Bad credit mortgages
Poor credit doesn't mean you your mortgage dreams are over - find out what lenders really look for and how to prepare.
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What is a bad credit mortgage?
Bad credit mortgages (also known as adverse credit or sub-prime mortgages) are home loans designed for people with a poor credit history. This could mean anything from late credit card payments to more serious issues like defaults, CCJs, IVAs, or bankruptcy. Most high street lenders are wary of these kinds of applications - but there are specialist lenders who'll still consider you.
These mortgages work like any other, but there are a few key differences. Interest rates tend to be higher to reflect the increased risk to the lender. You may also need a larger deposit - often 15% or more. That said, if your credit problems are in the past and you can show you've been managing your finances responsibly since then, you could still get a competitive deal.
How to improve your chances of approval
There are several things you can do to give yourself the best shot with a bad credit mortgage:
- Check your credit report: Before applying, get a copy of your credit file from a credit reference agency - Experian, Equifax, or TransUnion. Make sure everything is accurate and fix any mistakes you find.
- Build a bigger deposit: The more you can put down, the less risky you'll seem to a lender. Even an extra 5% can open up your options.
- Be a reliable borrower: Lenders love financial stability. Being in steady employment, paying outstanding debts, and keeping your monthly outgoings consistent can help.
- Work with a mortgage broker. A broker or mortgage advisor who specialises in bad credit can match you with the right lender - saving you time and stress.
What to expect from the mortgage process
Adverse credit mortgages have a slightly different process - lenders will want to understand more about your credit rating and establish your financial circumstances:
- You'll be asked about your bad credit: Be honest. Lenders want to know what went wrong, how long ago it happened, and whether things have improved since.
- There may be more paperwork: Expect to provide details of your job, other income details, bank statements, and possibly explanations for any red flags on your credit file.
- Rates will likely be higher: You may start out on a higher interest rate, but after a few years of being a responsible borrower, you could remortgage to a better deal.
- You'll have fewer options. Different lenders have different lending criteria, and your choice might be limited - but that doesn't mean there aren't good options out there.
Summing up
Having a low credit score doesn't mean the end of your home ownership plans. There are mortgage companies out there who understand that life happens - and they're willing to work with you. By getting to grips with your poor credit rating, preparing carefully, and taking advice from the experts, you can boost your chances and find a mortgage that works for you.
Frequently Asked Questions
Can I get a mortgage with a CCJ or default on my record?
Yes, you can. While high street banks might turn you down, many specialist lenders will consider you - even with a county court judgement (CCJ) or default. The key factors are how recent the issue was, how much it was for, and whether it's been settled. The longer ago the problem, the better your chances. Lenders are especially open to applicants who can show they've turned their finances around.
What about IVAs, DROs, or DMPs?
An individual voluntary arrangement (IVA), a debt relief order (DRO), or a debt management plan (DMP) can have more of an impact on your file than the odd missed payment on a utility bill. Getting a mortgage with one will mean work, and most lenders will want to see significant turnaround in your situation, including no more missed repayments. As ever, specialist lenders and financial advise will open up your options.
How much deposit will I need with a bad credit history?
You'll usually need a bigger deposit than someone with good credit - typically 15% to 30% of the property value. That said, the exact amount depends on the lender and how severe your credit issues. A larger deposit also helps reduce the interest rate you're offered. The more equity you can bring to the table, the less risky you appear to lenders, which improves your options.
Will I have to pay a higher interest rate on bad credit mortgage?
Most likely, yes - at least to start with. Because there's more risk for the lender, the rate is often higher than a standard mortgage. But this doesn't have to be forever. After a few years of steady mortgage payments, you could be eligible to remortgage to a better deal. Think of it as a stepping stone to a more affordable mortgage later on.
Does it help to use a bad credit mortgage broker?
Absolutely. A broker who specialises in bad credit mortgages can be very helpful. They know which lenders specialise in mortgages with bad credit and the minimum credit score they'll accept, and they can help present your application in the best light - saving you time and possible rejection. They can also help explain your credit record to lenders in a way that gives you the best chance of approval.
Does it help to make a joint mortgage application?
Yes, making a joint mortgage application can help, as it may increase the amount you can borrow based on your combined income. The final decision depends on the joint borrowers' finances and the lender's criteria. A mortgage calculator can give a useful estimate.
About the author
Lawrence Howlett
Lawrence Howlett brings a results-driven mindset to his writing, shaped by over a decade of experience across finance, legal, and energy sectors. As the founder of Moneysavingadvisors, he’s built a reputation for turning complex financial concepts into clear, actionable insights for consumers. His writing stands out for its clarity, structure, and focus on delivering value.
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