adverse credit mortgages

Home loans tailored for individuals with a history of poor or adverse credit

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Mortgages for individuals facing credit challenges

An adverse credit mortgage, often referred to as a subprime mortgage or a bad credit mortgage, is a home loan tailored for individuals with a history of poor or adverse credit. This type of mortgage may suit individuals who have previously missed mortgage or loan payments or have received a CCJ. Many clients have unpaid parking fines which have led to them having adverse credit.

What is an adverse credit mortgage?

This type of mortgage is specifically designed to accommodate borrowers who may have experienced issues like late payments, defaults, bankruptcies, or County Court Judgments (CCJs), making it challenging for them to qualify for a standard mortgage.

It’s important to note that adverse credit mortgages typically come with higher interest rates and fees, reflecting the higher risk to the lender. Borrowers considering this type of mortgage should be aware of the cost implications and seek professional advice to understand their financial situation better.

Who could benefit from an adverse credit mortgage?

Individuals with a history of bad credit

Borrowers who have faced financial setbacks, such as missed payments, or have a low credit score, may require an adverse credit mortgage to access the housing market.

Former bankrupts

Those who have gone through bankruptcy proceedings may struggle to qualify for regular mortgages but can explore adverse credit options to become homeowners.

People with CCJs

Individuals with County Court Judgments may find it challenging to secure a standard mortgage but can seek adverse credit alternatives to buy a property.

Self-employed or irregular income earners

Some self-employed or gig economy workers might have inconsistent income, leading to irregular credit histories. An adverse credit mortgage can be a solution for them.

Where can I check my credit score?

Are you concerned about your credit score? Check it right now and see if your financial plans could be affected by a low credit score. Our handy checker combines the four top credit checking agencies to provide an accurate report on your credit score.

There are also ways that you can help to increase an adverse credit score:

Reducing the amount of credit card balances you have.
Being registered on the electoral roll.
Having an extended period without any bad marks on credit reports (eg: a missed payment in the most recent 6 months will have a far greater impact than one 2 years ago).
Clearing a credit card regularly to show that you can borrow sensibly. (Please note that it can be risky to make any credit application before looking to apply for a mortgage or other lending).

How long do adverse credit issues like defaults, County Court Judgments (CCJs) and bankruptcies stay on your record, and does this affect your mortgage options?

Defaults, CCJs, bankruptcies and Individual Voluntary Arrangements (IVAs) remain on your credit file for six years from the date they were registered. Once this period has passed, the issues will typically fall off your record. However, if you have outstanding defaults, the debt could be sold to another company, which might register a fresh default upon purchase. It is always advisable to ensure these debts are satisfied.

Once an issue is over six years old, it generally stays behind you and should no longer affect your ability to obtain a mortgage. Bankruptcy is a notable exception, as some lenders will never lend to previously bankrupt individuals, although these providers are few and far between. Even though bankruptcy falls off your credit report after six years, solicitors perform bankruptcy searches as part of the mortgage setup requirements. A previous bankruptcy will show up at this stage and could effectively prohibit lending.

Speak To an Expert

Contact us for a fee-free initial consultation, our team of mortgage and financial experts is here to help. There may be a fee for arranging a buy-to-let mortgage, and the exact amount will depend on your specific circumstances. Typically, we do not charge a fee for residential mortgage advice.

Are mortgage rates significantly higher if you have adverse credit, and can they improve over time?

Adverse credit will affect the mortgage rates available to you, and these rates do tend to be higher, but they can improve over time. A significant factor in making mortgages more accessible is the amount of time that has passed since the credit issues occurred. If defaults or CCJs were registered within the last few months, obtaining a mortgage will be very difficult.

Options may exist if the issues are at least six months to a year old, though rates will be higher. These rates typically scale back the longer the gap between the last registered issue and your application. Once you have a three-year history with no further issues, you may potentially be able to access lenders on the high street again.

Can a first-time buyer get a mortgage with adverse credit?

Yes, first-time buyers can obtain a mortgage despite having adverse credit. If you have credit issues on your file, it is essential to ensure your bank account conduct is in good order before applying. Typically, lenders review the last three months of your bank statements. They look for consistent conduct, ensuring there are no bounced direct debits, that you have not exceeded your overdraft limits, and that there are no late charges.

Ideally, there should be no gambling entries on your statements. Having your own deposit is also very helpful. It can be more challenging for first-time buyers with adverse credit who live at home and are using gifted deposits. From a lender’s perspective, these applicants may not have demonstrated financial responsibility through consistent saving, paying rent, or managing a credit history.

While these factors combined can make an application difficult, they are not impossible to overcome. There are plenty of options available for those with adverse credit and, generally, the same criteria apply to both first-time buyers and home movers. The real key to a successful application remains your bank account conduct over the preceding three months.

Is there a difference between an adverse credit mortgage and a sub-prime mortgage?

There is no real difference between an adverse credit mortgage and a sub-prime mortgage. These are simply different terms for the same type of mortgage, often used interchangeably by lenders and brokers. Both refer to lending designed for applicants with adverse credit.

What steps can you take now to improve your chances of getting a mortgage if you currently have bad credit?

The way to improve your chances of approval is to ensure your bank account conduct is exemplary for at least three months before your application. Lenders want to see that you are not exceeding overdraft limits, missing direct debits, or incurring late charges. It is also advisable to avoid significant gambling activity.

Another helpful step is to use a credit card for small amounts and pay it off in full every month. This demonstrates financial responsibility by showing you can borrow and repay reliably. Typically, credit card companies do not charge interest if the debt is cleared within 30 days.

It is also beneficial to clear any outstanding defaults or County Court Judgments (CCJs) before applying, ensuring they are marked as settled on your credit file. If you are concerned about your history, we recommend obtaining a copy of your credit report to review it and ensure any past problems or arrears are updated. These are effective steps to take to put yourself in a position to be approved.

How do lenders view different types of adverse credit, and is a missed payment treated the same as a CCJ or an IVA?

A late payment is not treated the same as a CCJ or an Individual Voluntary Arrangement (IVA); there are varying degrees of adverse credit. A single late payment on unsecured borrowing, especially if it occurred over twelve months ago, is likely to be acceptable to some lenders. However, frequent missed payments present more of a problem.

CCJs represent a more serious step than simple arrears on unsecured borrowing. Arrears on secured borrowing are treated as even more problematic. At the higher end of the scale are issues like IVAs and bankruptcies, which are considered more severe and are accepted by fewer lenders.

There are levels to what is acceptable, and as previously noted, the passage of time is the effective healer for a credit file.

We’re here to advise on adverse credit mortgages

Before making an application, we recommend speaking with an expert to get professional advice.

Windsor Hill works closely with individuals considering an adverse credit mortgage to help them make an informed decision based on individual needs and circumstances.

Speak to one of our expert team members today to help you with your adverse credit mortgage requirements at 01225 962 456 or email info@windsorhillmortgages.co.uk