Bad Credit Mortgages

What we are seeing in today’s mortgage market in 2021 is a very positive change in house prices and the volume of clients who are looking to purchase their first property, or move to a larger property.

Now that the decision to leave the EU has been confirmed we are seeing a very different climate in the property market to the one we experienced in the latter half of 2020.

The mortgage lenders seemed to have taken up the challenge with a very positive approach to lending criteria, which has seen terms being made more attractive and flexible for clients who may have had credit problems in the past.

1.  Having a County Court Judgement (CCJ) registered against you.

2. Having a Credit Default on your file

3. Using a high percentage of your available credit limit on any credit facility (credit cards, mail order, overdraft)

4. Using short term loan facilities (Pay Day Style Loans)

5. Late or missed payments on any credit facility

6. Not being on the electoral roll at your current address

7. Not being in permanent employment for a minimum period of at least 6 months or being self-employed for at least 12 months.

8.  Previous Bankruptcy

9.  Being in a current, or having a satisfied, IVA

10. Either being in or recently out of a Debt Management Plan

11. Previous repossession of a property

12. Poor management of your financial affairs

13. Mortgage arrears

14. Your age

Request a copy of your credit file from Experian or Equifax in order that you can see the level of information that the lender will view to help them make their decision.

Make sure that you are showing on the electoral role at your current address

If you have any County Court Judgements (CCJ’s) or Defaults registered against you, you need to seek advice on whether paying them off would improve your position, as satisfying them will not remove them from your credit file.

If you are using more than 50% of any available credit limit, your credit score will automatically fall, and you will need to address this.

Pay Day Style loans have a massively negative impact on your credibility. Most lenders, depending on the loan to value, will not accept any during the last 12 months.

If you have been discharged from a Bankruptcy or an IVA, some lenders will consider an application immediately after discharge, but you would be looking at a maximum 65/70% loan to value (ltv) invariably with penal terms. It will not be until you have been discharged for three years that we can offer you High Street terms.

Some lenders are now more flexible towards clients who are in, or recently discharged, from a Debt Management Plan (DMP) so if you have conducted the plan in a satisfactory manner and have a 10/15% deposit we maybe able to help you.

If your credit file reveals poor management of your financial affairs, in most cases you should put on hold any plans to purchase a property for at least six months, and spend that time getting your finances in good order.

Mortgage arrears are not a good sign and in an ideal world there should be none in the last 24 months but depending on the loan to value we can accept a small amount in the last 24 months but maybe 1 in the last 12 but definitely none in the last six months.

Because all mortgages are now based on affordability, with an assumed retirement age of 70, this may mean that we cannot offer the usual 25-year term, which may affect the amount that you can borrow.

If you have had a property repossessed in the past, we would normally suggest that you wait at least three years following the repossession before you try to raise a mortgage to purchase again, but this again would depend on whether there was a shortfall following the sale of the property therefore we would need to discuss the implications of this with you.

We are here to help clients who would struggle to place a mortgage with a High Street lender because they may have a history of late or missed payments, been in a Debt Management plan, discharged from Bankruptcy or an IVA. All of these events will have a very negative impact on your credit profile, which would result in a decline by most lenders. This is where we at A Mortgage 4 You are here to help you find the right lender who will accept a bad or poor credit profile

In our experience most clients who have had financial problems have had them as a result of an event beyond their control, such as being made redundant, the breakdown of a relationship, loss of a business, a death in the family, and many other circumstances.  Some lenders will take a view of an event in your life which was beyond your control. You may have been irresponsible in your younger years, but now have your finances under control, and you are now looking to move forward with your life, having learnt from your previous mistakes. The good news is that there are still lenders out there who are willing to help, and we know who they are and work closely together with them to achieve the most competitive terms possible.

Our expertise is in bad credit mortgages.  We spend a great deal of our time monitoring changes in the market place and lenders underwriting. We have seen a number of new lenders coming into the market this year, some of whom specialise in bad credit mortgages.  This has brought some real competition to the mortgage market, which is very good news for clients because lenders have had to change their criteria to be more flexible, and make their terms more attractive.

• Late or missed payments on credit arrangements
• Mortgage arrears
• Defaults on credit arrangements
• Poor conduct of your bank account
• County Court Judgments ( CCJ’S )
• Previous repossession
• Bankruptcy
• Individual voluntary arrangements.( IVA )
• Can you be found on the electoral roll( IVA )
• Debt management.

• Can you be found on the electoral roll( IVA )
• How long have you been in your current employment
• Is your employment permanent
• Are you on the electoral roll
• Are you servicing your current commitments in a satisfactory manner?
• Your age
• Type of employment
• Will your travelling expenses increase by moving
• Is the property construction going to raise any problems

This question is often asked by clients who are not aware of how our “High Street Lenders “ make their decision to lend or not, this decision is made on how many points the clients score when the lender runs a “ decision in principal “ If the clients do not score enough points the application would be declined, and unless there are grounds for an appeal, it would fail.

When we look at the specialist lenders it is a manual underwrite, and it would only be in some cases where the lender does their own internal scoring to decide which tier of the product would be appropriate to meet the client’s credit profile.

There are with some  lender’s, up to eight tiers within one product, which would reflect the level of adverse credit, when it occurred, and what it actually is ( late or missed payments, credit defaults, county court judgements, arrears of unsecured loans or mortgages ).

With all Bad or Poor credit everything is date sensitive, the more historical it is the better, typically more than two years old, and the larger deposit that you have, the more flexible the lender will be on accepting the level of Bad Credit.

Lending today is about risk, the lower risk that the lender perceives, the more attractive terms will be offered. With new lenders coming to the market at the current rate of one a month, competition brings constant changes in underwriting criteria all of which is very positive going forward.

Thank goodness some of our lenders still make common-sense decisions based on a manual underwrite. Yes, you may be asked to find a bigger deposit than some other clients, but three years after discharge, the terms and conditions you will receive are the same as any other client. How much better does it get? Michael J Alexander.