Over the years we have helped hundreds of people with bad credit. One of the questions we get asked a lot is “What happens at the end of the deal?”.
It is a good question as ultimately you want to know whether or not you are going to be stuck paying high rates indefinitely or not. This post is aimed at looking at the options.
The type of lender
Bad credit means different things to different people and lenders. It is quite possible you could end up with a high street mortgage, a little building society or a specialist bad credit lender.
If you end up on the high street or with a building society it is quite likely as a bear minimum you will be able to switch products indefinitely with them. Their products may or may not be market leading but they are unlikely to be high… Maybe 0.5% above the market leaders give or take.
Specialist bad credit lenders are slightly different though. Typically with them you would revert to their “Standard rate” which is never very attractive. That means really in order to get something reasonable we need to switch lenders.
Your Mortgage options
Your options at this point really depend on your situation at the time. If you have no more bad credit or it is now histori, you would likely have more options than if you had picked up more bad credit in that time.
In essence your options would be the same as what they were originally more or less. But it would be dependent on your circumstances at the time. Those options are:
Product Switch with your current lender. Typically this is only if you are with a high street lender or a little building society and your repayments are all up to date. However some of the specialist lenders are now looking at offering retention deals.
Switch to a new lender. It could be that you had bad credit and were with a specialist lender and your credit has cleared up. That can mean now is the time to get you back on the high street. Its always nice to see customers go from adverse lenders through to the best buys. Its nice to see people getting back on track.
However it could also be that in that time you have picked up more bad credit. In those cases we may need to look at specialist lenders again for you.
The final option may be that you are no longer in a position to get a mortgage and so you would revert to the lenders standard variable rate. Up until around 12 months ago, they were in and around the 6% mark. However since the base rate has been increasing those rates have also gone up and are closer to around 9-10% now. This is obviously a last resort as most people would struggle with these sorts of rates. That being said, in 10 years as a broker, I have never known this to happen.
Summary
In short your circumstances at the time play a huge part in your options. But also the type of lender you are currently with. However the key thing is that in probably 99 times out of 100 you are going to be able to start moving to better lenders. The specialist products are just a short term fix whilst we wait for time to pass and your adverse ages.
With adverse the greatest healer is time and that is what those products give us – time between your adverse and being able to get a “normal” mortgage.