Everything You Need to Know
If you have heard of mortgages for bad credit but aren’t totally sure what they entail, you have come to the right place. Here are all of your questions answered, allowing you to proceed with a mortgage application with total confidence.
What is a Bad Credit Mortgage?
A bad credit mortgage, also known as a subprime mortgage, is a mortgage designed for individuals with a poor or limited credit history. While traditional mortgages may be out of reach for these types of borrowers, bad credit mortgages allow them to buy their own home—though often at higher interest rates and with stricter terms.
How Do Bad Credit Mortgages Work?
Bad credit mortgages work just like standard mortgages but come with some key differences so that a lender can mitigate their risk. These can include higher interest rates and larger deposits that you would see with a standard mortgage. Bad credit mortgages often come with stricter terms as well, and you may need to have a guarantor.
How Can I Improve My Chances of Getting Approved?
There are quite a few ways to improve your chances of being approved for a bad credit mortgage, including:
Checking your credit report: Get a copy of your credit report ahead of time so that you can identify and address any errors.
Save for a larger deposit: A larger deposit can reduce the lender’s risk and increase your chances of approval.
Improve your credit score by making timely payments on all your current debts, reducing your overall debt, and avoiding applying for new credit in the months leading up to your mortgage application.
Work with a broker: A mortgage broker who specialises in bad credit mortgages can provide valuable guidance and help you find the best deals available, boosting your odds of success.
Will a Bad Credit Mortgage Improve My Credit Score?
It’s well known that making regular, on-time payments will improve your credit score—and a mortgage is no different. A bad credit mortgage, if managed well, can be a step towards a better credit score over time. That’s why it’s really important to find a mortgage that you can start repaying with ease right away.
Can I Remortgage to a Better Deal Later?
Yes, once your credit score improves, you may be able to remortgage to a standard mortgage with more favourable terms. Regular, timely repayments and improving your financial stability will help, so it is really important to try and boost your credit score even after you have secured a bad credit mortgage.
Your Next Steps
Bad credit mortgages can be a great option for many borrowers, and they allow people to buy a home when it suits them rather than having to wait years for their credit score to be perfect. If that sounds like you, then why not get in touch with a broker who specialises in mortgages for bad credit today?
