Bad credit mortgage Scotland

Bad credit mortgages in Scotland – We can get you approved today

If you have a poor credit history and live in Scotland, you need to know that mortgages work differently here. It’s not just because there are fewer lenders compared to other regions in the UK but also because the mortgage process has some unique features.

This guide explores how the bad credit mortgage in Scotland process works, what makes it different from the rest of the UK, and what Scottish lenders look at when assessing your mortgage application. Read on for all the information you need about bad credit mortgages in Scotland.

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Is it possible to get a bad credit mortgage in Scotland?

If you have a poor credit history, you can still secure a bad credit mortgage in Scotland. Unfortunately, you’ll have a limited number of lenders to choose from compared to someone with a good credit rating or living in another part of the UK outside Scotland.

Having a smaller pool to choose from might restrict your access to competitive mortgage rates and deposit requirements.

What type of bad credit issues can impact your mortgage eligibility? Here are some common ones.

Mortgage arrears

In most cases, Scottish lenders will still review your mortgage application despite having mortgage arrears on outstanding debt. However, there’s a limit to what they’ll accept.

A maximum of three months’ worth of arrears in 24 months is considered acceptable. Anything higher than that might make it harder for you to get approved for a property loan.

Defaults

To default means you stopped making the required repayments on a mortgage, loan, or any other unsecured debt. Scottish lenders will only consider your application for bad credit mortgages if you settle the outstanding amounts on the open accounts in your credit report.

Few lenders would approve your application while your open accounts remain in default. It significantly reduces the number of lenders willing to fund you from an already-limited pool of mortgage companies in the region.

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Decrees

A decree is a court order compelling you to pay a specific amount of money to a creditor. Decrees have no expiry date and will appear on your credit report until they are paid off.

Applying for a bad credit mortgage in Scotland with an unsatisfied (unpaid) decree on file will significantly reduce your prospects of getting approved for a property loan. Few lenders would be willing to offer a mortgage to someone with a decree. Others are slightly lenient and may consider a mortgage applicant with between one and three unsatisfied decrees.

Debt management plans

Most mainstream lenders won’t even look your way if you’re currently on a debt management plan. On the other hand, a specialist lender with a high-risk appetite may approve your mortgage application if you meet specific criteria.

Trust deeds

A trust deed is a voluntary but legally binding contract between a debtor and their creditors to pay back a portion of what you owe them based on what you can afford. Any borrower currently settling outstanding debt under the terms of a trust deed has a very limited number of lenders to choose from.

It is worth noting that even after you finish paying it off, most mortgage lenders have a three-year waiting period from the discharge date, after which they may consider a bad credit mortgage application. Others have a longer waiting period that may run for as long as six years after the discharge date.

Sequestration

At the time of this publication, there is just one mortgage lender in Scotland that would consider an application from someone with one year of discharged sequestration (bankruptcy).

Depending on the lender, this period could be between 1 and 6 years. The longer the post-discharge period is, the higher your chances of securing a mortgage.

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How hard is it to qualify for a bad credit mortgage in Scotland?

The property prices in some regions of Scotland are very low. Prospective borrowers would, therefore, require smaller mortgages which are far easier to qualify for. More often than not, we’ve found it much easier than other parts of the UK.

That said, lower property prices might not always be a good thing. Some homes are very rural, making them less attractive to the lender since it would be difficult to sell if they repossessed it for non-payment.

Differences between Scottish debt solutions vs the rest of the UK

As mentioned, Scotland has significantly fewer bad credit lenders than other parts of the UK. For this reason, if you’re considering securing a mortgage with a lender outside of Scotland, it might help to familiarize yourself with the differences in the terms used to describe various debt solutions and how they work.

Debt arrangement scheme vs debt management plan

The Scottish government runs the debt arrangement scheme (DAS) as an alternative to a debt management plan (DMP) available in other parts of the UK.

The DAS is designed to give individuals enough time to settle their outstanding debts and, unlike a DMP, freezes interest and prohibits creditors from calling you incessantly.

Decrees vs CCJs

A decree in Scotland is known as a county court judgment (CCJ) in other regions. They are formal orders issued by the court compelling a debtor to repay monies owed to a creditor.

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Sequestration vs bankruptcy

In Scotland, the insolvency process is known as sequestration. The rest of the UK calls it bankruptcy. The sequestration process in Scotland is governed by the Insolvency (Scotland) Rules of 1986.

It is currently being amended to align with the Insolvency Rules of 2016 enacted across other parts of the UK.

Trust deeds vs IVAs

A trust deed is a Scottish version of what the rest of the UK refers to as an individual voluntary arrangement (IVA). Both are formal, legally binding agreements by a debtor to pay off unsecured debts to their creditors at a manageable rate within an agreed-upon timeframe.

How is the mortgage process in Scotland different from the rest of the UK?

The mortgage process is largely the same in both markets. The only differences are about stamp duty and how property surveys are carried out.

Stamp duty

The Scottish government levies Land and Buildings Transaction Tax on all property transactions. The rest of the UK has Stamp Duty, which is significantly more expensive than its Scottish equivalent. Fortunately for you, if you’re buying land in Scotland with a bad credit history, you would be able to channel a larger chunk of your investment towards the mortgage into getting better terms on the mortgage deal.

Property surveys

In Scotland, the seller of the property you’re purchasing is responsible for arranging a property survey. You don’t have to spend money on an independent valuation. In other parts of the UK, the mortgage provider or the buyer is the one that arranges and pays for the survey.

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How to get a bad credit mortgage product in Scotland

If you have a poor credit history, here’s what you should do to improve your chances of securing a mortgage.

Get your finances in order

Before you can even think of applying for a mortgage, you first need to get a handle on your finances. Determine where you stand with debt and devise a proper payment plan to settle your outstanding financial obligations.

One option would be to leverage the debt arrangement scheme so that you can freeze the interest to prevent an already bad situation from getting worse. Speak with a debt advisor to make the application on your behalf.

If you don’t already have a budget to cap your monthly spending, now’s as good a time as any to make one. Identify what your net monthly income and expenditure are, cut out unnecessary expenses, and work on settling unpaid debt from unsecured loans, credit card bills, and any other forms of credit you may have taken out.

Stick to the budget and stay on top of your repayments. This signals to potential lenders that you have taken control of your finances.

Fix your credit report

You next need to get ahold of your credit report to see where you stand. Ensure that it is up to date and that any debts you have recently settled reflect as satisfied. You should also check that the reports from the three main credit reference agencies – Experian, TransUnion, and Equifax – all have the same updated information.

If there are past issues on your report for which you have a reasonable explanation, make a request to the agencies to add a note that potential lenders looking into your credit file will see. A reasonable explanation could be redundancy, illness, disability, or retrenchment.

Get expert help from a bad credit mortgage advisor

The brokers we work with are the best in the industry. They have decades’ worth of experience dealing with bad credit borrowers and specialist mortgage providers that cater exclusively to them. They’ll advise you exactly what you need to do to improve your chances of getting your application approved.

For instance, they might ask you to save up more money to be able to put down a larger deposit. They may advise you to consider applying for a guarantor mortgage and have someone guarantee your debt. They may even ask you to work towards settling some of the adverse issues on your credit file.

They examine your case and lend mortgage advice specific to your credit circumstances. That way, when you finally apply for a mortgage, you have a higher chance of getting a favourable outcome.

Don’t let bad credit stop you

When seeking a bad credit mortgage in Scotland, you need all the help you can get. The only way to achieve your dream of owning your own home despite your past credit issues is to consult with a bad credit broker. They have insider knowledge of Scotland lenders with higher risk appetites to help you secure a competitive mortgage deal.

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FAQs

Am I limited to Scottish lenders when applying for a bad credit mortgage in Scotland?

Not necessarily. Several nationwide mortgage lenders will consider property loan applications from Scotland. Ensure that you talk to a whole-of-market bad credit broker that can accurately assess your borrowing needs and identify specialist providers likely to approve your mortgage application.

Is it possible to get a joint mortgage in Scotland with bad credit?

It depends on how severe your credit issues are. Lenders assess each applicant independently to determine how much of a risk you pose to them. Even if the other (joint) applicant has good credit, whereas yours is adverse, it doesn’t guarantee that the mortgage application will go through. Your best bet would be to consult a bad credit broker to explore your options.

Is it hard to get a bad credit mortgage in Scotland?

It depends on where the property in question is located. Some Scottish regions have very rural properties. Mortgage lenders tend to shy away from these properties since they would have a hard time finding a buyer for them if they ever repossessed them from a delinquent borrower.

On the flip side, some areas in Scotland have very low property prices for which you would need a smaller mortgage. This would be a lot easier to qualify for, even with your adverse credit history so contact us now to get started.

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