I have adverse credit and a small deposit – can I still get a mortgage?
The pandemic hasn’t done much to slow down house price growth in the UK. Indeed, according to the latest house price index from Nationwide Building Society, prices have grown 5.7% over the last year, taking the average property price to more than £232,000.
That presents a challenge to buyers scrabbling together the biggest deposit they can, but what about would-be buyers who also have adverse credit, perhaps having missed a few payments in the past, whether that’s on an existing mortgage or a regular household bill like your energy bill?
Don’t panic – there is a lender for you!
The good news is that the combination of adverse credit and a small deposit doesn’t have to end your property buying hopes, and you may still be able to find a lender.
While lots of lenders focus on borrowers with a spotless credit record, it’s not true of all lenders. There are plenty of businesses who recognise that many of us have the odd black mark in our records, but that these issues don’t stop us from being excellent borrowers overall, and so will consider applicants with some missed payments on their record.
These lenders don’t limit their deals to borrowers with enormous deposits either; you may still be able to find the mortgage you need, even if you only have a relatively modest deposit.
How recent can my missed payments be?
This will ultimately vary depending on the lender. All lenders are different and employ their own criteria when it comes to considering borrowers of all kinds. You might have something in your borrowing history that would be a big no-no for one lender, while another might not even look twice at it.
For example, we have seen lenders launch mortgage products of late where they will consider borrowers with missed payments and satisfied county court judgements, so long as they are older than 36 months, or the use of payday loans so long as they were taken out more than a year ago.
Others will consider even more recent missed payments – in some cases within the last three months – so long as the defaults were worth no more than £300. These lenders may also consider you if there have been a handful of missed payments over the last few years.
And a mortgage adviser can prove invaluable in identifying a lender who will consider a borrower in your specific position.
How a mortgage adviser can help you
It’s worth emphasising that there are lenders that will consider borrowers with deposits of 15% or so, and who have had repayment issues in the recent past. But these are rarely lenders that you will find on the high street, or who can be described as household names.
These specialist lenders design their products with these borrowers in mind but tend to only offer their mortgages through independent mortgage advisers. By partnering with the right mortgage adviser, you can enjoy a vastly bigger range of options than if you attempt to apply directly.
What’s more, a good adviser will be an expert on the exact criteria employed by those different lenders, so can direct you towards the lenders that are most likely to look favourably on an application from you.