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You are most certainly not alone if you have experienced financial difficulties at some point throughout your life. This could involve anything on the scale of simply missing a credit card repayment to filing for bankruptcy. Unfortunately, this will almost certainly have a negative affect your ability to acquire a competitive mortgage deal. In fact, since the credit crunch hit the UK mortgage market, any black spots on your financial history could prevent you from finding a mortgage full stop.

Bad credit mortgages (also known as sub-prime or impaired credit mortgages) were, until recently, widely available to all UK borrowers. In recent years many lenders have offered special mortgages to those classed as sub-prime borrowers (often at a higher rate than standard mortgage deals). This included people who had at one time or another been declared bankrupt, who had fallen behind on their mortgage repayments or who had suffered other debt problems in the past. At one point bad credit mortgages were also available to those with County Court Judgements (CCJs).

Unfortunately for those people with bad credit looking for mortgages at the moment, the UK sub-prime mortgage sector has been severely affected by the credit crunch. The majority of sub-prime lenders ceased to offer deals to new borrowers. Those sub-prime deals that were still available had very high interest rates and also required a much larger deposit to secure one than was previously requested.

As a result of this, if you are currently on a sub-prime deal, your mortgage repayments may rise substantially once your initial deal period comes to an end. If you still require a bad credit mortgage, you will most certainly find it hard to secure a new deal since the market is now a lot smaller than it was up until the final quarter of 2007.

Prior to the credit crunch, there was a large amount of bad credit mortgages available, many of them with very competitive rates. Some sub-prime borrowers even managed to achieve rates that were only slightly higher than some standard mortgage deals on the market. Unfortunately, this variety is no longer available as many lenders have restricted their criteria and have ceased lending to higher risk borrowers, such as those who require bad credit mortgages.

If you are in a position where you do need to remortgage to a new sub-prime deal, don’t give up all hope just yet. Get in touch with your current lender and find out what kind of products they have on offer at the moment. It might also be a good idea to seek some independent advice. A mortgage broker or adviser will be able to search the entire market for the best deals around and can also look at your current financial situation in order to provide tailored information and advice to suit your options.

Bankruptcy and mortgage arrears

You will probably have a poor credit rating if you have ever been declared bankrupt, fallen into arrears on repayments or have ever incurred a County Court Judgement (CCJ) in the past. Likewise if you have never had a bank account or have lived at many different addresses over the years, this may also count against your credit status.

Once you have been with a sub-prime lender for three years or more, providing you keep up your mortgage payments you should have repaired your credit rating to some extent. Before the credit crunch hit, you would have easily been able to return to the mainstream market and secure a new deal at a lower interest rate.

However, the transition from bad credit mortgages to mainstream mortgages may be found to be slightly more difficult now. The majority of lenders have reassessed their position towards risks and are now reluctant to lend to those people with any previous financial problems, no matter how small.

Don’t however let this put you off trying to get a mortgage, check with a financial adviser, you may find there is a deal to suit your particular circumstances.