Is It Better To Delay a Mortgage Application If You Have Bad Credit?

November 11, 2022

People with adverse credit history are often told to try and improve their credit score before applying for a mortgage. This is because lenders will look at your credit score as part of their assessment criteria, to see how well you have managed your finances in the past. Therefore, it makes sense to do all you can to get your finances in good shape before applying.

However, sometimes life circumstances don’t always fit in with textbook advice. Maybe you need to upsize your home to accommodate a growing family, or you have found an ideal property on the market, and you don’t want to miss out on the chance of buying it. 

Getting on the property ladder can often mean that you will end up paying less than you do in rent on your monthly repayments, especially in areas where average monthly rents are rising sharply, such as in London and the South East. 

As interest rates have risen to 3%, the biggest hike for 33 years, there are warnings that mortgage rates could rise even further over the next two years. Therefore, getting a mortgage deal secured as soon as possible can help you avoid higher monthly repayments than if you delay for 6 or 12 months.

With the news that house prices have fallen for the first time in 15 months during October, and the major banks and building societies are predicting a further fall of between 7 and 8% next year, this may be a help to first time buyers who have previously been crowded out of a competitive market over the past few years.

So, sometimes there is no time like the present. If you have a bad credit history, this may not be the major stumbling block to securing a mortgage deal that you might have assumed. There are various specialist lenders who are willing to look beyond the blunt tool of a credit file, and weigh up each case on its individual merits. 

There are circumstances in which you almost certainly won’t be able to obtain a mortgage, however. For example, if you have been declared bankrupt, you will need to wait until at least 12 months after you have been discharged. The longer you wait, the better chance you will have of accessing a good deal with lower interest rates.

It is a similar case if you have recently been discharged from a debt relief order; you should wait at least 12 months before applying for a mortgage. In later years, you may still need to put down a deposit of between at least 15% to 25%. However, if there are mitigating circumstances for your situation, and no other issues since, this may improve your case.

If your credit issues are less severe in nature, such as a few late or missed loan repayments which are not in the recent past, then there may well be a mortgage solution out there for you. If you would like to talk to a mortgage broker for defaults, please get in touch today.

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Your home may be repossessed if you do not keep up with your mortgage repayments.

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