Five Ways The Crunch Has Hit A Mortgage With Bad Credit Rating
Reduction In Mortgages
For a start, there are simply less mortgage with bad credit rating deals out there. That is because many of the riskier lenders in the UK were funded by the great American financial institutions, which have in the last year ceased to exist. Risk needs collateral, and the US investors had a lot of it until all the sub prime self cert mortgages in the States failed. Our mortgage funding, which allowed risky loans like a mortgage with bad credit rating, came from the American risky loans, and so we have seen a marked reduction in sub prime mortgages – simply they are harder to find now.
Higher Rates
As well has reducing products, there has been a need to put up rates quite considerably. The risk levels have changed, so as a result so has the reward for the lenders. Where once a mortgage with bad credit rating could have been found for slightly more than a prime high street mortgage, now rates can be anything up to several percent higher than they once were. This means that keeping up a mortgage with bad credit rating is going to be hard work with an addition of hundreds of pounds a month, every month onto your bill.
Tighter Limitations
The mortgage lenders do not want risk on their mortgage books – they need to recoup massive losses, so they are making sure their mortgage with bad credit rating borrowers are as good as they can possibly be. This means they have increased criteria for mortgage approval. They are now looking for borrowers with better credit ratings, less debt and better wages.
Need For Equity
One of the crucial aspects to gaining a mortgage with bad credit rating is how much equity you have. There are now nearly no 100% mortgages on the market. The credit crunch has made them too risky. In fact, the number of mortgages that need less than 10% of the property’s value have significantly reduced. Lenders need security, and the only security they can be sure of when lending a mortgage with bad credit rating is equity, and the more the better.
Need For Advice
This has always been a need when looking for a mortgage with bad credit rating, but now more than ever advice has become paramount. There are less sub prime mortgages out there and they are more expensive. They will be harder to live with and you will need to have all your finances in order if you are to get one. Without doubt, the credit crunch has made advice the most important aspect of getting a mortgage with bad credit rating.
