I Haven’t Got A Perfect Credit Record

Bad credit scoreUnfortunately people may have problems with the credit profile such as defaults on their credit payments, County Court Judgements, Bankruptcy, Individual Voluntary Arrangements or even repossession.

This can mean that it will be more difficult to get credit and in some cases not able to get credit at all.

When looking to obtain a mortgage this will be one of the main aspect of the application that a lender will look at.

It is important for the lender to be able to establish that you are able to demonstrate that you have been able to pay previous credit agreements and maintain your credit accounts satisfactorily.

However, this is not the case for a variety of circumstances, loss of job, ill health, divorce etc and it is at this point that people can fall into arrears with their credit commitments.

So what if I have had credit problems in the past ?

Dependent upon when you have had problems and what those problems were with your credit may determine how lenders will view your situation when applying for a mortgage.

If for example your problems were within the last 2 years the chance of getting credit for a mortgage are very slim. Most high street lender will not be able to offer a mortgage if this is the situation.

There are however lenders who specialise with mortgage products for people who are not able to match the strict criteria of mainstream lenders.

It is fair to say that the interest rates may not be as competitive as High Street lenders but they will generally be able to offer a mortgage dependent upon what your circumstances are and the severity of your past credit problems.

These types of lenders generally will want you to have a more substantial deposit if purchasing a property or if remortgaging a higher percentage of equity in the property.

These types of mortgage are generally not available from the high street and it is at this point you may need to seek the advice of a professional mortgage broker.

Mortgage brokers generally have access to these kind of mortgage products and by consulting with them and explaining your situation they will normally advise what mortgages would be available to you.

This can save you alot of time and effort trying to find the lender who may lend to you on your own.

There are some mortgage brokers who specialise in this area of mortgage advice and seeking their help would be extremely beneficial.

Consolidate Debt By Re-Mortgaging

houses sitting on moneyIf you already own a property with or without a mortgage and you need to raise funds to repay outstanding debts like credit cards, personal loans or second charges this is known as debt consolidation.

Debt consolidation as the name suggests literally puts all your debts under one roof – your house – and is usually a way of reducing your total monthly outgoings.

You must think carefully regarding securing your debts against your property as you are switching unsecured debts such as credit cards and personal loans to being secured debts on your property and also reducing the amount of equity in your property and by taking the debt over a longer period of time the total charge for credit is likely to be higher.

However, if you have credit card balances outstanding and you are only paying the minimum monthly amount the balance in reality is not reducing that much on a monthly basis as the majority is interest to the lender, ie you are not repaying much off the capital to reduce the balance – also the interest rate charged by credit card providers varies and can be expensive.

AN EXAMPLE OF HOW DEBT CONSOLIDATION WORKS

House Value £ 250,000

Existing mortgage £ 150,000 Payment £ 600 pm

Equity £ 100,000

Total Credit card balances £ 15,000 Minimum Monthly

Payment £ 450 pm

Total monthly outgoings £1,050 pm

Re-mortgage property with new £ 165,000 mortgage to repay existing £ 150,000 mortgage and £ 15,000 credit card balances

House Value £ 250,000

New mortgage £ 165,000 Payment £ 800 pm

Equity £ 85,000

Total Credit card balances £ 0 Minimum Monthly

Payment £ 0 pm

Total monthly outgoings £ 800 pm

In the above example you have reduced your outgoings by £250 per month.

There are other ways of consolidating debt such as FURTHER ADVANCES, SECOND CHARGE LOANS and PERSONAL LOANS – these will be covered at a later date.

Please remember your home may be repossessed if you do not keep up repayments on your mortgage or loan secured on it.