Non-conforming, or sub-prime lenders as otherwise known, can offer bad credit mortgages up to 100%. Here at A Mortgage 4 You we can find lenders who could offer you a loan even if you have bad credit.
100% borrowing gives you the opportunity to step onto the property ladder without a deposit available.
This type of mortgage is very popular among first time buyers who have previous bad credit. However, aside from the bonus of a no money down mortgage, you will pay slightly more each month in interest, but you will be able to buy a home sooner rather then later.
A 100% mortgage is not suited towards everyone's needs and with a property market that can fall, you could end up with negative equity (owing more than the house's worth).
Before deciding on a bad credit 100% mortgage, you should always seek the advice of an independent financial adviser.
Remember bad credit mortgages are a good way of repairing your credit score, providing you maintain repayments on your financial commitments. We have helped many obtain a 100% mortgage even if they do have some form of bad credit, however this is subject to credit scoring and status.
When you are looking to get onto the housing ladder, it can seem like a daunting task. A 100% mortgage could be the answer, even if you have bad credit. Waiting to gain a 5% deposit could make it harder if property prices rise within that time.
A 100% mortgage for those with bad credit can help overcome the problem of not having a deposit.
Some of the mortgages on offer can even lend past the value of the property by offering additional funds on an unsecured basis, but at the same rate of interest as the mortgage secured on the property. This is very useful if you need to add the costs of a solicitor, broker, valuation and other fees incurred. Alternatively, if you wished to borrow additional funds to help furnish the new property, then funds could be raised for that purpose as well.
Please be aware that you may have to pay an above average interest rate. This covers the added risk that the lender is taking. Another factor to cause the interest rate to be higher is the lack of competition in the market, with only a handful of lenders offering 100% mortgages, again having bad credit will affect the interest rate available to you
Whilst the interest rate is likely to be higher than that of a mortgage where a 5% or 10% deposit is being provided, this does not mean that the mortgage itself can not benefit from some of the more desirable flexible features.
An example of mortgage product flexibility:
- Mix of secured and unsecured borrowing within maximum stated Loan To Value limits - Max 95% secured loan + 30% for unsecured loan.
- Overpayments, underpayments, redraw facility and payment holidays
- Daily Interest
- No Mortgage Indemnity Guarantee (MIG)
- No overhanging 'Early Repayment Charge'.
- Portable
To calculate the maximum borrowing for 100% mortgages, the following calculation can be used to determine an approximate level of mortgage. Please note that mortgage lenders use different methods of determining the maximum mortgage available, and so you should talk to a fully qualified mortgage adviser for full details.
Maximum Income Multipliers (dependent on credit score and level of income) of 5.4 x the first salary + 1x the second salary or 4.1 x the joint salary less an amount for existing credit commitments (subject to an A1 credit score)
Hire purchase : Taken into account
Personal Loans : Taken into account
Overdraft : NOT Taken into account
Credit/Store Cards : Taken into account
Child Maintenance : Taken into account
Child Education : NOT Taken into account
Extra Income:-
other income - guaranteed : Add 50% to income before multiply
other income - regular : Add 50% to income before multiply
other income - irregular : No
investment income : No
mortgage subsidy : Add 100% to income before multiply
large town allowance : Add 100% to income before multiply
maintenance payments : Add 100% to income before multiply
non contributory pension : No
car allowance : Add 100% to income before multiply
Clients should seek the services of an independent financial adviser to help guide them to the best lender to suit their own individual circumstances. An IFA will source the whole of the market and make clients aware of the for and against of each plan.
Another very valid point is that when the valuation of the property has risen and the loan to value reduces to 95% LTV or lower, clients can switch to another lender to benefit from a lower interest rate with the lower risk.
