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Bad Credit Mortgage lenders guide

While many high street banks and building societies are prepared to be sympathetic towards some less serious credit issues, there may be times when you’ll need to go to a specialist bad credit lender in order to secure the mortgage you need.

What’s in this article

In this guide we’ll look at some of the best known adverse credit mortgage lenders and the types of credit issues they are prepared to consider.

The different types of lenders

Aldermore

Specialist lenders Aldermore ‘champion equality by supporting the exceptions to the rule and getting finance to where it’s needed’, meaning they are open to considering applications from people who might struggle to find finance elsewhere.

They are happy to accept a wide range of credit issues including arrears, unsatisfied debt management plans, individual voluntary arrangements (IVAs) and late payments. Defaults and CCJs within the last three years can be considered on an individual basis but Aldermore will not accept CCJs or defaults registered within the last three months.

Bluestone Mortgages

The focus for Bluestone is on demonstrating affordability, not fitting a set of checkbox criteria, so if you feel like you’re in a strong financial position going forward, despite issues in the past, they could be a good match for you.

Bluestone is one of the most flexible bad credit mortgages lenders, with no specific credit issues being off the table, even serious issues in the last three months. They have no maximum values in place for CCJs or defaults, satisfied or unsatisfied.

Buckinghamshire Building Society

The Buckinghamshire Building Society is a mutual society, owned by its members with a focus on traditional banking and customer service. Their aim is to ‘help people achieve financial security by helping them to buy a home of their own, particularly where the complexity of their circumstances requires a bespoke approach.’

They are willing to consider most types of adverse credit, potentially including recent CCJs and defaults, but will not accept applications from people who have a criminal record or have been previously repossessed.

Darlington Building Society

While open to a range of credit issues, Darlington Building Society is a little more cautious in its attitude to risk, and so might be better suited to someone whose bad credit issues happened long ago and were for smaller amounts. For example, any IVAs need to have been registered over eight years ago and satisfied over three years ago, and repossessions are only acceptable if they didn’t occur with the last five years. CCJs and defaults must be satisfied and then are subject to maximum amounts of £500 each.

Earl Shilton Building Society

All about personal service, Earl Shilton looks at each application on a case by case basis, meaning there’s plenty of scope for more complex credit histories to be taken into consideration. They will not accept criminal records or debt management plans, and defaults and CCJs must be satisfied for your application to be considered, but they have a sympathetic approach to a range of other bad credit issues.

Foundation Home Loans

A specialist lender who prides themselves in a quick, efficient service, with average decision in principle referral times and full application review times of just one day. Unsatisfied defaults, very recent CCJs and criminal convictions are their deal breakers, but otherwise they can potentially consider a variety of bad credit issues.

Furness Building Society

With over 150 years of history and experience in providing savings and loans to their customers, Furness really does understand what normal people need when it comes to specialist mortgages. Furness goes the extra mile, digging into the detail of your finances to come up with a mortgage that works for you.

They are cautious in some arrears - for example they don’t allow unsatisfied CCJs or defaults, and they impose low maximums on satisfied accounts - but they’ll take your case as an individual and do their best to find a solution for you.

Kensington Mortgages

Well respected and award winning lenders Kensington specialise in mortgages for people with complex credit histories, who don’t qualify for a standard high street mortgage. While they are firm about certain times of credit, for example having stricter criteria in place around IVAs and recent CCJs and defaults, they are more flexible in other areas, such as the number and value or satisfied defaults, CCJs and unsecured arrears.

Norton Home Loans

The strapline of Norton Home Loans is ‘real life lending’ and that sums up exactly what they are about - real life mortgages to people who don’t tick the right boxes to get a traditional mortgage from a high street bank or building society.

They can consider a range of factors that might otherwise hold you back from getting a mortgage, including bad credit but also your income and the type of property you’re looking to buy. They have a broad, flexible approach, and are likely to consider all types of bad credit scenarios.

Tandem

One of the new kids on the specialist mortgage block, Tandem was set up in 2014 as a digital challenger bank with a focus on accessible, sustainable finance. In 2022 they merged with Oplo, whose focus had been providing mortgages to people left behind by traditional banks. The new merged brand offers a range of specialist mortgage products, all created to be a greener, more transparent alternative to traditional finance pathways.

Lending criteria is flexible when it comes to your credit history, with an emphasis on assessing individual circumstances and needs.

The Mortgage Lender

Part of the Shawbrook Group, The Mortgage Lender (TML) is on a mission for ‘special’ to become the new normal when it comes to mortgages. They know that life nowadays isn’t about having a 9-5 job for life and a happy marriage with 2.4 kids and so they are open to mortgages for freelancers, for single people, for those with poor credit, or any combination of circumstances.

From our research, their exclusions appear to be previous repossessions or CCJs and defaults registered within the last three months. Otherwise TML has a very generous approach to all forms of bad credit.

Together

The ethos at Together is real decisions based on real people. ‘We get to know the person behind the application’, they say on their website, ‘because to us you’re more than a credit score or payslip.’ They offer a range of poor credit mortgages for people who may have had a mortgage declined by high street lenders and take a bespoke approach to each application, working hard to understand exactly what you need from your mortgage and how they can best fit with that.

Individual voluntary arrangements and debt management plans aside, they can potentially accept other forms of bad credit and at personalised rates and terms spending on your requirements.

Vida Homeloans

Vida uses a five tier system to categorise bad credit based on severity and the amount of time elapsed. Depending on which tier you fall into, you’ll qualify for a different rate. For example, the highest interest rates are offered to applicants who’ve had CCJs, defaults or missed mortgage payments registered in the last 6-12 months, whereas to qualify for the most competitive rates you’ll need to have had no CCJs in the last six years, no defaults in the last four and no missed mortgage or secured payments in the last three.

Vida offers two LTV options - 70% and 80% - so if a low deposit is an issue they might not be the lender for you.

More Information

What is a bad credit mortgage lender?

A bad credit mortgage isn’t a specific mortgage product exactly, it’s simply a mortgage that’s aimed at people who have a history of bad credit and may be perceived as higher risk. Unfortunately this element of risk means that many of the high street banks and building societies that you’d recognise in your local town centre simply won’t be interested. Many have automated assessment processes that churn out a yes or no without taking the time to delve into your individual circumstances.

A bad credit mortgage lender is a lender that’s a little more flexible when it comes to your financial background. They understand that life isn't always simple, that mistakes are sometimes made and that not everyone has a spotless credit record. They will normally look at applications on a more individual basis, exploring with you the context of your bad credit and trying to find a solution that works for you both.

Are bad credit mortgage lenders more expensive?

Yes. While all the talk of taking each application on its merits and accepting your less than perfect background sounds very amicable, this more flexible attitude to risk does come at a cost. You should expect to pay higher interest rates through a specialist bad credit lender, meaning your monthly repayments will be higher than through a mainstream bank and the amount you’ll pay back overall will be more.

This is to be expected as the lender is taking on more risk - you’ve shown that you’ve not always been able to manage repayments in the past and this has to be reflected in their pricing.

Will I need a bigger deposit for a bad credit mortgage lender?

You might for some of them, but there will also be options for 90% or even 95% bad credit mortgages, so if a low deposit is a real worry for you then don’t panic. The beauty with these kinds of specialist lenders is that they tailor make their mortgage offers for you rather than having a strict black and white set of eligibility criteria.

Will I have to stay with this lender for my whole mortgage?

The good news is that no, you won’t be tied into a specialist lender for the whole term of your mortgage, so you don’t have to worry that your bad credit is going to haunt you forever. Once you’ve got a couple of years of regular payments under your belt, proven your reliability as a borrower and built up a little more equity in your home, you should be in a good position to remortgage to a better deal and reduce your monthly mortgage repayments.

Do I need to use a broker for a bad credit mortgage?

Yes, it’s sensible to get some expert help if you have a history of bad credit. A broker who has specific experience of securing bad credit mortgages is ideal, as they will have existing relationships with niche lenders and be able to manage the whole process on your behalf. It’s especially useful working with a broker when you’re looking at more specialist lenders as these can be harder to find on your own. You may also find that not all of them accept direct applications, and that you’ll need to be working through a broker to even apply.

Are all bad credit mortgage lenders the same?

No, as you can imagine, each lender will have their own eligibility criteria and terms, and they won’t all treat different types of bad credit in the same way. They will also offer different interest rates, and may have varying LTV requirements, so it’s important to shop around and find the lender that’s the best fit for you.

We’ve taken an in depth look at some of the options when it comes to bad credit mortgages, and looked at the kinds of credit issues they may or may not accept. This is only a sample and is by no means comprehensive. Keep in mind too that this information is correct at the time of writing (February 2023) but may be subject to change and doesn’t guarantee you’ll have an application accepted. Talk to a broker and they will be able to research the whole bad credit mortgage marketplace for you and find the lender that’s best suited to your personal circumstances.

Conclusion

Whatever your bad credit issues in the past, hopefully this guide has reassured you that whatever your circumstances, there could still be a mortgage option for you. Team up with the right mortgage broker, someone with a good knowledge of the whole spectrum of bad credit lenders, and they’ll be able to assess your situation and match you with the lender that’s best suited to your situation.

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