These days, an imperfect credit score doesn’t necessarily mean exclusion from the property ladder. It can certainly make things more challenging and expensive, but bad credit isn’t the immovable obstacle it once was.
Admittedly, approach the vast majority of mainstream lenders with the intention of getting a subprime mortgage and you won’t get past the front door. Nevertheless, this doesn’t mean there aren’t accessible and affordable options available - you simply have to know where to look for them.
Poor Credit Vs the Conventional Mortgage
For most major lenders, credit is all that counts. Hence, if you lack a glowing credit report, your mortgage application won’t even be considered. Irrespective of the reasons for your imperfect credit and your current financial position, they’re unlikely to give you a second glance.
The same also applies for borrowers with no credit history whatsoever, who are often considered just as ‘risky’ as those with bad credit. Unfair, unjust and completely unnecessary, but the way of the UK’s traditional mortgage market nonetheless.
How Does a Subprime Mortgage Work?
On the plus side, subprime mortgages are readily available elsewhere. For those new to the term, subprime mortgages are specialist home loans for individuals who fail to meet the usual restrictive application criteria. A poor credit score, no credit score or general questions regarding your financial status - none need necessarily count you out of the running.
As you’d expect, subprime mortgages typically attach slightly elevated interest rates and overall borrowing costs. When a lender sees a less than perfect financial track record on paper, they naturally consider the applicant to be somewhat ‘higher risk’. Hence, higher borrowing costs are inevitable.
But this doesn’t mean it’s impossible to access an outstanding deal by way of a subprime mortgage. The key lying in targeting specialist subprime lenders - most of which cannot be found on the High Street. Whatever your financial history and objectives, it’s worth bringing your case to an independent broker to explore every available option.
Of course, if you already own your own home, your credit score could be even less significant. Home ownership opens the door to extensive range of secured borrowing options - one of which being short-term bridging finance.
Bridging loans differ from conventional mortgages in a number of important ways. Along with providing access to the funds needed within a matter of days, a bridging loan is also designed to be repaid in one lump sum after around six months. Using the applicant’s assets to secure the loan, credit checks and even proof of income may not be necessary.
If planning to move home and simply waiting for your current property to sell, a bridging loan can be a great way of ‘bridging’ the gap. Far more flexible than conventional mortgages, bridging loans can be used to fund a wide variety of property purchases and improvements.
Irrespective of how chequered your credit history may be, you may still be able to buy the home of your dreams with a bridging loan.
A Cause Worth Fighting For
Still, there’s no denying the immense advantages of having a strong credit history behind you. Precisely why it’s worth proactively investing in the cause, doing whatever you can to improve your credit score and keep it in good shape.
Examples of which include eliminating unnecessary debt, applying only for credit facilities you need, keeping up with all monthly outgoings, reducing balances on credit cards and so on. Small measures that have the potential to add up to a big difference over time.
Article by iConquer