Subscribe to our Feed
Adverse Credit Mortgage Facts
What is an Adverse Credit Mortgage?
Bad credit mortgage or adverse credit mortgage products allow people with a poor credit history, low credit score, missed payments, CCJ's, defaults, mortgage arrears or an IVA etc to be able to secure mortgaged funds for the purpose of purchasing property. They came about due to the demand by consumers with poor credit who wanted to get on the property ladder.
Whilst this doesn't mean everybody with bad credit can obtain a mortgage it does mean their are many lenders willing to consider mortgage applications for people with impaired credit.
How does a normal mortgage differ from an adverse credit mortgage?
A normal or typical mortgage normally provided by your local high street bank or building society will usually allow people to borrow monies for purchasing property based on their age, income and employment status, place and right of residence, existing financial commitments, mortgage term required and their ability to repay - what they normally do not provide is the ability for people who have had credit problems or bad debt to apply for mortgaged funds, the lending criteria set down by normal lenders simply do not cater for poor credit applicants to proceed to completion.
Specialist adverse credit mortgage lenders on the other hand have tailor made mortgage products which will allow these applications to proceed to completion, they obviously have their own lending criteria which will differ from lender to lender and even from different mortgage products provided by the same lender, but they make life much easier when applying for a mortgage with bad debt registered on your credit file. Adverse credit mortgage lenders are understandably at more risk than a normal lender of their borrowers missing mortgage payments defaulting on the mortgage loan - The criteria set by specialist lenders does minimise this but there is obviously more risk involved on the lenders part.
The lender has to reflect the additional risk involved in dealing with borrowers with poor credit and as such their mortgage products will typically carry slightly higher interest rates the a normal mortgage lender. There may also be a difference in how the interest rate is calculated, a normal lender will configure its normal variable rate based on the Bank of England Base Rate, a specialist lender will tend to us the London Inter Bank Offered Rate (LIBOR).
How do I know which adverse credit mortgage is right for me?
Its easy to get confused with all the mortgage products available from normal mortgage lender, if bad credit gets added to the mix then things can seem incredibly confusing, especially when the adverse credit lenders themselves do not deal directly with the public. The best way to ascertain which mortgage is best suited to your individual circumstances is to speak to a mortgage broker who understands the sub prime mortgage market, you can speak to a mortgage broker who deals in a little of both the normal mortgage industry and the sub prime market but more often than not you will get better results speaking to a broker who specialises in adverse credit - that way you are pretty certain they are genuinely going to understand the market, lenders and products available which will obviously benefit the borrower.
How can I be sure I need an adverse credit mortgage?
There are certain circumstances where a potential borrower will know they can not get a normal mortgage with a high street lender, maybe they have defaulted on a number of loans, or had CCJ's registered against them or perhaps they have arrears on their existing mortgage or been refused elsewhere. If this is the case then its likely a bad credit mortgage would be needed.
If however you are unsure if you would be able to get a mortgage through normal channels you can do a number of things to check if you could approach a high street lender, the obvious option is to speak to a high street lender (your existing bank or building society) and ask if they would give you a mortgage, however this can be time consuming and, if they are unable to lend through bad credit can prove embarrassing for the borrower. A better option may be to speak to a specialist adverse mortgage broker, if you speak to a broker who only does high street mortgages and they can not do anything for you, then you will need to source a specialist broker after speaking to the initial broker - a better option would be to contact a specialist broker from the outset due in the main to the fact that they will more than likely be able to tell you if you would apply to high street lender just by looking at your circumstances which would speed things up immensely.
