TERRY McAlpine feared he would never be a homeowner due to £50,000 debt and a crumbling credit rating, but he still managed to get a mortgage on his three-bedroom house.
Often lenders won’t take someone with bad credit because they’re considered too risky.
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If someone’s record reveals that they have a history of missed credit card or loan repayments, lenders usually conclude that this is a dangerous trend and they will reject applications.
Another barrier to potential home ownership is the risk of repossession – as a mortgage lender can take your home if repayments are not made.
Terry, from Upton in Northampton, had seen his finances in tatters thanks to the antics of a longtime ex-girlfriend.
He says she has racked up almost £50,000 in debt by using her credit cards without permission.
How to Boost Your Credit Score Before Applying for a Mortgage
FIRST, make sure all your payments are made on time – this includes everything from household bills to credit cards to loans.
Mortgage lenders take a dim view of late payments.
If you have debt, look for ways to put money aside each month to help pay off your debt.
If you’re struggling to meet your repayments, talk to your lenders – they may agree to a payment plan that suspends the interest you owe, as long as you stick to the plan and make your payments in full and on time. time.
Then check if your expenses are lower than your income and look for ways to reduce your expenses if they are too high.
Finally, check your credit report to find out your score. That means getting a free credit report from each of the three credit bureaus – Experian, Equifax and Noddle – because you can’t tell which one a potential lender will use.
The result was a ruined credit report, which led to a series of mortgage applications being turned down when Terry, 45, and his wife Charlotte, 34, a registrar, started looking for a house to buy.
Only after an internet search found Onlinemortgageadvisor.co.uk – a broker who specializes in finding mortgages for people who have struggled elsewhere – that he secured a mortgage from Kent Reliance.
Terry was able to settle his debts by working overtime – and with the help of his new partner – before they started saving for a house.
In total, the couple put down a £10,000 down payment for a £90,000 mortgage. The rest of the property is owned by the council and they have the option to overpay and buy the rest of the property.
Terry, a sustainable drainage engineer, told The Sun: “I had pretty much given up hope but in no time our broker told Charlotte and we had a mortgage.
“That meant we could buy our three-storey townhouse for £270,000.
“We made a down payment…and signed a two-year fixed rate mortgage. We couldn’t be happier.”
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Terry’s story shows that aspiring homeowners with bad credit shouldn’t give up hope of buying a property.
In fact, according to financial comparison service Moneyfacts, while credit repair mortgages account for less than one in five deals, the number of deals available increased by more than 100 in the six months to August.
It brings the number of such transactions from 743 to 843.
But mortgages for people with bad credit usually come with tougher questions about how repayments will be honored and require that any credit issues be firmly gone.
Expect to be able to provide payslips and bank statements dating back more than the usual six months.
How to get a mortgage with bad credit
If you’re considering buying a home, use an independent mortgage broker to ensure you get the best deal.
You should check that your broker will compare the whole market and ask what the fees will be – brokers, such as London & Country or Onlinemortgageadvisor.co.uk, are free to use.
Don’t be tempted to start applying for mortgages from your bank or any other provider you can find.
A scattered approach will only hurt your chances of getting a mortgage, as potential lenders will check your credit report, and every check that doesn’t result in a successful mortgage application will lower your credit score.
Before going to a broker, you can use free eligibility tools to check your likelihood of getting a mortgage before applying, which means your credit score won’t be affected.
Comparethemarket recently launched such a tool like a Experian – but these only have a few lenders listed at the moment, which means they don’t compare the whole market.
Also, while some lenders will offer a mortgage to people with bad credit history, they will take into account a checkered past and charge higher than average interest.
Rates are generally 1% or more above standard two-year fixed mortgage rates, although some are more competitive.
They will also likely require larger deposits, usually between 25% and 35% of the purchase price of the property.
And they will generally attract higher product fees of around £1,500 instead of £500.
Use a mortgage broker to find the best deal for your needs.
find how couple turned down mortgage due to bad credit history find way to buy £158,000 two-bed house.
here is how you can boost your credit score so you can get on the property ladder.
More, we reveal the banks you can get a mortgage from WITHOUT having to show your statements.
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