Adverse Credit Mortgages
(also known as sub prime or bad credit mortgages)
With so much debt around it is no surprise that so many people have defaults, county court judgements, missed payments, mortgage arrears, bankruptcies all of which preclude the granting of a prime mortgage. The sad thing is that in many cases the reason for the bad credit lies outwith the clients control i.e. redundancies, partner separations, disputes etc.
Adverse lenders first came into the UK in the early 90’s but since then a lot of lenders have entered the market and many are well known High Street lenders who maybe trade under another name, to keep their businesses separate, so there are no shortage of good deals with well established lenders.
To get a sub prime mortgage you generally have to have a larger deposit than with a prime mortgage, rates are slightly higher and are based on a libor rate which generally tracks Bank of England base rate but is reviewed every 3 months. Having said that it is possible to get fixed or discounted rates but these will depend on the severity of the debt problems.
As already said there are now many lenders in the sub prime field and many products on offer but because of the higher interest rates it is very important to look around to get the best deal. Also beware of large broker up front fees and compulsory insurances which you will be told can be added onto your mortgage but can increase it by thousands on pounds and your monthly payments by a large amount. The lender will lend without a compulsory insurance and there are brokers such as Mortgage Connections who will not charge fees.
Remember taking an adverse mortgage is just seen as a stop gap to let you get back on your feet, clear up your credit and then after 3 or 4 years you can apply for a prime mortgage.
