What is an adverse credit mortgage?
An adverse credit mortgage is a mortgage available to borrowers who have negative payment information on their credit file. This includes CCJ’s, missed payments, IVA, bankruptcy, defaults. Although many high street lenders will decline applicants with adverse history, we have access to numerous specialist lenders who can consider a mortgage application.
What are the benefits of borrowing money with an adverse credit score/lender?
This will allow you to repair your credit file. Adverse credit entries usually stay on your credit file for up to six years. Therefore, provided you keep up with your repayments and there are no further credit blips then the plan would be to secure a mortgage with a High Street lender in the future. This is a tried and tested method. (There are no guarantees this will be possible; it will depend on your circumstances at the point of application).
It is more likely to be accepted if we approach a lender that can accept the negative entries on your credit file as there is more chance of acceptance. West Yorkshire Money will research thoroughly before submitting a case to a lender to ensure a smooth process for our clients.
The impact of a low credit score on mortgages
Applicants with a low score are often unable to get mortgages from a High Street Lender as they can be seen as a high credit risk. However, West Yorkshire Money has access to Lenders who do not use credit scores when making a lending decision. The lender will make their decision based on criteria, so your score becomes irrelevant.
Please note that the interest rate will be higher than High Street Lenders, but this is a stepped approach with a view to securing a mortgage from a High Street Lender once your credit score has improved.
What is a bad credit score?
Lenders subscribe to three credit agencies: Experian, Equifax, and Transunion. Some lenders will use one of the credit agencies when making a lending decision. However, some use all three at different parts of the application.
You can check your credit file for free by clicking here. (This is one report including all three agencies.)
*This is a 30-day free trial, so please ensure you cancel the subscription to avoid being charged.
There is no way of knowing the exact credit score which will cause a pass or a failure as lenders use other factors to assess an application. An experienced Adviser will have a good understanding of your credit file and be able to provide the best advice.
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What is the maximum term I can take my mortgage over?
Forty years, however, this will depend on your age and retirement planning. Another factor you need to consider is that your circumstances will change during the mortgage term. You might take the maximum mortgage term, now this could be reduced in the future, but it will depend on affordability. You will pay more interest on a longer mortgage term.
Budget planning is important.
When considering your mortgage term, it is important to consider the following factors:
• Affordability
• Retirement planning
• Career progression
• Family planning
If you are renting, you often find that it is cheaper to buy in some cases.
Although your mortgage will be assessed on your current circumstances, the points above should also be considered. Creating a spreadsheet to capture your monthly expenses is useful when discussing your options with an Adviser.
How much deposit will I need?
Some lenders require no deposit but would require family assistance. Don’t hesitate to get in touch with the office for further information.
Your deposit can come from savings, family gifts, equity, there are also a couple of lenders who will allow a loan as a deposit, but this will need to be affordable in addition to the new mortgage.
A deposit amount will depend on your circumstances, but it could be as low as 5%.
Purchasing at a discount or buying from a family member.
If you are purchasing from a family member, the equity within the property can be used as a deposit. The family member would need to agree that you are buying at a concession. This may mean no cash deposit would be required.
Similarly, if using the Right to Buy scheme or the Right to Acquire scheme, the discount from the council or housing associate can be used as a deposit.
Can I consolidate loans and credit cards into my mortgage?
This will depend on how much you wish to consolidate and how much equity you have in the property.
You also need to be aware that you will pay more interest over the term as you are taking the debt over a more extended period. You are also securing a previously unsecured debt; if you fail to keep up with repayments you have, you could be at risk of repossession.
Lenders will also consider the level of debt compared to income. Some will also factor in a proportion of the debt even if this will be repaid, as past data does show that some clients do not repay their debts even though they declared to do so.
What can I afford to borrow with an adverse/low credit score?
West Yorkshire Money can source mortgages from the whole of the market, which means we are able to approach a variety of lenders to maximize affordability. Each lender has different criteria. Therefore, affordability can differ from Lender to Lender. But you can be assured we will work with you to secure the borrowing which suits your budget.
