Getting a Mortgage with Bad Credit (2024)

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Bad Credit Mortgages

Looking For A Bad Credit Mortgage?

What is a bad credit mortgage?

This is a type of mortgage for borrowers with adverse credit history or a low credit score. These deals are often arranged through specialist and mainstream mortgage lenders who are better equipped to cater to the needs of borrowers who fall into this category and are worried they won’t be able to buy a house as a result.

It’s important to remember that even though you may have a poor credit score, there may still be a many lenders out there willing to accept you. Most lenders don’t go by arbitrary scores from third parties but have bespoke criteria they have set themselves that differs from lender to lender.

It’s therefore very important to access the right expertise to ensure you are matched with the best possible lender for your circ*mstances.

How do they work?

Bad credit mortgages are no different to regular mortgages, but the way they are assessed is often different. Rather than simply reject an application because adverse credit is present, the lender will review the age, severity and reason for the credit problems and base their lending decision on these factors.

These mortgages are usually offered with a higher interest rate to offset the risk posed by the bad credit, have higher deposit requirements and are often arranged through specialist mortgage brokers.

Get Started with a Mortgage Broker

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How to get a mortgage with bad credit

Using our unique, free broker-matching service, we can help you find a mortgage broker who specialises in bad credit. This will boost your chances of approval and securing a favourable interest rate for your mortgage.

Make an enquiry with us and you’ll be paired with a specialist advisor. They will then guide you through the following steps to full application:

• Downloading your credit reports: You can do this yourself by signing up for a free credit report trial. Whilst your broker won’t be able to carry out a credit check for you, they will be able to help identify what the credit issue is and advise you on the best course of action from this point. They’ll also help remove any inaccurate or outdated information that could otherwise hinder your chances of getting a mortgage.
• Building up and optimising your credit files: Your advisor will suggest ways to build up credit quickly to improve your prospects ahead of your application.
• Preparing the necessary documents and paperwork: You will need documents including proof of address, ID and three months’ bank statements. Head to our mortgage applications page if you need a full list of the documents required.
• Finding the mortgage deal for your circ*mstances: The right mortgage broker can help you secure the best rate and deal thanks to their knowledge, experience and deep working relationships with lenders in this corner of the market.

What fees will a bad credit mortgage broker charge?

Typically, a broker will charge either a flat fee or a percentage of the mortgage amount, which is payable once the mortgage has been completed. For straightforward cases, this could start anywhere from between £300 – £500 as a flat fee or up to 1% of the mortgage loan.

Some brokers won’t charge any fee to a customer at all and will simply take a procuration fee (usually up to 0.5%) from the lender.

The amount a broker charges depends on the complexity and work involved with the specific mortgage application. For more complicated cases – where severe bad credit is involved – a broker will likely charge higher fees and could also ask for payment to be made in stages during the process.

For example, if a mortgage broker sets a fee of, say, £900 for a complex application they could ask for that payment to be made as follows:

• £300 once the agreement in principle has been received
• £300 when the mortgage offer is in place
• £300 upon full completion

What credit issues will mortgage lenders accept?

Under the right circ*mstances, it is still possible to get approved for a mortgage with the following credit issues below, which have been grouped together based on their severity.

Not severe

• No credit history
• Low credit score
• Late payments

Severe

• Missed mortgage payments
• Defaults
• CCJs
• IVAs
• Debt management plans
• Payday Loan usage

Very severe

• Repossessions
• Bankruptcy
• Multiple credit problems

How to improve your chances of approval

You can boost your chances of qualifying for a bad credit mortgage by doing the following:

• Make sure your credit reports are up to date: Check your credit reports for any outdated information. If anything is inaccurate you can request to have the information removed, and this can strengthen your chances of mortgage approval.
• Save up as much deposit as possible: Most mortgage lenders will ask you for 5-10% deposit, but if you have poor credit, the minimum requirement can be higher than this. Any extra you put down can increase your chances of landing a low interest rate.
• Consider family support options: If you have family who are willing and able to support you, there are options including guarantor mortgages and family springboard mortgages that could be worth exploring.
• Explore government schemes: You may find it easier to qualify for a bad credit mortgage if you qualify for a government scheme such as Shared Ownership, Right to Buy or the First Home scheme.
• Apply through a specialist mortgage broker: There are mortgage brokers who specialise in bad credit, and their knowledge, experience and lender contacts can significantly improve your chances of mortgage approval and landing a low rate.

Eligibility Criteria

There are three main things involved in mortgage eligibility assessments when bad credit is a factor:`

1. The type and severity of the issue – missed payments on bills or loans are given more leniency than more serious problems such as recent bankruptcy, for example
2. The date it was registered – the older your adverse credit history, the better. After six years, even the most severe credit issues will have disappeared from your credit reports, but deposit requirements can also be higher while they are present.
3. The reason for your bad credit – An unexpected life event is easier for a mortgage lender to overlook than general financial mismanagement. If you can provide a satisfactory explanation for your adverse, your chances of approval may increase.

Deposit requirements

The minimum deposit requirement for a residential property in the UK is 5% or 15% for a buy-to-let, but if you have adverse credit, some providers will only offer you a mortgage loan if you put down more deposit, depending on the age and severity of the issue.

If sufficient time has passed and the specific credit issue you’ve had is no longer recorded on your credit report, it is possible to get a mortgage with a low deposit – even the most severe cases.

For example, a repossession remains on your credit record for seven years. Once this time has passed – and as long as your credit history has been clear since – there’s no reason why a lender would not consider you for a mortgage with only a minimum deposit of between 5%-10%.

The table below will give you an idea of the amount of deposit you will typically need based on the type of adverse credit you have:

Are you guaranteed approval with 50% deposit or more?

Nothing is guaranteed as your credit profile is just one variable the mortgage lender will review. However, you will stand a good chance of finding a provider willing to offer you a 50% loan-to-value with bad credit, as a deposit this substantial will offset the risk involved in the deal – provided other aspects of your application are strong.

You will still need to pass all of the standard eligibility and affordability checks, but a deposit of this size will certainly help your cause.

Can you get a 100% mortgage with adverse credit?

This will prove very difficult – if not impossible – as 100% mortgages are not typically offered to customers with bad credit, or anyone else, for that matter. One of the only ways to get a residential loan with no deposit whatsoever is by having a family member or close friend act as a guarantor.

With a bad credit guarantor mortgage (also known as bad credit family springboard products), the lender will secure the loan against a property your guarantor owns or against their savings, as this security can serve as an alternative to a deposit.

Other factors

Although a provider will look at your credit history when assessing your application, they might also base their lending decision on the following variables…

Income & Employment

The more you earn, the more you could borrow, but how you earn your income will also be of interest to the mortgage lender when they’re calculating the size of your mortgage.

A specialist mortgage lender might be needed if you’re self-employed or are hoping to get a mortgage based on bonuses, overtime or commission. Furthermore, there are specialist lenders for customers who are looking for a mortgage on low income.

The good news is that having bad credit will not directly impact the amount you can borrow, as this is largely based on your income and outgoings. Most mortgage lenders will cap your maximum borrowing at 4.5 times your annual salary, though others might go higher.

Age

Some providers won’t cater for borrowers over 75, others 85 and a minority will lend with no upper age limit, as long as they’re confident the borrower will be capable of repaying their loan debt in retirement.

Outgoings

Any debt repayments you’re making could impact the size of the mortgage you are offered. Other significant outgoings (such as outstanding loans or dependent children) may affect the amount you’re able to borrow. You can read more about debt-to-income ratios and how they are calculated..

Property Type

Properties with non-standard construction (i.e. thatched roof, timber frame, etc) might require a specialist.

Which mortgage lenders offer bad credit mortgages?

A wide range of lenders will consider applications of this type, from high street banks to specialist mortgage providers, and some of them will even consider high-risk customers with very poor credit.

To give you a snapshot of how different lenders assess each type of credit issue, we’ve put together the criteria tables below…

Mortgage lenders eligibility criteria can change at any time, so this information should only be used for example purposes.

For up-to-date figures and bespoke advice about which lenders you should consider, make an enquiry and we’ll introduce you to a mortgage broker with experience in this area for free.

High street lenders

High street lenders don’t always offer mortgages to people who have a bad credit record, and the ones which do might offer you unfavourable rates.

The tables below will give you an idea of how likely you are to get home financing based on the type of credit issues you have and how long you might have to wait before pressing ahead.

Please note that these tables are for example purposes only and should be used purely as a general guide. To get up-to-date information it’s best to speak with a mortgage broker.

If you have any type of bad credit, the independent brokers we work with will search the entire market for the best deal based on your needs and circ*mstances.

What interest rate to expect

Typically, if there is a history of bad credit, interest rates are likely to be 1-2% higher than a regular mortgage.

The table below shows some examples of interest rates:

Last updated December 2023

Get matched with a bad credit mortgage broker today

If you have bad credit of any kind, getting a mortgage can be more difficult and the consequences of approaching the wrong lender or being declined can be more severe. But the good news is that bad credit doesn’t mean you can’t get a good deal, and help is out there.

The right mortgage broker could help you get onto the property ladder despite your credit issues, and the rates they help you secure might even surprise you. We offer a free broker-matching service that can find the right broker for you by assessing your needs and circ*mstances and pairing them with an advisor who has the expertise you need.

Call 0808 189 2301 or make an enquiry online and we’ll set up a free, no-obligation chat.

Get Started with a Mortgage Broker

Maximise your chance of approval with specialist advice from an expert in Bad Credit Mortgages