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 Money
Page > Mortgages
> Adverse Credit Mortgage - UK Guide
 In a
nutshell
An adverse credit mortgage is offered to
consumers with a poor credit history/rating who will not
qualify for standard mortgage products.
Best
Mortgage For
People with credit history/rating
problems. This kind of mortgage is generally offered to
consumers whose credit rating has been affected by previous or
existing financial problems. These problems can include CCJs,
bankruptcy, defaults, arrears etc. It may also suit people
that fall into the adverse credit category - such as the
self-employed and people with no credit rating at all - even
though they have not had any specific credit problems. People
in this kind of situation will not pass a standard credit
rating check with many lenders - an adverse credit mortgage is
one alternative for them.
Mortgage Type
If you
have a specific mortgage in mind - i.e. a repayment or
interest-only mortgage - then you'll be able to find a
provider that will arrange this within the adverse credit
sector. You should also be able to find a full range of deals
such as fixed, variable and capped rates, although you may
have to shop around a little to get exactly what you want as
some lenders may limit your choices.
Typical
Amount to borrow
This will ultimately depend on
the mortgage lender you choose - some will follow industry
averages of around 3+ times your annual salary (if you are the
sole mortgage holder) or 2.5+ times combined salaries (if you
are a couple). Others may offer you less or more depending on
their own terms.
Deposit
As people
with adverse credit are perceived to be a higher risk by many
lenders they will often ask for a higher deposit (up to 20% of
the money borrowed) to compensate for this fact. Some,
however, will offer standard deposit rates of 5-10% and some
will allow 100% mortgages.
Advantages
It used to
be extremely difficult to take out a mortgage if you had a
poor credit history - adverse credit mortgages level the
playing field and allow everybody to borrow the money to buy
property. They are specifically designed for people who have
had financial problems and also offer an ideal solution to
others such as the self-employed that fall into the adverse
credit lender category through no fault of their own. Also,
adverse credit lenders will take your personal circumstances
into account - standard lenders will not necessarily do this.
This can be helpful if your poor credit history is based on a
specific reason such as redundancy or illness, for example.
Standard mortgage lenders don't tend to look at the big
picture like this.
What to
look out for
You may need to provide a higher
deposit (up to 20%) to secure an adverse credit mortgage and
you may find that your lender ties you into deals (such as
fixed rate periods and discounts) for longer than is usual in
the industry.
Different lenders view adverse credit in
different ways so you may find that you can get a better deal
by doing some comparative research before you buy. The
majority of adverse credit mortgage lenders will charge you
higher rates on your mortgage than borrowers with good credit
will have to pay. These rates can vary according to the kind
of credit rating you actually have so, again, it's worth
shopping around to find the best one for you.
Alternatives
If you
find yourself in the adverse credit category for a
'non-credit' reason such as being self-employed etc., then you
can look at a self-certification mortgage as an alternative.
If you believe that your credit rating problems are not too
severe then it might be worthwhile taking advice to see
whether you could buy a standard mortgage deal as an
alternative - some mainstream lenders are becoming more
flexible about working with adverse credit
applications.
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