willing to take on the risk of financing your property loan.
This guide explores what a bad credit mortgage broker can do for you and why they’re your best bet if you have a bad credit score and credit problems.
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What does it mean to have bad credit?
When you take out a personal loan, mortgage, or any other form of credit financing, you enter into an instalment credit agreement with the lender to pay for goods, services, or assets at a later date.
The lender allows you to repay them in instalments on the condition that you make these payments at specific times with added interest, and as you may know, these are generally higher with bad credit mortgages.
When you don’t hold up your end of the bargain by failing to make these repayments on time, there’s a high likelihood that you will also fail to make timely payments in the future. This possibility of delinquency is reflected in the form of an adverse credit score in a credit report.
Lenders use this information to help them make better lending decisions. They analyse your credit history by checking how many credit commitments you have (also known as credit accounts), how much credit you have taken out in the past couple of years, and what accounts you have open.
They also check details of missed payments, mortgage repossessions, bankruptcies, and foreclosures you may have. All this information is available in your credit file, and that’s what they use to assess your existing financial situation.
Credit reference agencies (CRAs) use this data to calculate your credit score on a scale of 0-999. Any credit score under 580 is considered bad credit.
Individuals or companies with poor credit histories and credit ratings often have a hard time borrowing money, especially at competitive interest rates. Lenders consider this category of prospective borrowers riskier than those with sterling credit records and will have to apply for subprime mortgages otherwise known as bad credit mortgages.
What is a bad credit mortgage?
With that brief background on what it means to have poor credit, let’s first dispel some myths, shall we? The first is that mortgage companies don’t lend to people with bad credit; that anyone with a poor credit history shouldn’t dream of ever owning a home.
That’s a huge misconception. If there were any truth to it, Brits would be in big trouble.
Don’t get us wrong, having a squeaky clean and perfect credit record with a nice, shiny credit score is great since it opens many lending doors.
However, there are specialist lenders that identified a gap in the market and swooped in to give prospective bad credit borrowers a chance to own their own homes.
The flexibility in their criteria is designed to cater to borrowers who’ve been shunned by high street providers and are willing to offer bad credit mortgages.
If you have a debt management plan, have had arrears in the past, had a county court judgment (CCJ) entered against you, or have declared bankruptcy in the last six years, mortgage lenders automatically consider you a “high-risk” borrower. Most of them will immediately dismiss your application for a mortgage loan if your report mentions any of these issues, even if they’ve long since been resolved.
On the other hand, specialist mortgage lenders examine applications on a case-by-case basis. If you’ve acted in good faith by keeping up your repayment instalments and taking proactive steps to bump up your credit rating, there’s no reason why they wouldn’t approve you for a mortgage.
That, ladies and gentlemen, is what a bad credit mortgage is. It’s a mortgage specifically designed for individuals who’ve had difficulty keeping up with credit agreements in the past, which has, in turn, adversely affected their credit score.
How hard is it to get a mortgage with bad credit?
It’s not going to be a walk in the park. That doesn’t mean it’s impossible, either. Bad credit tells a lender that based on your past financial delinquency that there’s a good chance you might default on your repayments. Lending you money puts their capital at risk.
Specialist mortgage lenders look at the bigger picture. They have a higher-than-average risk appetite and consider several factors when assessing your mortgage application beyond just focusing on your credit score.
They analyse your credit report to identify what happened, why it happened, how long it has been since it happened, and what impact it has had on your overall financial position.
They then use this information to calculate your mortgage terms, such as the interest rate and loan-to-value (LTV) ratio.
They might give you a mortgage with a slightly higher interest rate to mitigate the risk you pose to them or perhaps ask you to put down a little more on the down payment on your home.
All things considered, that’s a small price to pay compared to getting your application rejected entirely.
How can a bad credit mortgage broker help?
Bad credit mortgage lending is a niche area of credit financing. These lenders aren’t your run-of-the-mill high-street financiers.
They target a very specific borrower demographic and are willing to look past your poor credit history to give you a mortgage at highly competitive rates.
Now, you might be thinking, “That sounds great and all, but where exactly do I find these specialist lenders?”
That’s where a bad credit mortgage broker comes in. They frequently deal with bad credit applicants, which is why they’re so good at what they do.
They will assess your current financial situation to help you find the right specialist mortgage provider offering the most competitive interest rate.
If you have bad credit because of any of the issues listed below, a bad credit mortgage broker can help you secure a loan.
- Bankruptcy
- No credit history
- Poor credit scores
- Asset or home repossession
- Late payments on credit cards or loans
- Missed or defaulted mortgage payments
- County court judgments (CCJs) entered against you
- Mortgages and individual voluntary agreements (IVAs) with a debt management plan
Like specialist mortgage providers, experienced specialist brokers aren’t easy to come by either, especially if you don’t know where to look. You need to leverage a resource that does all the heavy lifting for you.
Loan Corp is one such broker-matching service you can use. Our team of experts will quickly assess the specifics surrounding your particular credit issue and see if you are eligible for impaired credit mortgage requirements.
Once they do, they will connect you to an expert broker with decades’ worth of experience securing mortgages for borrowers with bad credit.
If you want to become a homeowner but your poor credit history is standing in the way of that, your best bet at getting a mortgage with competitive terms is by leveraging the broad network of providers that bad credit mortgage brokers have at their disposal.
They frequently deal with bad credit applicants even for self-employed poor credit mortgages, so they know which UK mortgage lenders are likely to approve your mortgage application.
Cost of bad credit mortgage brokers
A common misconception people have about brokers is that they are expensive. They erroneously believe that going to the lender themselves will get them a better deal.
The reality is that brokers have more bargaining power than individual customers when negotiating better terms and competitive interest rates with lenders. The fee range for most specialist mortgage brokers is between 1% and 3% of the mortgage amount. In most cases, this cost is covered by the savings derived from the competitive rates they get you.
It is worth noting that fees can be higher or lower depending on the complexity of your credit woes and your specific personal circumstances. It is part and parcel of the homeownership process.
A bad credit mortgage broker will only charge you a fee once they’ve secured a mortgage whose terms you’re pleased with. Those that charge a fee upfront will refund it if they don’t get you a mortgage deal you like.
That said, some brokers don’t charge borrowers any fees for helping them secure a mortgage. This is because they earn a commission from the lender once the mortgage is set up.
No fees? That sounds like a great deal, right?
Wrong.
The problem with this type of arrangement is that some brokers may recommend borrowers to a smaller pool of lenders. They’re also likely to recommend you to the lenders that pay them the highest commission rates. Nothing about that setup would be in your best interest.
Think about it. As things stand, you already have a hard time securing a mortgage because of your bad credit. This means that your choice of lenders is already limited.
The last thing you need is a broker restricting your access to the wider lending market, effectively denying you the most competitive terms on your mortgage.
Get expert help from a bad credit mortgage broker
Poor credit shouldn’t stand in the way of home ownership. There are plenty of speciality lenders willing to give you a mortgage. All you need to do is find them and we can do this for you.
Loan Corp can get you approved as experienced brokers who understand your specific credit situation and with loads of insider knowledge to help you secure a mortgage at the most competitive rate.
FAQ
Can you still get a mortgage with bad credit?
Bad credit history should not hinder you from securing mortgage financing. That said, your run-of-the-mill high-street financiers will likely not approve your mortgage application if you have a bad credit history.
However, niche bad credit lenders will likely approve you unless your credit file is seriously poor. If you have any judgements such as a CCJ you should settle them before applying for a mortgage.
Brokers specialising in bad credit mortgages have a pool of lenders they can link you with to get you started on your journey towards home ownership.
How much will a bad credit mortgage broker charge for their services?
There is no standard fee, although most brokers charge between 1% and 3% of the mortgage amount. Some brokers don’t charge the borrower any direct fees. Instead, they earn a commission from the lender once the mortgage is set up.
This arrangement may not be in your best interest since the broker will likely recommend lenders paying them the highest commission rates, even if their mortgage terms are exploitative.
Can I remortgage my home if I have bad credit?
A bad credit mortgage broker can connect you to a lender and help you overcome any credit hurdles you might be facing. They can help you remortgage your home for debt consolidation purposes, to pay off debt, or if you’re thinking of taking out a second charge mortgage.
They’ll ensure you’re getting the most competitive rates in the market from lenders willing to give you a manageable LTV ratio when remortgaging with bad credit history.
If you have bad credit and are looking for a mortgage, start your application online now to help secure your next mortgage.