Remortgages and Mortgages for people with CCJs, discharged bankrupts

Whatever financial problems you may have had in the past, do not assume you are excluded from taking out a mortgage. 

If you have CCJs (county court judgements) against your name or even if you are a discharged bankrupt, the chances are there will be a number of lenders that are happy to help you buy a property. 

Specialist mortgages are available from light sub-prime (an industry term which describes mortgages for people who fall outside normal lending criteria due to past financial problems) through to heavy adverse credit for those with serious credit problems. 

Levels of sub-prime

Sub-prime categories differ from lender to lender, but below is a rundown of the categories that are usually available. As a rule of thumb, the lighter sub-prime categories have lower rates which get higher as the lever of bad credit increases.

Near prime – also known as super light, extra light and ultra light

This category is extremely new, with lenders just launching near prime products this year. A typical customer would be someone who has just slipped out of prime lending because of a credit problem, but whose credit history is not bad enough for them to fall into the light sub-prime category. For example, they may have very low level CCJs or be in minor arrears on an existing mortgage. Rates are very close to mainstream prime rates.

Light sub-prime

Light sub-prime is for those borrowers with minor adverse credit – as a guide this could be CCJs up to £3,000 or having missed a number of existing mortgage payments. Again, light sub-prime rates are reasonably close to prime mortgage prices.

Medium sub-prime

Medium sub-prime borrowers have a significant level of adverse credit. This could be, for example, £7,000 worth of CCJs, having missed a quarter of their mortgage payments in the last year or perhaps having just had a bankruptcy discharged. These borrowers will usually have to put down a slightly bigger deposit, around 15%, and they will pay a noticeably higher rate than prime borrowers.

Heavy sub-prime

Heavy sub-prime borrowers will probably have a significant level of adverse credit. They could have CCJs totalling £10,000, have missed half of their previous year’s mortgage payments and have a recently discharged bankruptcy against their name. These borrowers will pay a premium to get a mortgage and will usually have to put down at least 20% of the purchase price as a deposit.



Unlimited sub-prime

This is the deepest level of sub-prime lending available to borrowers. Lenders will allow customers with unlimited levels of CCJs and arrears to take out a mortgage as long as they can put down a quarter of the property’s value as a deposit. They will pay a significantly higher rate of interest than mainstream borrowers for their mortgage – for example, 2% more than a mainstream mortgage rate.

Anyone with a poor credit record should shop around for the best rates in the same way they would for a mainstream mortgage.

 

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