The situation for those with bad credit mortgages
12th December 2011
These days it isn’t uncommon to see lenders offering bad credit mortgages. As the economy struggles to get back on track after the recession, many people have been left unable to afford a mortgage. This has driven them to apply for bad credit loan options. Whether you have CCJ’s or if you just have a slightly bad credit rating, you could still benefit from a bad credit mortgage.“
The Perils of a Bad Credit Mortgage
One thing that sets apart bad credit secured loans is the fact that they typically come with high interest rates. Whilst shopping around for a better deal can help you to save a little money, you will still be paying a higher interest rate than you would with a standard loan. When you are talking about a mortgage, a high interest rate is something that can really damage your finances in the long run.
Think about it, you may be able to afford the high interest rate at the moment, but what if your circumstances change? You could lose your job or you or a loved one could fall ill. If the situation changed would you be able to afford the high interest rates? If you miss just one repayment then the rates would cause a downhill spiral. You could find yourself in a lot of debt very quickly and worse – you could lose your home.
The Choice of Bad Credit Mortgage Lenders is Limited
If you are searching for a bad credit mortgage then you will find that it is actually quite difficult. Before the recession, there were more than 30 different lenders offering bad credit mortgages in the UK. These days there are only a handful of lenders offering this type of loan. The interest rates have also increased quite a lot compare to how much they used to be.
The Terms and Conditions
You will find that bad credit mortgages often have different criteria that need to be met over standard payday loans. Some lenders will set a particular repayment method. With a standard mortgage you may get to start making repayments a month or two after you sign the contract. With a bad credit loan the lender will typically require you to start paying off the loan immediately.
Bad credit mortgages also often come with a shorter term repayment basis than standard mortgages. This means that you will need to repay the loan quicker than you would with a standard mortgages. Many standard mortgage lenders will give you up to 30 years to repay the loan. As the repayment term is shorter for bad credit mortgages, this will make the monthly repayments higher.
Those who do have a bad credit mortgage can improve their credit rating as long as they make the monthly repayments on time. However, one missed repayment and it can really send you into a lot of debt that is difficult to get out of. If you already have bad credit and debt then you should reconsider getting a bad credit mortgage.