Bad credit inevitably means that you won’t often qualify for the most competitive rates on the mortgage market – but it doesn’t mean that you should be paying outrageous costs either!
The downside is that fewer lenders will approve an applicant with adverse credit history, but decent interest rates should be achievable with a little support from an experienced broker.
Today, our mortgage brokers delves into some of the issues behind a bad credit mortgage and ways to improve your interest rates with just a little preparation.
Comparing the Best 2022 Bad Credit Mortgages
While rates are indicative and dependent on the surrounding circumstances, we’ve collated a few details from some of the best mortgages in 2022 available to bad credit applicants.
These scenarios are based on a 30-year mortgage valued at £150,000.
|Monthly payment||Max Loan to Value||Interest Rate||Fees||Annual Percentage Rate (APRC)|
|Lender A||£576||95% (5% deposit)||3.05%, three-year discounted rate||£199||4.9%|
|Lender B||£664||95% (5% deposit)||3.39% lifetime discounted rate||£0||3.5%|
|Lender C||£636||90% (10% deposit)||3.05% three-year discounted rate||£199||4.9%|
|Lender D||£685||90% (10% deposit)||3.64% 5-year fixed rate||£774||4.2%|
|Lender E||£504||75% (25% deposit)||1.31% 2-year fixed rate||£995||3.3%|
|Lender F||£879||75% (25% deposit)||5.79% 2-year fixed rate||£0||4.9%|
Achieving Low-Interest Rates on a Mortgage With Bad Credit
Rates vary considerably and sometimes suddenly, so it’s pretty difficult to give a solid indication of what you might be offered.
The trick is to work with an established broker to ensure you hit all the affordability metrics the lender has in place before you apply.
Bad credit mortgage providers have huge variations in their policies and acceptance terms, so this option means you can have confidence that your selected lender won’t reject your application outright because of credit issues.
The 2022 Bad Credit Mortgage Market
More lenders are now considering bad credit applicants, primarily due to a huge increase in the prevalence of credit issues.
Low-rate mortgages are easier to come by with an adverse credit history, even if you’ve had significant financial difficulties in the past.
One of the big changes is that mortgages for applicants with recently discharged bankruptcies are available, as are home loans at higher LTVs than we’d have found a few years ago.
Choosing a lender isn’t straightforward since the first step is to analyse your circumstances and identify the optimal lender, depending on their criteria.
Remember that lenders aren’t solely reliant on credit records to make decisions, and they’ll be more open to making an offer if you hit eligibility markers around the following:
- Income – the lower the salary multiple you’d need to borrow the required amount, the less high-risk the application is. Brokerage support is strongly advisable if you receive variable income, such as a salary plus bonuses and commission.
- Age – lenders tend to prefer borrowers under 75, so your prospects improve if you are younger and have bad credit.
- Property – a conventional bricks and mortar construction is the easiest type of property to mortgage. Non-standard homes, such as those with thatched roofs or timber frames, can be a little more complex.
- Deposit – the higher a deposit, the more lenders you can choose between.
Deposit requirements for 2022 Bad Credit Mortgages
Larger deposits improve your mortgage interest rates immediately because the lender takes a considerably lower risk by agreeing to the mortgage.
It’s all about commitment to repay the loan and assessing the property value if the home were to be repossessed and sold as a way to recoup lender losses.
Most bad credit lenders set a maximum LTV (or loan to value ratio), so you’ll need a minimum 5% deposit and up to 25% as a down payment with some lenders, depending on the nature of your credit issues.
Buy to let bad credit mortgages normally need a higher minimum 15% deposit. Still, there are options to offset the risk, such as using a guarantor or offering another asset as security.
Much depends on how serious your credit issues are perceived to be. Numerous defaults or a CCJ tend to be classed as medium to heavy adversities, whereas a couple of late payments several years ago aren’t as big a stumbling block.
Applying for a Bad Credit 2022 Mortgage With Multiple Credit Issues
No matter how severe, one standalone credit issue is always preferable to multiple, more minor credit problems spanning several years.
Lenders want to see that bad credit problems have been resolved and that their applicant has since borrowed responsibly.
If you have extensive credit problems, you’ll likely need to offer a larger deposit or pay higher than average interest rates to secure the borrowing you need.
For more information, please get in touch with Revolution Brokers on 0330 304 3040 or email our friendly team at firstname.lastname@example.org.