Residential Mortgage for Bad Credit UK
Residential Mortgages are home loans with a variable or fixed interest rate base on your credit history. Although you may have a bad credit history or bad credit score, you may be eligible for a mortgage. The adverse of your credit history, will be used to determine the interest rate of the mortgage. For example, A bad credit customer, with a score of 400, may be offered with a mortgage at 5.20%. Although it is higher than normal, it is well worth it in order to help you step on to the property. This will increase your monthly repayments from normal to from, £50 plus.
After two years of repaying this mortgage, you may be entitled to remortgage with another or same lender at a much lower rate. I would call it your first stepping stone into the property market and baby steps for a couple of years until your credit history and repayment history is satisfactory without any arrears.
How to increase my credit history / score?
You can ensure the following:
- Keep all repayments of existing in-store cards, Credit Cards, Loans on time,
- Do not miss any repayments on any mortgage credit accounts,
- Close any unused Credit Cards you may have – Unused credit cards reduces headroom of available credit you may be entitled to.
- If you have a credit card account, repay the balance in full at the end of the month.
- Try to avoid repayment plans for any credit accounts you may have. Having plans in place to repay a debt can be a serious impact on residential or buy-to-let mortgages.
- Avoid using any unauthorised or authorised bank overdraft facilities.
- Avoid using Short term loans, also known as Payday loans or High Cost Short Term Credit. Most direct mortgage lenders see this as a huge risk and may turn down your mortgage application whether it is a residential or a Buy-to-let mortgage.
Your main objective is, to try an show you are paying your creditors on time and show that you have the right behavior when dealing with your creditors. A good 6 to 12 months of a good standing credit record, will help you progress further with your mortgage application regardless or your previous bad credit history.
Which lenders deal with Bad Credit Mortgages
There are many direct lenders who will assist and offer mortgages for those who have a bad credit history or record, also known as adverse credit record.
The following are our recommendations for bad credit mortgages: