Mortgages For People With Bad Credit – Are They a Good Idea?

There are many reasons that people find themselves in the unfortunate situation of having a bad credit rating. In many cases it is actually something that could have been avoided if the right steps had been taken at the right time. However this is all too easy to realise in hindsight and of course is of no use once things have gone from bad to worse and your credit rating has been damaged.

Depending on how badly you have damaged your credit rating, it may still be possible to obtain some forms of credit, especially secured credit. In some cases you may have to work at repairing your credit rating for a few months, perhaps even a year, before lenders will consider taking a chance on you. If you are already a home owner then you can use this to your advantage by using your home as security. There are many lenders that specialise in loans for people with bad credit who will happily lend you substantial amounts of money if you are willing to secure it against your home. If you do not already own your own home, and are looking to get a first time mortgage, then you are going to find the process a lot slower and more complicated initially.

Getting a mortgage with bad credit is possible, it is just more difficult than if you have a good credit rating. Lenders will see you as a high-risk and therefore are less willing to lend to you. It is for this reason you may find you have to approach specialist lenders in order to secure a bad credit mortgage. These kind of financial institutions will have their own set of lending criteria, which may well differ from a high street lender, and they will want to go more in depth into things such as your employment history and credit report. If it is felt that you match the necessary criteria then you may well find you are offered the mortgage or loan that you have requested, however you should be aware that the terms of high-risk lending are going to be less favourable than those found in banks and building societies. Higher interest rates, larger deposit requirements and possibly arrangement fees are common place among bad credit lenders, as these reflect the perceived risk that is being taken, and provides adequate cover should you default on the terms of your credit.

It is because of these terms that it can sometimes be much more beneficial to hold off applying for a bad credit mortgage, instead waiting for a few months to repair your credit rating to a standard that would meet the criteria stipulated by many high street lenders. Committing to bad credit mortgage loans can end up costing you a lot more money over time than you may think, especially if you get the chance to remortgage in the future but find you are facing high exit fees. Always think very carefully before signing up to any financial commitment, and remember that while waiting a few months may not seem like the best choice at the time, you could be very thankful in the long run if you do.