Tag: mortgage advice

Getting a “bad credit” mortgage

Getting a “bad credit” mortgage

Mortgage lenders are now obligated to look at long-term “affordability” when calculating whether or not to offer a mortgage.  This is not necessarily a bad thing, but it can create challenges for people in unusual situations, especially for those who have a bad credit record.  Fortunately, these challenges often be overcome.  Here are some tips.

Make your credit record as good as it can be

There may be nothing you can do about your credit record being bad, but there may be some actions you can take to limit the damage.  Make sure you take care of any “quick wins” such as making sure that you are listed on the electoral roll.  Similarly, make sure that you check for any mistakes as you can ask for these to be rectified.

Depending on the situation you may even want to see if you can get any “black marks” removed, for example, if you defaulted on a debt, but can now afford to pay it, then you might want to try reaching out to the company and seeing if they will take your payment and remove the mark.

Make a point of managing your finances impeccably

This is partly an extension of the previous point and partly a reflection of the need to practice good financial management in general.  Basically, you want to be in a position where you can convince lenders that you really have dealt with whatever issues messed up your credit file in the first place.  Acting responsibly for a month or two is unlikely to impress anyone, but acting responsibly for a year or two is more likely to be taken seriously.

In short, even if your credit record is “bad”, if the issues were in the past and you can clearly demonstrate that you’ve now sorted yourself out, then you can really improve your chances of being taken seriously by lenders.

Build as big a deposit as you possibly can

Admittedly this holds true for just about everyone in the UK (and quite possibly in other countries as well) but it has particular relevance for borrowers with bad credit.  Basically the more of the purchase price you can pay upfront, the less the lender is at risk in the event that you default, or, to put it another way, the more chance there is that they’ll recover the full loan principal from the sale of the house, even if it takes place in a buyer’s market.

With this in mind, depending on your situation, you may want to look at properties which have room for some kind of expansion, for example space at the side, an attic or a basement.  That way you could take out the mortgage on the price of the house “as is” and then increase the usable space later when your credit record has improved (if only through time).

If you’re thinking about going down this route, be sure to consider all the implications.  For example, you might want to research the likelihood of you needing planning permission (and if so your chances of getting it) and think about the level of potential disruption building works could involve.

Go through a specialist mortgage broker

Simply put, if you’re a potential borrower with a bad credit record then you’re the proverbial square peg in a round hole.  In other words, you’re exactly the sort of person who’s likely to struggle with algorithms and automated scoring and, by contrast, to get particular benefit from “the human touch”.  A good mortgage broker will take time to listen to you and understand your situation and as well as having a good knowledge of available mortgage products, they may also have professional contacts with lenders to help get your application past computers and in front of actual people.

If you would like to know more or are thinking of applying, please contact us

Your property may be repossessed if you do not keep up repayments on your mortgage.


What does the election mean for mortgages?

What does the election mean for mortgages?

All things considered, it’s probably fair enough that the news has been dominated by the question of what Boris Johnson’s election victory means for Brexit.  It’s probably also fair to say that Brexit will have a huge influence on the UK over the coming years, if not decades.

It is, however, also important to note that Brexit is only one issue among many.  The economy in general and the housing market, in particular, are also key issues for UK residents and while they will almost certainly be influenced by Brexit, they will also be influenced by various other factors, not least of which being government policy and practice.  With that in mind, here’s a quick overview of what the election could mean for mortgages.

The Brexit issue

Having just said that Brexit is only one issue among many, there’s no getting away from the fact that it is likely to be a very important issue.  Given that the Conservative win makes a hard Brexit massively more likely, it’s probably safe to assume that this will have an adverse impact on the Pound, at least over the short term.  This assumption can be supported by a look at the way the currency markets have reacted to Brexit-related news and, in particular, the way the Pound has dived since it was announced that Boris Johnson intended to try to make it illegal to delay Brexit any further.

In and of itself, a weak Pound is bad news for some and good news for others.  It does, however, have the potential to push up inflation and if that happens there will be one of two outcomes.  Assuming that the government sticks to the current rules on inflation (i.e. a target of 2% with a 1% margin of error either way), this would effectively force the Bank of England to raise interest rates, which, of course, is bad news for borrowers.  That being so, borrowers might want to look for a fixed rate, possibly a longer-term fixed-rate, to give themselves reassurance.

Any remortgaging decision should be taken with care and not just because there tends to be quite a bit of upfront expense and paperwork.  Fixed-rate mortgages can be relatively expensive, partly because they are still something of a niche market and partly because they essentially combine two products, a mortgage and an insurance policy.  At the same time, however, while there is a limit to how far interest rates can drop (unless you believe the government would use negative interest rates), they can rise indefinitely. 

The affordability issue

Whatever your views on Brexit, hopefully, you will benefit from the fact that the saga appears to be coming to a close and that, one way or another, we can all move on.  As is always the case in life, this is likely to be easier for some people than others.  For example, people in professions for which there is high demand globally may feel confident about their ability to “keep calm and carry on”, whereas other people may feel rather more vulnerable.

If you already own your home and are having concerns about how to pay your mortgage over the long term, then it might be a good idea to speak to a professional financial adviser.  They might be able to help you find options you might otherwise have overlooked, which could be anything from taking advantage of the rent-a-room scheme to looking for a mortgage product with some degree of flexibility, such as an offset mortgage.

If you are looking to buy your first home and are concerned that Brexit could make it harder for you to get a mortgage, then you may want to look at products such as the Lifetime ISA and/or the Help-to-Buy scheme, to see if they could make it easier to build a substantial deposit and thus increase your attractiveness to lenders.

Your home may be repossessed if you do not keep up repayments on your mortgage.


Talk With Us On Facebook