What Is a Bad Credit Mortgage Broker?
A ‘bad credit mortgage broker’ is a person or company that helps people who require a mortgage to find a mortgage lender. Mortgage brokers are experts in putting clients and lenders together.
Sometimes a person with bad credit will be refused a mortgage by a high street lender, but there are other non-high street lenders who are more willing to consider you for a mortgage despite you having a poor credit score.
A bad credit mortgage broker will help to locate a lender who will be most amenable to your needs.
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How Can a Bad Credit Mortgage Broker Help You?
A typical high street bank will rely on credit scores to calculate the risk involved in a customer loan. Unfortunately, if an individual has missed payments, CCJs (County Court Judgments), defaults on previous loans, or has declared themselves bankrupt, these factors (and others) can result in a bad credit score and some lenders may be reluctant to provide you with a mortgage as they perceive you as ‘high risk’.
This is where a bad credit mortgage broker, such as ourselves, comes in.
An adverse credit mortgage broker will work with mortgage lenders for bad credit history customers; lenders who are willing to offer mortgage products for individuals who have a poor credit score.
Here at The Mortgage Broker, we have years of experience as well as a wealth of contacts in the mortgage industry. We are uniquely positioned to help you find a lender who will be more understanding of your bad credit circumstances and offer you a mortgage deal where other lenders have turned you away.
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A mortgage broker finds the best possible rate for your exact circumstances.
Is a Bad Credit Mortgage Right for You?
If you have a County Court Judgment (CCJ), an Individual Voluntary Arrangement (IVA), have declared bankruptcy, or have a bad credit score due to other factors, then you may benefit from the assistance of a bad credit mortgage broker.
An adverse credit mortgage lender may be able to provide you with a mortgage even though you have a below average credit score and have been unable to obtain a mortgage through other lenders.
To be eligible for a bad credit mortgage you may need to:
- Show that you have a regular income and are able to meet the mortgage repayments
- Provide a larger than typical deposit (usually 15-20%)
The main concern for lenders is that you have the financial means to meet the mortgage repayments and a larger deposit helps an adverse credit mortgage lender to reduce their risk.
Clients Break Free from 7.74% Rate and Funds Home Improvements
Initial Enquiry
The customers approached us seeking assistance to refinance their existing mortgage. They were currently with Helidor (previously Northern Rock), didn’t think they could remortgage, and were struggling under a high interest rate and restrictive mortgage terms.
Their primary goal was to obtain a fixed-rate mortgage for payment stability. Whilst also raising money to replace windows and doors, which would improve household bills and add to the value of their property.
| Current Lender | Property Value | Balance | Loan to Value | Term | Interest Rate | Payment Type | Product Type | Payment |
| Helidor | £195,000 | £68,174 | 34.96% | 14yrs 6 months | 7.74% | Repayment | Variable | £647.00 |
| Unsecured Credit | £28,173 | Various | Various | Repayment | Various | £754.00 | ||
| Debt Management Plan | £24,000 | 14yrs+ | £193 | |||||
| Total | £120,347 | £1,594.00 | ||||||
| New Lender | Property Value | Balance | Loan to Value | Term | Interest Rate | Payment Type | Product Type | Payment |
| New Mortgage | £195,000 | £86,013 | 44.11% | 14yrs | 5.99% | Repayment | Fixed | £757.52 |
| Unsecured Credit | £28,173 | Various | Various | Repayment | Various | £754.00 | ||
| Debt Management Plan | £24,000 | 10yrs | £193 | |||||
| Total | £138,186 | £1,704.52 |
The Challenge
- The applicants were classified as “mortgage prisoners,” locked into an unfavourable loan due to their current financial situation.
- One applicant was under a Debt Managment Plan (DMP), which traditionally signals credit distress and limits remortgage options.
- They weren’t seeking to consolidate unsecured debts into their mortgage, as they have short terms to run. However, these continuing would impact affordability.
- They wanted to raise capital for home improvements.
The Solution
Using our specialist mortgage knowledge, we identified a lender with flexible lending criteria, who would offer a benefical solution to the customers, which met their needs.
We worked closely with the lender to structure the remortgage, including a thorough explanation of the DMP’s status, strong payment history, and recent improvements in financial discipline.
The customer was also with a fee charging DMP company with £46 of the £193 payment going to the DMP company. We suggest and sent details of fee free companies to ensure the whole payment went to the creditors.
The Result
The client successfully secured a new mortgage of £86,013 over 14 years on a 5 year fixed rate product. Whilst this doesn’t make an immediately monthly saving, it was the most competitive way to raise capital. Also, as unsecured debts are paid off they will have £654 additional surplus.
The lender was willing to:
- Offer a fixed rate mortgage product at a competitive interest rate.
- Accept applicants under a DMP.
- Consider capital raising for home improvments.
- Offer a more competitive interest rate than their existing lender.
How did this help?
How can you increase the likelihood of a mortgage offer?
It’s a good idea to work with a bad credit mortgage broker who will help you to find the best adverse credit mortgage lender for your unique circumstances.
Being fully transparent and honest about your financial situation and credit score is essential and if you can find a guarantor this will help lenders to view you more favourably.
Click here for an easy-to-use credit rating checker: Check My File
What Can You Do if You Require a Mortgage but Have Bad Credit?
Although it presents a challenge, it’s far from impossible to get a mortgage even with bad credit. What steps can you take to increase your chances of obtaining a mortgage offer despite your low credit score?
Companies such as Experian, Equifax, and otters should be able to provide you with your credit report free of charge. This is a good first step and having any inaccurate information removed should improve your credit score.
Mortgage lenders will look at your income-to-debt balance as part of their evaluation process. Obviously the better the ratio of income to expenditure the better.
Similar to step 2 above, having a regular income will work to your advantage when applying for a mortgage. Lenders prefer to see stability in income and expenditure. Try to avoid changing jobs just prior to making your mortgage application or having gaps in your employment.
Having a larger deposit will allow a lender to view you more favourably as this will help to reduce the risk involved with making a mortgage offer. The larger the better, but typically an adverse credit mortgage lender may look for a deposit of 15-20% of the property’s value.
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Can I Get a Mortgage if I’m in Debt or Have Bad Credit?
A mortgage broker finds the best possible rate for your exact circumstances.
What Documents Will You Need to Provide?
An adverse credit mortgage lender will likely require the following documentation:
- ID such as a driver’s licence or passport
- Payslips or other proof of income
- Proof of address – usually a utility bill or council tax bill
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How To Understand and Improve Your Credit Score
A lower than average credit score is usually caused by certain factors, such as:
- HIgh debt
Lenders will look at your ratio of income to debt
- Defauts and missed payments
These can affect your credit score and can stay on your credit file for several years
- Bankruptcies and CCJs
Lenders view these as a bad sign, although if they were discharged many years ago this may be taken into consideration
- Credit history and credit score
Your credit score is represented as a number and your history will include payments, balances and any defaults on your debts.
What Are the Advantages of Working With a Bad Credit Mortgage Broker?
- Specialised advice specific to your circumstances
Bad credit mortgage brokers are experts and will tailor support accordingly to your requirements.
- Broad selection of mortgage options
Mortgage brokers have a large network of contacts and access to specialist lenders.
- Help with your mortgage application
A mortgage application can be confusing and stressful – a mortgage broker provides support in this process.
What To Expect When Applying for a Bad Credit Mortgage
A lender will make an assessment based on:
- Income and expenditure
Can you afford the repayments? Do you have a steady income and lower outgoings?
- Your credit score
This offers a guide to lenders to evaluate their risk in lending you money
- A higher deposit requirement
Lenders will usually require a larger deposit to reduce their risk
- HIgher interest rates
You may have a higher interest rate due to having worse than average credit
How To Get More Favourable Terms
There are certain things you can do to improve your overall terms, including:
- Increase your credit score
Correct any incorrect information on your credit file. Pay off any debts. Any improvement you make will help.
- Save up a larger deposit
Lenders will view a large deposit more favourably.
- Use a mortgage broker
Specialist bad credit mortgage brokers have years of experience and relationships with lenders built up over time giving them a greater chance of negotiating better terms for you.
Frequently Asked Questions
It will depend on certain factors such as how long ago the bankruptcy happened, but yes, it is not impossible.
Every lender will have different requirements and there is no standard score as such. In general, the better your credit score the more chance that you will get a good mortgage deal.
This will depend on how complex your particular circumstances are but usually a few weeks. A mortgage broker will be able to give you an estimate based on the information you provide.
Due to the types of more specialist lenders, they can often take a little longer to offer a mortgage than a high-street lender.
Conclusion
Although obtaining a mortgage when you have bad credit can appear difficult, it is definitely not impossible. When you work closely with a reputable bad credit mortgage broker you give yourself the best opportunity to improve your chances of getting the mortgage deal you want despite your bad credit.
Here at The Mortgage Broker, we are experts in providing advice and help to customers with bad credit and finding you the adverse credit mortgage lender to suit your unique needs.
An experienced Bad Credit Mortgage Broker can make a world of difference in making your dream of home ownership a reality – even if you have bad credit. Contact us and let us help you.