Mortgages for People with Bad Credit Score

The number of people with bad credit score has been increasing steadily. There are specialist lenders who are experienced in assessing the risk associated with bad credit. Due to their specialist knowledge they can calculate the risk and ask justifiable premium in the form of higher interest rate and arrangement fees. Although the larger lenders will not accommodate those applications, there is still competition in the bad credit mortgage market. So, for people with bad credit, there is range of products to choose from. A bad credit mortgage can help people to arrange their finances for a much longer period. In turn, they can afford to make the payments and get their financial affairs in order. They may even be able to qualify for the better rate mortgage products in a couple of years to further reduce their outgoings.
People with bad credit history are well advised to stop applying for the traditional mortgages, because most high street lenders will not entertain them. These applications and rejections will further decrease their credit score. They should seek a bad credit mortgage broker or a specialist lender who is happy to consider their applications.
Interest rates on these mortgages are higher than for traditional mortgages. This is the natural outcome of the higher risk they represent. There may be additional conditions on bad credit mortgages which are placed to provide further security to the bad credit mortgage lender. These might include a larger arrangement fee at the start of the mortgage, or stricter redemption penalties. They will be required to put much higher down payment as well. The higher down payment gives extra security to the bad credit lender who worries about the credit worthiness of the applicant.
There is another alternative which is to try to improve the credit score by keeping up with the payments and applying a bit later, usually at least 6 months. However saying this is much easier than people with financial problems to suddenly start keeping up with their payment without a change in their circumstances. So even though they may be charged higher rates and face special conditions, a mortgage (or refinance mortgage) would allow them longer time to shape their finances.

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