Some bad credit mortgages are backed by major insurance providers but available through brokers, others by stand-alone providers, but they will mean higher interest rates, greater monthly payments and higher penalties for arrears. In any case, if you decide a bad credit mortgage is right for you, you'll need to find a mortgage advisor who will help you get the best deal.
There are some steps you should take before you even think about getting mortgage advice. For example, by getting hold of your credit record through contacting a company such as Experian UK or My Equifax and updating it if it's not accurate, you can avoid some of the penalties associated with a bad credit record: your credit record may still contain closed or paid-up accounts, which you can ask to have removed.
Taking out a credit product such as a bad-credit credit card or bad credit mortgage will improve your credit rating if you make payments on time, but it's not an undertaking to be taken on lightly. You'll need proof of income, and it's advisable to have other debts in order before you proceed: could also consolidate any other debts you are able to for the sake of paying a better interest rate.
Mortgage advice for a bad credit mortgage should encompass the following areas of pitfall in a potential mortgage:
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higher late fees and payment penalties, 'prepayment penalties' for repaying your mortgage too soon. It could after all be in your interest to switch from a bad-credit mortgage to a standard mortgage after several years of improving your credit history, to benefit from more favourable interest and payment amounts.
Your bad credit may have been acquired as a result of previous mortgage arrears, a county court judgment against you, as a result of bankruptcy, have missed payments due to an irregular income, or have changed address many times. Whatever your circumstances, you should be able to get mortgage advice without having to pay a fee. If you choose a mortgage advisor who knows the whole market, and isn't restricted to bad credit mortgages, you may find that you get a better deal.
A bad credit second mortgage could be used if you already have a bad credit mortgage and are looking for a way to consolidate or repay debts, given that bad credit mortgages can be offered at a rate that is less that other unsecured debts. Bad credit second mortgages can be useful if are self employed investor landlord and have another property with a mortgage that you may have missed a payment on.
There are other ways to improve your chances of getting a mortgage if you have a bad credit rating. One is by improving the terms you offer to an agreement, through getting a higher salary, asking for a smaller mortgage, making a bigger down payment, or a secured property against which to pay for the mortgage.
Insurance brokers will differ in the rates they charge, which is normally a percentage of the amount of the final mortgage. You should, however be able to get advice for free, so whatever your mortgage circumstances there's always hope that you will one day own your own home.