Bad credit mortgages are becoming common

Non-conforming, sub-prime or bad credit mortgages have become increasingly common since the credit crisis and many mortgage lenders are beginning to offer competitive mortgage products as a result.

Bad credit mortgages were created to help the large number of people falling into debt. A bad credit mortgage will not only help a borrower buy a home but it can also help a borrower recover from an adverse credit history, provided they make their monthly payments.

Bad credit is gained by missing payments on loans and credit cards, by court action taken for late or missed payments or being declared bankrupt. Although for some people being declined credit is their first clue that they have a bad credit rating and, for borrowers looking to buy a home this can be a devastating blow.

Getting rejected by lenders for traditional mortgage products is something that can expand your credit history. This can be avoided by speaking to an independent mortgage adviser who, through specialist lenders can help borrowers regardless of their credit rating.

Although lenders will provide bad credit mortgages, the interest rates and charges applied are considerably higher than those of standard mortgages. A borrower will need to have a deposit as 100 per cent mortgages are not an option. Ideally a borrower should have a large amount of money behind them to aid the process. A deposit of around 30-40 per cent of the cost of the property may be needed which is easier said than done for someone with bad credit.