Is it Easy to Get a Home Loan in the UK With A Low Credit Rating?

There are many people who go through credit problems at some time in their lives. Actually, last year, mortgages for people with poor credit accounted for around 14% of all UK home loans. This proportion is growing year after year.

There are numerous reasons for having a negative credit score. Often, the person has run into bad luck. Typical circumstances may be Redundancy, Separation, Sickness, Bereavement or Bankruptcy. Any of these incidents would cause a person to fall behind on their mortgage loan payments.

Indicators that you're likely to have a negative credit history are: You have filed for bankruptcy. You have a court judgement against you. You have entered into debt agreement. You have been in arrears with a previous mortgage or other bank loan.

Until recently, poor credit could deeply restrict your chance of finding a mortgage. There was a possibility that you would be required to speak with a mortgage lender specialist and accept a higher interest rate than normal borrowers.

But UK Mortgage Lenders are becoming more and more understanding to potential homeowners with poor credit histories. They are more interested in making a point to seek out those who are typically responsible borrowers but have simply had bad luck. A lot of standard lenders now offer home loans even with an unperfect credit rating.

In the last several years, the range of "credit repair" and "adverse credit history" mortgage agreements from building societies and mainstream banks has grown remarkably. This added competition means that the mortgage deals that are being offered to borrowers with less than perfect credit are better. You'll find lower interest rates and more welcoming terms. One of the greatest advantages of doing business with these mainstream lenders (typically building societies) is that they generally offer you the opportunity to change to one of their usual lowest interest rate mortgages within the next two or three years - assuming you've been making your payments on time.

In fact, people with only marginally adverse credit ratings will often discover that the rates they have been offered are no more than 1% over the lender's usual variable rate. Sometimes they even qualify for similar uk mortgage deals that are offered to mainstream borrowers.

For people who have terrible credit, what will generally happen is, the more severe the credit score, the higher the interest rate charged. Worse case scenario, new bankrupts and others with more serious credit issues may find rates up to 11%. But these rates do not apply to the majority of borrowers, so don't let this turn you away.

If you have ended up with a very bad credit rating, one of the best things is to make consistent payments on any financial responsibilty you have. The mortgage lenders want to see payments that are unbroken and constant. It's not the amount paid. It is the reliability they're searching for. Additionally with a good annual income, this can really help you to better your credit record. These two things are the prime ways that those with positive credit ratings got those ratings.

Mainstream borrowers can now expect a wider range of choices in UK mortgage deals: trackers, fixed rate mortgages, variable rate mortgages – the list doesn't stop there. The best part is that most of these are currently made available with poor credit mortgages too. A lot of lenders who deal with poor credit situations now offer similar choices to those available to mainstream borrowers. Two to three year fixed mortgages are becoming increasingly popular because they give security. Even if rates fluctuate, payments on a fixed rate mortgage don't go up.

To find the best mortgage deal, it pays to get some professional advice when trying to find a mortgage or remortgage. Think about calling a bad credit mortgage specialist, who can look at a greater assortment of mortgages for you. Shop around to find the one that works best for you. Just as long as you've got your finances under control right now and you've payed all the legal obligations regarding your recent debts, you have got an excellent chance to get a mortgage or remortgage.

Authors biog:

Brian Harbinson contributes regularly to MortgageSorter, a UK site that specialises in making UK mortgages easy to understand

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