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Online broker launches free bad credit mortgage advice
Online mortgage broker Habito has teamed up with bad credit adviser Impact Specialist Finance to offer free mortgage advice to people with histories of adverse credit.
Habito says that the new partnership will provide specialist mortgage help to people who've had serious credit issues, such as CCJs, mortgage defaults and missed payments.
Here, we explain how a broker could help you get a mortgage if you've had financial problems, and offer advice on playing the waiting game to secure a better deal.
Habito launches bad credit mortgages partnership
The new partnership between Habito and Impact could offer a welcome boost to mortgage applicants who have adverse credit histories, as they'll be able to obtain advice without needing to pay Impact's standard fee of £574.
Habito says the link-up is particularly designed for people who've experienced 'serious credit issues', such as mortgage defaults or late payments.
This also represents a big move in the mortgage advice market.
Until now, Habito and other 'robo' or online mortgage advisers such as Trussle have primarily focused on remortgaging and buy-to-let loans, leaving more complicated areas such as bad credit mortgages to traditional high-street mortgage brokers.
- Find out more:bad credit mortgages
Why do you need a broker for a bad credit mortgage?
There are two main reasons to use a mortgage broker if you've had credit problems.
1. Insider knowledge on bad credit mortgages
Firstly, going through the mortgage application process alone can be frustrating and ultimately fruitless.
Some of the biggest lenders adopt automated underwriting systems, which can leave borrowers who have less straightforward financial circumstances facing a 'computer says no' response when they apply for a home loan.
A broker will possess specialist knowledge of which lenders will consider applicants with different forms of bad credit, saving time and preventing pointless applications that could dent your credit score further.
2. Deals exclusively available to brokers
The main attraction of employing a broker is that the vast majority of deals for people with bad credit aren't available directly from lenders.
Data from Moneyfacts shows that more than half of bad credit deals are only available through brokers, a figure that rises to 81% on products that will accept applicants with a history of bankruptcy.
This means that borrowers who go it alone with their application could be limiting themselves to a small section of the market.
| Direct from lender only | Direct or through a broker | Broker only | |
| CCJs | 15% | 15% | 70% |
| Arrears | 23% | 19% | 58% |
| Bankruptcy | 0% | 19% | 81% |
- Find out more:our bad credit mortgages guide reveals individual lenders' policies on CCJs, bankruptcies and IVAs
Finding the right broker for a bad credit mortgage
This doesn't mean you should call the first broker in the phone book, however, as not all advisers can access every mortgage deal on the market.
Some banks offer their loans through 'selected' intermediaries only, meaning they will have a panel of brokers that have exclusive access to their products.
This makes it important to do your research and find a broker that offers a truly 'whole-of-market' service.
- Find out more:how to choose a mortgage broker
How hard is it to get a bad credit mortgage?
An adverse credit history doesn't have to stop your mortgage application in its tracks.
Your chances of getting accepted for a home loan depend on how severe your credit problems are or were, how long ago the events that led to your bad credit took place, and how much money you've got saved up for a deposit.
The good news for borrowers is that the number of deals available is increasing by the month, as shown in the chart below.
Getting a mortgage with a CCJ
A County Court Judgment (CCJ) is issued when you fail to pay money you owe and the lender has exhausted its options in trying to recoup the debt.
According to Moneyfacts, there are 1,621 products available to people who've had CCJs.
If you've been discharged from your CCJ for at least three years, you can access a very competitive mortgage rate without needing a huge deposit, as shown below.
| Type of deal | Loan-to-value | Lender | Initial rate | Revert rate | Fees |
| Two-year fix | 75% | Accord | 1.35% | 4.25% | £995 |
Borrowers with ongoing or more recently discharged CCJs will need a bigger deposit of up to 30-40% to avoid paying a much higher rate.
- Find out more: how to get a mortgage after a CCJ
Getting a mortgage with an IVA
An individual voluntary agreement (IVA) is a contract agreed between someone who is in debt and their lender in a bid to stave off bankruptcy.
Some 507 deals are currently available to people who've had an IVA and, again, the best rates are available to those who've been discharged the longest.
The cheapest rate is offered on a five-year fix from Skipton Building Society, and is only available if you've been discharged from an IVA for at least four years and have a deposit of at least 40%.
| Type of deal | Loan-to-value | Lender | Initial rate | Revert rate | Fees |
| Five-year fix | 60% | Skipton BS | 1.46% | 4.99% | £1,495 |
- Find out more:how to get a mortgage after an IVA
Getting a mortgage after bankruptcy
Bankruptcy is a last resort, and you'll need to have been discharged for a long time and have a chunky deposit before you can get a mortgage.
There are 720 products currently on offer to people who've been bankrupt, but the rules are strict.
If you've been discharged from your bankruptcy for four years, you can get the above 1.46% deal from Skipton Building Society, although again you'll need a 40% deposit.
Borrowers who've been discharged for six years can get a slightly cheaper rate of 1.44% from Yorkshire Building Society with a 35% deposit.
How to convince lenders to give you a mortgage
- Improve your credit before applying:repairing your credit score might take a while, but simple measures such as ensuring you're on the electoral roll can add points to your score, along with longer-term factors such as not having missed any payments for a couple of years.
- Be up-front about your circumstances: being honest about financial problems you've had and what you've done to fix them will help brokers and lenders more thoroughly understand your situation.
- Make sure you're settled: lenders value security, so if you've started a job recently, wait until you're out of any probation period before applying.
- Accept you'll need a bigger deposit:even if you're now free of your credit issues, you're likely to need a deposit of at least 25% to get a good mortgage rate - and the more you save, the less risky you'll seem to lenders.
- Don't make multiple applications: applying for a mortgage will leave a mark on your credit report, and multiple applications in a short time could bring your score down.
Find out more by checking out our guides on bad credit mortgages:
