If you’re one of the millions of people with bad credit, you may feel like you’re out of options when it comes to getting a mortgage. However, this is not the case. This article will present the different schemes available for you, such as a remortgage with bad credit. More than that, it will help you understand the specifics of this type of loan to decide whether it is right for you. Finally, you will learn about shared ownership mortgages, which can be an excellent option for people who want to get on the property ladder but don’t have the perfect credit score.
How Do People Get Bad Credit?
Bad credit is a type of negative credit rating that indicates to lenders that a borrower may be a high-risk investment. For this reason, it can decrease the chance of getting approved for loans, lines of credit, and credit cards. As a result, bad credit makes it difficult to finance large purchases like homes or cars. Moreover, it can also lead to higher interest rates and fees from lenders, making it more expensive to borrow money.
There are many ways that people can end up with bad credit. The most common is missing payments on credit cards, loans, or mortgages. This situation can happen if someone experiences financial difficulty and cannot make their minimum monthly payments. Another way people can get bad credit is by defaulting on a debt, which means they have failed to make any payments for over six months. Other ways people get bad credit include:
- Missed or late payments on debts and bills;
- Foreclosures and history with collectors;
- Having judgments or liens against you;
- Bankruptcies and charge-offs.
Can You Get a Mortgage with Bad Credit?
The short answer is yes, getting a mortgage is possible even with bad credit. However, it will likely come at a higher interest rate than usual. Additionally, you may need to provide a larger down payment or have a co-signer to get the loan approved. If you’re considering applying for a mortgage with bad credit, compare rates from multiple lenders and get pre-approved before you start shopping for a home. Doing so will help you know what interest rates you can expect to pay and what loan terms apply to you.
However, there are a few things to keep in mind before applying for a bad credit remortgage:
- First, it’s essential to ensure that you understand the terms of the loan and your obligations.
- Secondly, it’s also recommended to consider the potential fees to ensure you’re getting the best deal possible.
- Finally, remember that your bad credit history will still be a factor when you apply for a bad credit remortgage, so make sure to keep up with your payments and improve your credit score to increase your chances of approval.
What Are the Benefits of a Bad Credit Mortgage?
If you want to decide which borrowing option suits you best, it is recommended to check with a specialized advisor. Mortgage brokers have access to many lenders who offer services for clients with previous credit problems. They will explain the eligibility criteria and offer you advice on improving your credit score. Additionally, a broker will discuss with you the advantages of a remortgage with bad credit:
Perhaps the main reason many people access a remortgage with bad credit is the need for cash. However, there is always a lender that can help, whether you need money for dealing with daily expenses or want to finance a large purchase. You can access the much-needed funds and slowly improve your credit score simultaneously.
In basic terms, consolidation debt means paying off several smaller debts with the help of a larger one. This practice helps you combine the loans from different lenders into a single mortgage. As a result, you can pay a lower interest rate, and you will have to make only a monthly repayment.
Improving The Credit Score
One significant advantage of this type of loan is that it helps you raise your credit score. However, once you access a bad credit loan, you must keep up with the monthly repayments. Then, as time progresses, you will raise your credit and the chances of receiving better offers from now on.
What Are Shared Ownership Mortgages, and How Do They Work?
Shared ownership mortgages are a type of mortgage that allows you to purchase a portion of a property while renting the remainder. They are an excellent option for people who want to get on the property ladder but don’t have the perfect credit score. Shared ownership mortgages can also help to reduce your monthly payments. Moreover, they require a much lower deposit than a standard house-purchasing loan.
Unfortunately, there is a downside to shared ownership mortgages. While they are an affordable solution to make your way towards owning a property, to apply for them, you will need the approval of a housing association. In other words, this scheme is not aimed at clients with bad credit. So if you don’t qualify for a shared ownership mortgage, maybe you should consider applying for a different loan.
How to Apply for A Remortgage with Bad Credit?
A mortgage broker will assist you in the entire application process. The eligibility criteria differ depending on each type of loan, but to remortgage with bad credit, you should usually:
- Provide proof that you can make the monthly payments on time and in full;
- Have a poor credit history, no matter the reason;
- Have a larger deposit than someone with good credit.
If you meet all of these criteria, you should be eligible for a bad credit remortgage. However, keep in mind that each lender has its specific criteria, so it’s essential to compare offers from multiple lenders before applying.
Bad credit remortgages can be an excellent option for those with less-than-perfect credit who are looking to purchase a home. By understanding the terms of the loan and shopping for the best deal, borrowers can save money and get into their new home sooner than they might think. Keep these things in mind when considering a remortgage with bad credit, and you’ll be on your way to homeownership in no time.