A Complete Guide to Bad Credit Mortgages

Welcome to our guide to bad credit mortgages. If you need a mortgage but are worried your credit history might get in the way, you’ve come to the right place.

Here you’ll learn how these mortgages work, how to get one, why you should choose Money Helpdesk to guide you through the process, and more. 

Can you get a mortgage with bad credit?

Yes. It is possible to get a mortgage with a history of bad credit but you will usually need to put down a larger deposit than someone with clean credit and pay a higher rate of interest.

Here is how mortgage lenders assess applicants with adverse credit…

1. Bad credit severity

Minor credit problems such as late payments are easier for mortgage lenders to overlook, while a more severe issue such as a bankruptcy or repossession is far more likely to have an impact on your application and make mortgage approval more difficult.

This table shows what mortgage lenders class as minor, severe and very severe bad credit:

You can find out more about these credit issues, how they can impact a mortgage application, and how to get approved if you have one of them through the links.

2. How long ago the issue occurred

The older your credit problems, the better, as far as mortgage lenders are concerned. You will likely find that a wider range of rates and deals become available as time passes - even severe issues, such as bankruptcy, will no longer appear on your reports after 6-7 years.

3. The reason it occurred

Mortgage lenders can be more forgiving of bad credit if you have a good explanation for it appearing against your name. For example, a missed payment because of an unexpected life event such as redundancy or a sudden bereavement would be less of a hurdle than a debt management plan that was the result of irresponsible spending.

4. The overall strength of the mortgage application

As well as assessing your bad credit, mortgage lenders will also be keen to see how closely you meet their general eligibility criteria, which we have outlined in full below:

• Deposit amount: The exact amount of mortgage deposit you will need to put down can vary based on the circumstances surrounding your bad credit, but on average, lenders will typically be looking for at least 15-20% of the property value.

• Age: Most mortgage lenders have a maximum age limit of 75 years old for applicants. Some stretch to 85 and others have no upper age restrictions at all

• Property type: If you have bad credit and are buying a non-standard property - i.e. one that isn’t made from bricks and mortar or has unusual features - this can be an added complication. Mortgage approval is still possible with specialist advice.

• Income type: Some lenders prefer borrowers who earn their income through full-time employment. Borrowers with bad credit who are self-employed or earn non-standard income such as royalties or investments may need specialist advice.

How bad credit mortgages work

There are mortgages specifically designed for people with bad credit, often referred to as ‘bad credit mortgages’ or ‘adverse credit mortgages’. These home loans are typically offered by specialist lenders with more flexible criteria than high street banks.

Bad credit mortgages usually have higher rates and deposit requirements than standard mortgages as the lender is taking on a greater level of risk by offering you finance.

However, you could think of it as a temporary arrangement that gets you onto the property ladder. Once your credit situation has improved over time, it may be possible to remortgage onto a standard mortgage agreement with a lower interest rate and more favourable terms.

It’s also important to remember that having bad credit doesn’t necessarily mean you need a specialist bad credit mortgage. Many mainstream lenders offer standard mortgages to borrowers with less severe types of adverse credit, so it’s worth exploring every option.

How to get a mortgage with bad credit

Follow the steps below to get started with your bad credit mortgage application, increase the likelihood of approval and boost your chances of securing a favourable deal:

1. Download your credit reports

It’s important to get an idea of what shape your credit reports are in before you apply for a mortgage with bad credit. You should review how long your bad credit has been listed for and look out for anything that shouldn’t be there as errors and inaccuracies can be removed by lodging a request with the credit agency that has them listed against your name.

You can download your credit files by accessing a free trial with Checkmyfile.

2. Build credit where possible

There are simple ways you can build and repair credit ahead of your mortgage application. Make sure you’re listed on the electoral register, pay all of your bills and other credit commitments on time in the run-up to your application, and settle any debts you’re in a position to clear. Quick fixes like these can make a big difference in the long run.

3. Speak to a mortgage broker

The right mortgage adviser can increase your chances of success. Our mortgage brokers specialise in helping customers with bad credit onto the property ladder. They will do the legwork finding the ideal mortgage for you, comparing specialist lenders with high street deals, help you secure the best rate and guide you through the application process.

You can book a free, no-obligation chat with broker who specialises in bad credit mortgages to begin your mortgage journey below:

Compare the latest bad credit mortgage rates for free

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List of bad credit mortgage lenders

There are specialist mortgage lenders for borrowers with adverse credit. They offer tailored deals for those with more serious credit problems and have more flexible criteria.

These mortgage lenders include:

• Accord Mortgages

• Kensington

• Bluestone

• Pepper Money

• Aldermore

• Kent Reliance

Please note that most specialist lenders can only be accessed through a mortgage broker.

In addition to specialist lenders, some mortgage applicants with adverse credit may find options on the high street, but mainstream banks may only be an option for those with less severe types of bad credit, or credit issues that occurred a long time ago.

High street lenders who accept some types of bad credit include:

• Halifax

• Barclays

• HSBC

• Natwest

• Barclays

Read more about the available providers in our guide to bad credit mortgage lenders.

What rate to expect

Bad credit mortgages usually come with higher interest rates than standard mortgages. In general, mortgage rates can be anywhere between half a percentage point and two full percentage points higher for borrowers with adverse credit compared to those with a clean credit history. Just how much higher yours will be will depend on these factors:

• The type of bad credit you have

• How long you’ve had it for

• The amount of deposit you have

• The overall strength of your application

• The mortgage lenders you qualify for

Interest rates are generally lower with high street mortgage lenders, but those with more serious bad credit might be restricted to specialist providers.

However, that doesn’t mean getting a favourable rate is out of the question. With a high deposit amount and a strong application, a good deal might well be possible.

You can compare the latest rates from bad credit mortgage lenders for free using our mortgage sourcing tool below. It has been set to return results from specialist bad credit lenders by default but you can manually change it if you wish to compare the entire market:

Bad credit mortgage calculator

You can use our specially designed bad credit mortgage calculator below to get a rough idea of your maximum borrowing.

Please note that this calculator has been tailored for borrowers with bad credit, but it is advisible to speak to a broker for bespoke calculations before applying for a mortgage.

Why use a bad credit mortgage broker?

If you are applying for a mortgage with bad credit, speaking to a mortgage broker before you begin is highly recommended. Not only will they grant you access to a wider range of rates and deals, they will also guide you through the application process from start to finish.

At Money Helpdesk, we have brokers who specialise in bad credit mortgages. They have deep working relationships with the lenders that offer them and can often access exclusive mortgages tailored to the needs of people with bad credit, ones you won’t find on the high street.

Our bad credit brokers could help you save time and money when applying for a mortgage, and they have the track record to prove it. You can find out about the advisers on our team on our About Us page and read some of our bad credit mortgage case studies below:

Case study

Read Our Bad Credit Mortgage Case Studies

Read Case Study

Tips to help you get approved for a mortgage with bad credit

If you are applying for a mortgage with bad credit, it’s a good idea to try to optimise your credit files beforehand. The tips below can help you improve your credit position:

1. Pay all bills in full and on time: Including loans, credit cards, and other accounts. This will show lenders that you're a reliable borrower and manage the debt you owe.

2. Don't apply for too much credit at once: This can indicate you are struggling to make ends meet with your current income and expenses. A good credit score means balancing your credit mix and making sure your credit card balances are within limits.

3. Reduce debt where possible: A good credit score isn't just based on what you owe; it also includes how much debt you have compared to your income and available credit, so consider clearing debt you’re in a position to pay off before applying for a mortgage.

4. Check your credit history: Regularly checking your credit history is very important if you want to make sure it's up-to-date and accurate. Make sure you challenge any inaccuracies with the relevant credit reference agency and request the removal of outdated information.

5. Use credit cards responsibly: It would help if you aimed to use credit responsibly and make repayments in full each month. Credit scores are calculated on, among other things, the amount of credit you have compared to how much you use. Getting a limited credit card can help you build up some credit history, as long as you use it within your means.

6. Get on the electoral roll: Finally, it's worth remembering that registering to vote at your current address will improve your credit score in the eyes of lenders. You can find out how to join the electoral register by visiting the UK Government’s official website.

Furthermore, Lee Trett, director and mortgage adviser at Money Helpdesk, believes that the best piece of advice for a bad credit mortgage applicant is to speak to a broker as their first step.

“Mortgage brokers really are the key to getting approved for home finance with bad credit,” he explained. “Through a mortgage adviser with the right credentials and lender connections, you can access a much wider percentage of the market, including specialist lenders and exclusive deals, boosting your chances of mortgage approval.

“Although there usually broker fees involved when applying for a mortgage with bad credit, it’s important to remember that an adviser’s job is to leave you in pocket overall from the savings you’d make across the mortgage term, with all fees and charges factored in.”

Through a mortgage adviser with the right credentials and lender connections, you can access a much wider percentage of the market, including specialist lenders and exclusive deals, boosting your chances of mortgage approval.

Lee Trett

Mortgage Advisor & Director

Why choose Money Helpdesk for your bad credit mortgage?

Many mortgage brokerages will claim to be able to get you approved with bad credit, but there are many reasons to choose a Money Helpdesk advisor if you find yourself in this situation.

Our bad credit mortgage brokers have access to the entire market and are fully regulated by the Financial Conduct Authority (FCA). We will only assign you to an advisor who is an expert in the type of adverse credit that you have, but that isn’t the only reason to choose us.

With Money Helpdesk’s help, you can:

• Get a rates comparison of 90+ bad credit mortgage lenders

• Access exclusive rates and deals for borrowers with adverse credit

• Apply for a decision in principle online in minutes

• Access advice from a 5-star rated bad credit mortgage broker

Ready to begin your mortgage journey? Make an enquiry with us online to arrange a free, no-obligation chat with a bad credit mortgage specialist today.