There are a number of factors when trying to determine how much a bad credit mortgage will cost.
Firstly we need to look at the things that are not specific to bad credit mortgage:
- Size of the loan,
- Term of the loan,
- Size of deposit.
These 3 things are important to any application. The larger the loan, the more the repayments will typically be. The term also affects the payment, if you pay it over a longer period your repayments will be lower but it will take longer to pay off and so in turn costs more in the long run. Lastly the size of the deposit, if you are a 25% deposit, you are probably going to end up on a lower interest rate than someone with a 10% deposit. I will not go in to too much detail in this section as this is pretty standard stuff for any sort of borrowing whether it be mortgages, credit cards, finance for a sofa etc.
When I am speaking to people about their bad credit and trying to determine their options, many people think the reasons are important. They are to some extent, but in the main people fall in to one of the categories:
- Relationship breakdown,
- Health issues,
- Work Issues,
- Youth (ie You were not aware of the implications of not paying it).
Obviously there will be more to it than one of those and I can appreciate at the time it may have been a traumatic period but when discussing your future options we are looking at what is displayed on your credit report.
For that we need to know:
- What is on your report (Default/CCJs/Arrears etc),
- Dates (the dates those were issued and if applicable satisfied),
- How much they were for,
- What they were for (Mortgage arrears would be seen as worse than late payments on a catalogue for example).
Any other issues?
The bad credit issues will be the major factor for most applicants, but if there are other issues then that could limit your options further. As an example, if you are self employed with 1 years accounts or you are employed on a temporary contract that could affect your options.
It may not be your circumstances causing problems, it could be the property. A simple example here could be a flat/apartment with a short lease or a house with a large percentage of the roof being flat.
As these things can limit your options significantly that can alter the rates more so than any adverse will.
What rates are available for people with Bad Credit?
If we assume no other issues, then you could be looking at normal rates (under 2%) through to rates in excess of 6%. We have built a Calculator for people with Bad Credit issues to get a guide as to what the rates and repayments could be, you can access our Bad Credit Calculator here. This calculator does not take in to account normal lenders who may consider the odd blip, so if you have an one off small/old/satisfied default then we may be looking at better options than this calculator checks for, but if nothing else it should give you an indication.
We would always suggest getting in touch to see how much a Bad Credit Mortgage cost will be for your specific circumstances as can we discuss your options in detail and give you a far better idea of what is available in the market today.