People with low credit scores often assume their chances of getting on the property ladder are slim, as they are frequently turned down by high street lenders. However, one expert who specialises in securing mortgages for people with 'adverse' credit says a poor credit score should not shatter your dreams of owning a property, as there is a whole sector of lenders willing to work with you.
Specialist Lenders Offer Alternatives
Emma Jones, managing director of nationwide mortgage broker and adverse credit specialists Whenthebanksaysno.co.uk, explained that many people automatically think of high street banks when considering mortgages. "They apply for a mortgage with a well-known bank and get rejected, try another, get rejected again, and then give up," she said. However, she noted that a wide range of specialist lenders cater specifically to those rejected by high street banks. "Many applicants are surprised when we tell them that just because a few high street banks have said no doesn't mean other specialist lenders will," Jones added.
Higher Rates but Potential for Improvement
Jones acknowledged that borrowers with poor credit, such as a history of missed payments or County Court Judgements (CCJs), should expect to pay higher interest rates than prime borrowers. "Yes, you'll almost certainly be paying a higher interest rate, but if the payments are affordable and mean you can get onto the property ladder, it's something to consider, especially if repayments are still cheaper than rent," she said.
Moreover, taking out a mortgage with a specialist lender can actually improve a person's credit score. "After a couple of years of making mortgage repayments, they are seen as much more reliable by prime lenders," Jones explained. "Many of the people we arrange mortgages for end up taking their next mortgage out with a high street lender. The specialist lender effectively acted as a 'bridge' to better rates."
Tips for Prospective Homebuyers
Jones advised those with poor credit to save for a larger deposit if possible. "The bigger deposit you put down, the less risk you represent to the lender, and in many cases, the cheaper the mortgage rate you'll be able to secure," she said. However, she emphasised that even without a large deposit, there are plenty of lenders willing to consider applications. "Don't give up. There are plenty of lenders out there who will take a good look at you rather than give you a straight 'no'," she concluded.
