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Home » Services » Mortgage Services » Adverse Credit Mortgages » How Adverse Credit Affects Mortgages

How Adverse Credit Affects Mortgages

Ciarán Power

Last Updated: February 2nd, 2024 at 6:36 pm

Table Of Contents

Introduction

Adverse credit can have a significant impact on your mortgage prospects. Understanding how it influences your available pool of lenders, the rates offered, and the overall feasibility of obtaining a mortgage is essential for those with less-than-perfect credit histories. This page delves into the relationship between adverse credit and mortgage opportunities.

Effect on Choice of Lender

The presence of adverse credit in your history can be a deciding factor in what lenders will borrow to you. Lenders scrutinize credit histories to assess risk, and adverse credit can often lead to declined applications. However, this isn’t a universal rule. The severity of the adverse credit, its age, and the circumstances surrounding it are all considered.

You will probably find most high-street lenders here in the UK have pretty strict criteria surrounding your credit history. However, many lenders exist (often accessible by brokers only) who specialise in handling applications from individuals with adverse credit, offering alternative solutions where mainstream lenders might not. This is where the value of a broker like Green Mortgages shines, as we can access these types of solutions!

Impact on Mortgage Rates

If you have adverse credit, you may find that the terms of any mortgage offer are less favourable than those for individuals with clean credit histories. This often translates to higher interest rates, which lenders charge to offset the perceived higher risk. Additionally, you may be required to provide a larger deposit, as lenders seek to reduce their exposure to potential default. The combination of higher rates and larger deposits can in many cases make mortgages more expensive for those with adverse credit.

Long-term Financial Implications

Adverse credit doesn’t just affect the initial stages of securing a mortgage; it can also have long-term financial implications. Higher interest rates mean higher monthly payments and an increased amount of interest paid over the life of the mortgage. This can significantly affect your overall financial planning and budgeting. It’s important to carefully consider these long-term costs and weigh them against the benefits of homeownership.

Our Thoughts

Adverse credit can present challenges in the mortgage process, but it’s not an insurmountable obstacle. By understanding how it affects mortgage applications, terms, and long-term finances, you can make more informed decisions. It’s essential to explore all available options, including specialist lenders, and to be fully aware of the potential costs involved. With the right approach and expert mortgage advice from Green Mortgages, securing a mortgage with adverse credit can go from a stressful situation to a breeze.

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