The UK adverse credit mortgage - benefits and risks

A UK adverse credit mortgage is designed for those people who have poor credit ratings or debt problems. One of the main benefits of a UK adverse credit mortgage is that you can borrow to purchase property even with a poor credit rating or debt problems including County Court Judgment (CCJ) and loan default problems

The financial industry recognises that people sometimes get into financial problems at some stage, through no fault of their own, such as a divorce. There are a number of mortgage lenders who will lend money even when the borrower has a poor credit rating

Most people with adverse credit problems fall into the category of ' light adverse ' (missed the odd loan payment or had one CCJ awarded against them) or ' heavy adverse ' ( missed many loan payments, with different loan companies, and with possibly multiple CCJ's awarded against them). Except in extreme cases, even people with heavy adverse credit problems can be found a new mortgage .

Of course there is a price to pay for a UK adverse credit mortgage. People who have debt problems either currently, or in the recent past, are regarded as higher risk and so are charged more than for a non-adverse case. This will be either by higher interest rates or more expensive arrangement fees, or both. 

However, in the current low interest environment some of the best adverse mortgage deals cost not much more (and sometimes less depending on specific circumstances) than an average to poor non-adverse deal based on standard variable rates. Some non-adverse borrowers on standard variable interest mortgages who haven't re-mortgaged for a few years may actually be paying more than a person on a new light adverse mortgage!

benefits

The main benefit of a UK adverse credit mortgage is that even if you have debt problems or have had them in the recent past you can still obtain a mortgage to purchase your home.

Having a poor credit rating need not be a permanent thing. If you can continue to pay off your adverse credit mortgage and other debts with no further problems you can rebuild your credit rating. The very fact that you are able to maintain payments on your new UK adverse credit mortgage will help you to rebuild a healthier credit rating. After a few years of 'clean' payment history, you should be able to re-mortgage your property using a more favourable deal and eventually be considered a non-adverse case.

risks

The cost of a UK adverse credit mortgage will generally be higher than the equivalent non-adverse mortgage because you represent a higher risk to the lender. You must be able to maintain your mortgage payments and be committed to controlling and reducing  your other debt levels, especially unsecured debt such as credit card expenditure.

When interest rates rise all mortgage borrowers suffer, but UK adverse credit mortgage borrowers will feel the strain first since they often pay higher interest rates to start with.

Tell me more about Better Mortgages