Many people experience credit problems at a certain point. Loss of income, illness, divorce, and poor financial management are a few contributing factors. Any of these can cause a homeowner to fall behind with mortgage payments. A poor credit rating usually makes it more difficult to get a mortgage. However, things seem to be getting easier for people in this situation. A recent study revealed that 14 percent of UK mortgages were held by people with poor credit and this figure is increasing annually.
In the past, mortgage applicants with poor credit typically paid much higher interest rates than other homeowners. Since the economic recession, UK mortgage lenders are encountering more applicants with poor credit scores. They realize that many of these people are simply victims of bad luck. Even mainstream lenders are now willing to provide mortgages to people whose credit history is tarnished.
The assortment of UK mortgages offered by building societies and banks has increased rapidly in recent years. With the increased competition, the mortgage deals available to homeowners with poor credit have become more attractive. Attractive terms and lower rates are being welcomed by poor credit borrowers. Using a mainstream lender may provide the opportunity to switch to a better deal in a few years if payments have been made as agreed.
The easiest way to qualify for a mortgage with bad credit is to make timely payments with other forms of credit. A mortgage lender looks for consistent payments made on time. Though paying off balances in full each month is great, making at least the minimum required payments consistently is more important to lenders. Having a steady income also increases the chances of qualifying for a mortgage. The lender must feel confident that the borrower will be able to make payments over the long-term.
Working with a broker who specializes in bad credit mortgages can also be helpful. This person will identify the mortgages available based on the credit rating of the applicant. It would be difficult for the average consumer to find all these offerings on his or her own. The deals should be compared to identify which is the most attractive in terms of interest rate and repayment terms.
Bad credit borrowers are now finding themselves qualifying for fixed and variable mortgages with reasonable interest rates. Many are also eligible for tracker mortgages, which feature a variable rate based on a specified percentage above the Bank of England base rate. Two-year fixed rate mortgage loans offer security, making them popular with poor credit borrowers.
More borrowers with slightly subpar credit are receiving rates less than one percent higher than the typical variable interest rate offered by the mortgage lender. Some are even getting the same deals that good credit borrowers are receiving. By making timely and consistent payments for other credit and working with a bad credit mortgage specialist, consumers with bad credit histories are finding their mortgage applications accepted by mainstream lenders, offering them the chance for an even better deal in the future.
