Adverse Credit Mortgages Overview

Poor credit history arises from such problems as defaults, mortgage arrears, bankrupt, county court judgements (CCJs). People in these situations will probably need an adverse credit mortgage.

With an estimated five million households in the UK, or one in four people, experiencing problems getting a mortgage because they have some form of adverse credit there is a need for companies to help out. There are a rising number of lenders who provide mortgages for people with a poor credit history and mortgage advisors who can help you locate the right mortgage for your circumstances.

High street lenders use a credit reference agency such as Equifax or Experian to determine your creditworthiness for a mortgage. If the search exposes any problems, you will be given a low credit score or poor rating and will have problems getting a mortgage. However there is an increasing range of adverse credit mortgages designed for people who have problems with credit in the past or black marks against their name.

The main reason people fall into the sub-prime category is because they have had credit difficulties in the past and as a result have a bad credit rating. This does not necessarily mean they have done anything wrong in the past. There are a number of possible reasons.

With borrowing and consumer credit rising, there are times when people have taken on too much debt and find themselves struggling to keep up with repayments.

With divorce and redundancy on the increase people can get into financial difficulty through no fault of their own.

Prospective borrowers with no credit history, those who do not appear on the electoral roll, and people who have moved a several times in a short space of time can also find themselves labelled as a non standard borrower.

Specialist adverse credit lenders give people with a poor credit record a chance to get a mortgage, get their finances back on track and improve their credit rating in the future. Many lenders now operate in this sector; they include global investment banks and specialist arms of high street banks who underwrite a wide variety of cases, from people with minor financial problems to those with heavy adverse credit.

The adverse credit mortgage industry (sub-prime) has come to the fore in recent years. Some years ago it was seen as a murky area for unscrupulous brokers who would charge sky-high fees and lenders who lumbered you with huge rates of interest. Today there is a much broader range of products which are more competitively priced, less punitive and give more innovative deals.

Having a poor credit rating can be an upsetting and worrying experience, whatever the reason, but there are now ways around it.

Specialist lenders offer credit repair deals. In these, you would need to put down a deposit of around 10% and pay a higher interest rate than you would with a regular deal. The upside is that once you have maintained your payments on one of these deals for a specified period (usually about three years) your credit history will be repaired, enabling you to consider remortgaging on to a new deal with a better rate. 

A truly independent broker will look at your individual circumstances and find the best adverse credit mortgage for you, helping you to find a mortgage even if you have been turned down elsewhere.

Tom Smith
10th August 2007

Recent Mortgage News:

• Adverse Credit Mortgages Overview [10.08.07]
  Poor credit history arises from such problems as defaults, mortgage arrears, bankrupt, county court judgements (CCJs). People in these situations will probably need an adverse credit mortgage.
  
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  An average off 77 properties a day were repossessed in the UK in the first half of the year – an increase of nearly a third, and it takes the rate to its highest level for eight years.
  
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