Adverse Credit Mortgages

Adverse credit mortgages, also known as subprime or bad credit mortgages, have been in the press a fair amount recently due to their contribution to the recent property downturn. If you have been looking to buy a property over the past few years, you will have noticed that the lending criteria have tightened significantly in response to economic conditions, especially if you have a poor credit history. If you have had debt problems, had a County Court Judgement (CCJ) filed against you or you have missed payments on your credit card or other loan, your credit rating may well have been damaged.

The implications of applying for adverse credit mortgages are that you will usually be charged a higher interest rate (due to lenders seeing you as a higher risk borrower) and that you will generally need a larger deposit to put towards your property. However, there are lenders that specialise in providing mortgages to people with a less than perfect credit rating, and it's worth approaching these lenders as well as the more mainstream high-street lenders, because their product offerings are likely to be more suited to your financial circumstances. We would advise getting a copy of your credit report from one of the large credit reference agencies, because then you can check your credit status before making any adverse credit mortgage applications.

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Shopping around for Adverse Credit Mortgages

• You are eligible for adverse credit mortgages if you have been bankrupt, if you have participated in a debt management plan or IVA (individual voluntary agreement), had CCJs or if you have missed loan or credit card payments.
• With a poor credit rating, you need to be able to put down a larger deposit when you buy a property, with a minimum of around 30-40 per cent.  You should also expect to be charged higher interest rates on adverse credit mortgages, because the lender sees you as statistically being more likely to default on your mortgage payments.
• If you have a bad credit history, all is not lost.  After a few years of making all your mortgage payments and other debt payments in full and on time each month, your credit rating will start to recover.  CCJs only stay on your history for six years, so you will not have them following you around forever and you will eventually be able to remortgage to a product with more favourable rates.