Looking for help getting a mortgage with adverse credit?
The cost of living crisis has made staying within their means even harder for a lot of people. You might find yourself with minor credit problems if you’ve had something like late credit card payment or late phone bill. If you’re looking to get a mortgage but now have adverse credit, we may be able to help. Our award-winning broker team specialise in increasing buyers’ affordability so you can get on the ladder. To get started, create a Tembo plan today for free, or find out more about what options are available below.
What issues can impact my credit score?
There are different types of late payments or defaults which makes you have ‘bad’ credit. These includes:
- Late or missed payments
- Mortgage arrears
- Previous repossessions
- Bankruptcy
- County court judgements (CCJ)
- Individual voluntary arrangement (IVA), or debt management plans
How does poor credit impact mortgage applications?
Having adverse credit means you will be charged a higher than average interest rate for your mortgage, or you could be refused by some lenders altogether. Don’t panic if you end up in this situation.
Our team of mortgage experts can advise you on the best solution, and what mortgage options may still be available to you, depending on how bad your credit score is.
What types of adverse credit can we help?
No matter the size of house deposit you have, or the type of property you wish to buy, if you have a poor credit rating it’s often harder to get a mortgage. If you’ve missed small payments in the past such as a phone bill, we may be able to help you get a mortgage. To find out what you could afford, create a plan with us today for free. If you've got an active IVA or DMP, have declared bankruptcy or had your home repossessed in the past, there will be limited mortgage options available to you. While we still may be able to help, we recommend you speak to a specialist adverse credit mortgage lender.
If you’ve had a CCJ in the past, we might be able to help
If you’ve had a county court judgement (CCJ) in the past for a nominal amount, we might still be able to help you get a mortgage. However, if your CCJ has been for a larger amount, we'd recommend you talk to a mortgage broker who specialises in adverse credit.
How to get a mortgage with adverse credit
Even if you have adverse credit, there are still mortgage options that can help you get on the ladder, although these will be more limited and you may not get access to the most favourable mortgage rates. The best way to get a mortgage when you have poor credit is to use a reputable mortgage broker who has the expertise to look into all the options for you. Our expert team has helped thousands of first time buyers and home movers boost their mortgage affordability. Working with over 100 lenders, we have access to specialist mortgage products designed to help you afford more. We are also directly authorised to look beyond our vast panel of lenders if there are other products you can apply for. To find out what you could be eligible for, create a plan with us or learn more about the ways you could boost your borrowing power below.
Buy with help family or friends
Boost how much you can borrow for a mortgage with help from family or friends. Whether you need a guarantor on a mortgage, or are looking to get a joint mortgage together, Tembo can help. Create a free plan with us today to see what you can afford, and get a personalised recommendation for how to boost your buying power at the end. Or, keep reading to find out some of the ways you can increase your borrowing potential.
Income Boost
If your salary is too low to get a mortgage on your own, an Income Boost could be the answer. Also called a Joint Borrower Sole Proprietor mortgage, an Income Boost is where you add a friend or family member’s earnings to your mortgage application. With a larger combined income, you can borrow more, so you can get on the ladder sooner or afford a larger property. You’ll still be the sole owner, but as a joint borrower your loved one will be jointly liable for the repayments. So if you miss a monthly payment, they will be required to step in.
Deposit Boost
If you have bad credit, depending on the severity the lender may want you to put down a larger house deposit. If you have a low house deposit, or are struggling to save, a Deposit Boost may help. It works by a friend or relative unlocking money from their own home through a small mortgage. This money is then gifted to you, either to top up your own savings or to be used as your entire house deposit. With a larger house deposit, you will be able to afford more, as well as getting access to better mortgage interest rates which can be useful when you are less likely to get favourable rates with adverse credit.
Savings as security
If you have a loved one who wants to help you get your own home and has cash savings, they could use a springboard mortgage, also called a Family Guarantor mortgage. Your family member will deposit 10% of the property’s value in a special savings account for a set term. At the end of the period, your relatives will get their savings back plus interest, as long as you keep up with your mortgage repayments.
Co-owning with friends or family
Buying a home with up to five relatives or friends as joint owners is a great way to increase how much you can afford, especially if your bad credit is limiting how much you can borrow. This is often called tenants in common, but we call it Dynamic Home Ownership.
Each owner will hold individual equity in the property, and each owner’s share is tracked separately. So you can all benefit from increased borrowing capacity, and any potential property value gains over time, while keeping it clear and fair who contributed what.
Buying by yourself
If you don’t have family who can support you getting on the ladder, or want to buy by yourself, there may still be ways you can get a mortgage with poor credit. To find out what mortgage schemes you could be eligible for, create a free plan to get a personalised recommendation including indicative monthly payments and interest rates.
Private equity loan
Similar to the old Government’s Help To Buy scheme, a private equity loan provides you with the additional capital you need. In fact, you could boost your budget by up to £150,000. It works by topping up your house deposit with a second charge mortgage secured against your new home, so you can put down a larger down payment. In return, the lender will take a stake in the property, so any profit or loss in property value will also be shared with the lender.
Shared ownership
If you’re finding it hard to put money aside for a house fund, or afford the monthly repayments to buy a home, Shared Ownership could be the answer. Instead of getting a mortgage on the full property value, you buy a share in the home, normally between 25-75% of the market value, and pay rent on the rest. Over time, you can “staircase” your way to full ownership, buying more of the home in regular instalments or as you can afford it.
Higher lending schemes
If you work in a professional job, such as a doctor or solicitor, or earn over a certain amount, you may be eligible for a higher lending scheme. This allows you to borrow a higher multiple of your salary. Most mortgage lenders will lend buyers 4-4.5 times their salary for a home, but with a higher lending scheme you could get up to 5.5 times your earnings. To find out if you could qualify for one of these schemes, create a free Tembo plan.
Tips for getting a mortgage with adverse credit
Check your score with a reputable credit reference agency
Many of the free credit checks online aren’t very comprehensive, and will typically not pick up on all your credit commitments. This means they aren’t that useful to get a clear picture of what’s causing you to have poor credit. Instead, use one of the main credit referencing agencies that are used by mortgage lenders - Equifax, Experian, TransUnion and CoreCredit.
Dig into your credit score
It’s worthwhile to check your credit score and sort out any missed or outstanding payments. Find out what has caused you to have bad credit in the first place, when it was registered, what the balance is and whether it still needs to be paid.
Ensure any old ties are closed
If you have been financially associated with someone in the past, for example you had a joint current account with an ex, your credit score could still be associated with them. Until the account is fully closed in both names, there is a chance you are still financially associated, so it’s worth checking you don’t have any old ties impacting your credit.
Improve your credit score
Once you know what’s causing the issue, you can take steps to resolve the problem and improve your credit rating. This will significantly help your affordability when it comes to applying for a mortgage.
Save up as large a house deposit as you can
Depending on the severity of your credit issues, lenders may require you to put down a larger house deposit. For lighter adverse credit such as the odd mispayment, an old default or CCJ, you may only need a 5-10% deposit. However, if you have multiple credit issues that are more recent, you might need to put down as much as a 25% deposit.
Use an experienced mortgage broker
Go through a broker, one lender you are beholden to their eligibility, we can find something that suits you
Buying with someone, whether it’s a parent, friend or partner can increase how much you can borrow
But it’s important to note that buying together, either as joint owners or with a mortgage guarantor, means you will be financially associated on your credit reports. If either the home buyer or the mortgage guarantor has bad credit, this can negatively impact the other person’s score. If the home buyer misses any monthly repayments, this could also negatively impact a guarantor’s credit rating too.
Good credit doesn’t outweigh the bad
If you are buying a home with someone with poor credit, or vice versa, the good credit score won’t ‘cancel’ out the bad. Mortgage lenders score each individual’s credit score on their own merit. So it’s a good idea to improve your own credit score as much as possible.
Avoid doing multiple credit searches
If you’re preparing to get a mortgage, we’d recommend avoiding doing multiple credit searches up to 6 months before your application, even soft checks. This includes applying for car insurance, credit cards and even using comparison sites to see what you could get.
Don’t take out any new credit commitments
Large payment commitments such as cars on finance, credit cards or loans will impact your credit rating and affordability. Your mortgage lender reserves the right to re-check your affordability at any point until you’ve completed your new property. If they find your mortgage affordability has significantly reduced, they might not lend you what you need for a mortgage.
Spark to a mortgage expert if you are looking at later life lending
Lending into retirement or later life with adverse credit will mean there are limited options available to you, especially if you’re looking at interest only mortgages. It’s worth speaking to a mortgage specialist to see what options are open to you.
Get a personalised recommendation with our plan.
Trying to work out what options you have when you’ve got adverse credit can be difficult and time-consuming. Our smart technology works out the best ways to boost how much you could afford through specialist lending schemes, based on your personal circumstances. It’s free, takes 10 minutes to complete, and there’s no credit check involved. At the end, you’ll get a personalised recommendation with indicative monthly repayments and interest rates.
Work with a specialist mortgage adviser
Our award-winning team of mortgage brokers are experts when it comes to boosting home buyer’s affordability. We can advise you on the best schemes for your situation, whether it’s through a family assisted mortgage or specialist lending scheme.
“Don’t be put off if you have bad credit. There are options out there to help you get a mortgage, although these are more limited than for someone with a good credit rating. Work with a mortgage broker like Tembo who has the expertise to scout out all the options open to you.”
- Kirsty White, Mortgage Lead
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Discover how Tembo could help you
If you have adverse credit, don’t lose heart. Our smart technology and expert mortgage advisors can help you find the right solution to boost your affordability. Create a personalised Tembo plan recommendation in under 10 minutes to get started. You'll be able to book a call with one of our team to talk through how we could help you get the keys to your dream home.