Really bad credit

[ummmm]

I might be splitting up with my partner so will have to sell my house. But i've got really bad credit. Could I still get a mortgage if I was putting down a large deposit?? Say �100k

[Ethel]

You might be better off buying a home for �100k whilst your credit rating recovers.

[ummmm]

I couldn't get a house for 100k where I live

[Oneeyedvic]

Yes, in a ll likelihood, you will - there will always be a company who will lend you the money - it does depend on what sort of deposit �100k is, but I assume that is is at least 25% deposit.

You will of course be paying a premium price - higher than normal rates.

[ummmm]

I think I could get a house for about 160,000 so it mean a 60,000 mortgage

[Loosehead]

Bad credit is bad credit, it means you are likely to not pay, the lender doesn't care how much deposit you've got they don't want the hassle. Yes the loan is secured but it's still a lot of potential agravation. I think therefore the only lenders will be at loan sharking rates. Better to sit on the 100k and save and let it grow to the cost of your new house. Who knows the market may drop in the interim.

[atolhurst]

Why not speak to a mortgage provider and see what they say. - get a mortgage in principal maybe. You never know, your rating might not be as bad as you think.

[EverClean]

Check out your exact credit rating with Experian, Equifax or both. With this information,and some personal info, a mortgage broker will be able to give you an idea of whether you can borrow what you want. Lenders are unable to borrow on equity and can only consider if you can afford this mortgage based on your income. Interest rates for people with poor credit have come down a lot recently and you would still be able to get a fairly competetive rate. Speak to a mortgage broker.

[Oneeyedvic]

"Lenders are unable to borrow on equity and can only consider if you can afford this mortgage based on your income. "

Whilst this is technically true, it is a bit like saying "Cars are unable to drive on private roads at over 70mph" - technically true, but a quick trip to any motorway or a road will tell a different story.

There are plenty (and I mean plenty) of companies who don't care what your repayments are like so long as there is adequate security -whether they admit it or not.

As for the "its hassle" response from loosehead - well - on the basis that if you don't pay, they are only lending you �60k against something which they will be able to sell for at very worst case scenario �120k, it is very much worth the hassle!

Go to a mortgage broker who will know the best place to put the business

[EverClean]

But surely Vic, whoever these lenders are they will ask for an income on the application? In that case you can do one of three things - 1. State a provable income and back this up with evidence. 2. Declare a self-certified income that is accurat and true but may not be provable or 3. Commit fraud and state an income on the application that just isn't true.

In any of these cases then the lender is assessing affordability and NOT the value of the security.

Am I naive?

[Oneeyedvic]

It will be points 2 or 3.

They are purely asking the question to ensure (if it goes to court) that they can show that they have asked the right questions. They turn a blind eye (so long as it is vaguely sensible) and are purely lending on the asset value.

In a similar way - there is not a single motor manufacturer that I am aware of that restricts their cars to 70 mph for Britain - are they really convinced that people go on track days or go on holiday to Germany a lot?

[EverClean]

Then if the lender has themself covered, it all falls back on the mortgage adviser. I for one will not encourage a client to exaggerate an income or allow a client to "change their mind" regarding an income when they find out that the income they first told me wasn't enough to support the loan they required. It is a grey area and lenders are only concerned about covering themselves and not Treating Customers Fairly but that doesn't mean that we should take advantage of that. I don't see a future for self-cert mortgages in this country. The onlt ones that can make a long-term living out of it are the no win no fee claim companies.

[Oneeyedvic]

Really depends ( im my opinion - and I am not a mortgage broker - I only deal with commercial finance) on how you phrase things:

1) "How much do you earn?"

2) To afford this mortgage, you need to be able to afford to pay �x per month. Can you afford that? (obviously interest rates can go up etc etc)

Speaking as a director of a company, I can tell you that my salary is not linked to what I can afford (there are variously director loans / dividends as well as wages) - if it wasn't for self cert, I couldn't get a mortgage easily.