Adverse Credit Loan or Adverse Credit Mortgage
This is a term used to describe credit problems the borrower may have suffered in the past. Such problems will encompass County Court Judgments, (CCJ's) defaults, arrears on loans and bankruptcy.
What is an adverse credit mortgage?
To clarify the situation here are some of the other names people have given to Adverse Credit Mortgages:
- Non status mortgage
- Bad credit mortgage
- Sub prime mortgage
- Non standard mortgage
- Poor credit mortgage
- Credit impaired mortgage
As you can see there are many different names for it, but all essentially mean the same thing.
Adverse Credit History
Adverse Credit Mortgages are for people who have an adverse credit history. An adverse credit history could include:
- County Court Judgements (CCJ's)
- Mortgage or rent arrears
- Self employed - Although you can apply for a self certificate mortgage
- Decrees (Scotland)
- Bankruptcy
- I.V.A
- Trust deeds
- Bad credit history
Adverse Credit Mortgage
However, there are other factors which mean you may have to apply for an adverse credit mortgage, such as the lack of a credit history or if you have changed address many times in a short space of time.
Mortgage Lenders
Mortgage lenders may also turn you down if you have changed address many times or if you are an entrepreneur without 3 years worth of audited accounts. Self-employed borrowers may have to apply for a mortgage via sub prime lenders but may also apply for self-certification mortgages, meaning they declare their earnings without having a set guaranteed salary.
Qualification for Adverse Credit Loan
It is estimated that one in four British people would not qualify for a standard mortgage from a high street lender. This means they require sub prime lenders in order to acquire a mortgage loan. Fortunately there are many sub prime lenders across the UK, and also a growing number of mainstream lenders who consider lending to people with an adverse credit history. These lenders typically operate on a cascade system, whereby you can apply for a mortgage with them, but if you have some adverse credit it will cascade through a list of schemes until they have one that applies to your circumstances, without having to move to another lender.
Different adverse credit Schemes
The extent of your adverse credit will affect the schemes available to you, and different lenders have different criteria when assessing individual cases. It is a general rule though that the more adverse credit you have, then the lender will normally charge a higher interest rate and is also likely to offer a smaller loan to value on the property.
Risk Factors of Adverse Credit Loans
As adverse credit specialists Money Highway recognise these factors, and are experts in placing the right mortgage for each borrower depending on their individual circumstances. If the credit record of the borrower is only slightly adverse, then this may only mean a minimal loading of the interest rate.
Adverse Credit Risk
Lending money is all about risk. A bank will weigh up the risk factor of lending money to an individual and decide whether they are likely to get their money back with interest without too much hassle. Therefore some lenders will simply not lend to high-risk category borrowers, others will but will adjust their interest rates accordingly. This means you may have to pay higher interest rates on your mortgage. On the positive side you get a home to live in that belongs to you, and if you repay you mortgage back as required by the lender, after three years your credit history will have benefited considerably.
There's hope even if you have a bad credit rating
Having adverse credit does not mean that you are stuck with an adverse credit mortgage though. Once you have the mortgage, provided you keep up to date with the payments for the three years and conduct the rest of your financial affairs in a similar fashion there is an excellent chance that you can then benefit from one of the schemes offered by the high street lenders.
Remortgage
This means that after three years you could remortgage (switch mortgage lenders) to a high street lender and enjoy massive savings on discount interest rates. It's all about climbing the ladder from adverse credit history and no property at the bottom to positive credit history and ownership of property at the top.
Money Highway
We specialise in Adverse Credit Mortgages, remortgages, and adverse credit loans. You can apply here for more information from a specialist consultant at no obligation or cost! |
