Welcome to Adverse Mortgages

For most people, taking out a mortgage is a very necessary and important part of purchasing a property. This is easier for some than for others, depending on an individual’s or couple’s financial situation. The better your credit history and credit score, the more promising your chances are. However, if you have adverse credit, you may find you won’t be considered for standard mortgages on the market. Instead, you might need to look at adverse mortgages.

What are adverse mortgages?

There’s really no such thing as an adverse mortgage, but you can find mortgages intended for those who have adverse credit. You might also see them labelled as ‘bad credit’ mortgages. 

You’ll tend to find adverse mortgages offered by specialist lenders rather than high street banks or building societies. Specialist lenders are those with experience in helping people with more challenging situations or credit histories.

Have a listen to this really good podcast on bad credit mortgages by The Mortgage Broker to learn more.

Can I get a mortgage with adverse credit?

Your credit record does tend to follow you around, so it makes sense to do everything you can to maintain it. But what if you’ve made poor financial decisions or got into trouble with late payments, missed payments, or even CCJs? Certain actions can take several years to drop off your credit file. You may want to get a mortgage long before that time comes.

An adverse credit history can cause you problems when it comes to making a mortgage application. However, as we’ve seen, there are still possibilities on the market today.

Differences between standard mortgages and adverse credit mortgages

There are a few key differences you should keep in mind when looking at these mortgages. We’ll go through them below.

Higher interest rates

Anyone with bad credit represents a bigger risk to a lender. This means that lenders who are still willing to grant you a mortgage are only likely to do so with a higher interest rate attached.

A bigger deposit

Many standard mortgages work with as little as 5% to 10% deposit on the property being purchased. In the case of an adverse mortgage, you might see a higher minimum in place. This could be as high as 20-25% of the purchase price. In some cases, it may even be higher. Again, this reduces the risk taken on by the lender.

Lower borrowing limits

Everyone will have a limit on the amount they can borrow for a mortgage, no matter what their credit score is like. In the case of someone with adverse credit, the upper limit is likely to be lower to reflect the poor credit score.

With all these elements in play, it becomes even more important than ever to compare mortgages to find the best deal you possibly can. Adverse mortgages may be more expensive than regular ones for those with good or excellent credit, but there are still variations between lenders and products. This means you do need to look at interest rates, fees, lenders, and other variables.