Bad credit mortgages

  • Find out whether you're likely to be able to get a bad credit mortgage
  • Mortgages for people with bad credit: how much can you borrow?
  • How to improve your credit score, and what creates a bad credit score

Since the credit crunch began it has become more difficult for people with a bad credit score to get a mortgage.

Before 2007, the sub-prime sector - ie. people with bad credit - was viewed as a lucrative area of the mortgage market for lenders, and these kind of loans were widely available.

But in recent years, lenders have become more risk averse and the market for bad credit mortgages is now more limited.

Can I get a bad credit mortgage?

Even with a poor credit history you may still be able to find a mortgage, but it will be more difficult than for someone with a better credit record. You can also expect to be charged higher than average interest and you will need to have a large deposit. 

Lenders often restrict the amount they are willing lend. This is usually around 80% of the value of the property, though some lenders will only offer mortgages up to 60% of the value of the property. For more information about what loan to value means, read 'what a mortgage lender will lend you'.

Some lenders specialise in bad credit mortgages and a financial adviser would be able to suggest lenders that can help. The Which? Group offers an independent mortgage advice service, Which? Mortgage Advisers, that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the website.

Why would I have bad credit rating?

A number of things can affect your credit rating. Some of the main reasons include:

  • If you have missed credit card, loan or mortgage payments
  • If you are in some kind of debt repayment arrangement, e.g an IVA, or have been declared bankrupt
  • If you have County Court Judgements against you

If you think this may apply to you then you should request a copy of your credit report before applying for a mortgage. There are three agencies in the UK that hold this data: Experian, Equifax and Callcredit. Our guide to credit reports has more information about how to do this.

Once you have your report you should consider what you can do to improve your credit rating, for example checking all the information on record about you is correct. You should also avoid making lots of different applications for credit including mortgages as this will show up on your record and may harm your rating further.

Read how to improve your credit rating for more suggestions.

Video: what is Mortgage APR?

It's a term you'll see whenever you compare mortgages, but what does APR actually mean? Find out in our two-minute video.


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Video transcript

All powerful robot? Absolutely Perfect Recital? Arbitrary Pension Refund? APR is a term that gets bandied about a lot but what on earth is it and how exactly does it help you choose a mortgage? Which?, can explain.

Disappointingly for you for
fans, APR just stands for Annual Percentage Rate and is meant to make it less taxing on the brain to compare what different mortgage deals will cost you unlike the interest rate, APR includes compulsory fees such as the arrangement fee or booking fees you have to pay when you take out the loan as well as the interest you pay, so in theory it should give you a better idea of how much of your hard earned money will be leaving your bank account each month, but of course nothing is ever that easy.

Lenders can calculate it in slightly different ways, and it is based on a lot of assumptions so it is, at best, just a rough guide.

For a start, it assumes interest
rates we'll stay the same over the full time of the mortgage, but as we a ll know, in reality interest rates change all the time and in any case most people would switch mortgage deal once or more during the entire term rather than sticking with the same product throughout the entire period.

To really get how much you will have to lay out for different mortgages. You're better off looking at the total cost over the period of the initial deal.

So if you were considering taking out
a five year fixed rate mortgage, this would include how much you would pay in fees, the interest you pay, and your repayments of that five year period.

If you're looking for mortgage the Which? mortgage comparison table lets you search through all available deals from lenders large and small to choose the best deals based on quality of service as well as the cost and benefits. We'll even show you the total cost over the initial period in our tables.

More on this...

Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers, Which? Insurance Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.