who will accept you in 2019? – Which? News

A bad credit history doesn’t have to end your home ownership dreams, with lenders offering a range of deals for people who have had CCJs, IVAs and discharged bankruptcies.

And by saving a little more money and improving your credit score over time, it’s even possible to get a competitive mortgage rate.

But who will accept you for a mortgage if you have had financial problems in the past? We’ve combed through the terms of over 30 lenders to help you figure out which ones will accept borrowers with bad credit history and what criteria you’ll need to meet to get a good deal.

Mortgages for bad credit: how many offers are available?

Last month, Which? analyzed the mortgage market and found that a third of offers are available to people with less than perfect credit histories.

And while the vast majority of these products were limited to those who had CCJs, there were also offers for people with historical IVAs and bankruptcies.

Our research found that to get a mortgage with bad credit, you might need a larger deposit than for a standard home loan – with the majority of deals available at 75% loan-to-value (LTV).

This means you will have the most choice when you have a 25% deposit.

Mortgages for different types of bad credit

Lenders who will accept applications from people with bad credit generally fall into two categories:

  • Those who offer specific mortgages to people with bad credit. These tend to be specialist lenders who offer a suite of offers for people with credit problems.
  • High street lenders who do not offer specialist products but will consider applications from people with bad credit.

The table below shows the general criteria lenders place on applicants with CCJs, IVAs and bankruptcies.

Obtaining mortgages after a CCJ

A County Court Judgment (CCJ) is generally issued when you have not paid the money you owe the lenders and reasonable attempts to recover the money (such as letters and late payment notices) have been exhausted.

The good news is that there are many specialist mortgages available for people who have had CCJs – with over 20 lenders operating in this market.

Deals are available for people with CCJs worth up to £5,000, but to get the best rate you’ll need to have had maximum CCJs of £250-£500.

The table below shows the cheapest starting rates on mortgages that indicate they are available to people with CCJ.

LTV max. Max CCJ Lender Transaction Type Initial rate Return rate CAP Costs
75% Up to £250* Atom Bank Two-year fix 1.44% 4% 3.7% £1,200
75% Up to £500 OK Two-year fix 1.69% 4.25% 4.2% £495

Source: Money Facts. February 25, 2019. *max three CCJs in last 36 months, max one in last 12 months

Learn more: Get to know the details in our guide to get a mortgage with a CCJ.

Getting mortgages after an IVA

If a borrower cannot afford to repay their debts in full, they can enter into a contract with their lender, known as an Individual Voluntary Agreement (IVA).

Only seven lenders have specialist offers for borrowers who have had an IVA, and to get a mortgage you will need to have your IVA settled (or ‘satisfied’).

While a handful of products are available to people who have settled their IVA in the last 12 months, the vast majority of offers are only available if at least three years have passed.

The table below shows the cheapest initial rates offered to people who have satisfied their IVAs for three or four years.

LTV max. IVA Lender Transaction Type Initial rate Return rate CAP Costs
60% Satisfied four years Skipton Two-year fix 1.59% 4.99% 4.5% £995
75% Satisfied three years OK Two-year fix 1.69% 4.25% 4.2% £495

Source: Money Facts. February 25, 2019.

Your mortgage options after bankruptcy

Bankruptcy is when all your debts are canceled and your assets are sold to pay them off. A bankruptcy ends with a “discharge” notice, which is normally issued 12 months after the date of the bankruptcy order.

You cannot apply for a mortgage when you are under a bankruptcy order, and the longer you have been discharged, the more options you will have. To get a competitive rate, you will need to have been discharged for at least three years.

The good news is that you can get a mortgage for up to 90% of the LTV after being declared bankrupt.

The table below shows the lowest starting rates available at three popular LTV levels for people who have been discharged from bankruptcy.

LTV max. Bankruptcy Lender Transaction Type Initial rate Return rate CAP Costs
60% Released four years Skipton Two-year fix 1.59% 4.99% 4.5% £995
75% Released three years OK Two-year fix 1.69% 4.25% 4.2% £495
90% Released four years Skipton Two-year fix 2.01% 4.99% 4.7% £995

Source: Money Facts. February 25, 2019.

How to get a mortgage with bad credit

If you have a less than perfect credit history, you should try to fix it before applying for a mortgage.

Here are some steps you can take to improve your credit score over time. As a starting point, make sure you’re registered to vote, limit credit applications, and consistently pay all debts on time each month.

As we mentioned earlier, to get the best rates, you may need to save a larger deposit. Owning more of the property will make you a less risky proposition to lenders and open up the possibility of more choice and better mortgage rates.

Learn more: learn more about the app in our comprehensive guide to mortgages for bad credit.

Gladys T. Hensley