Updated: December 06, 2021

How to get the Best Rates on a Bad Credit Mortgage

Worried about how your adverse credit will affect your mortgage? Find out the best bad credit mortgage rates and how to get them in our detailed guide.

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No impact on your credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 06, 2021

People with bad credit may not qualify for a traditional mortgage, but there are specialist lenders out there with a more flexible criteria. These mortgage providers can cater for a wider range of customers, but often charge a high interest rate to offset the increased risk.

In this article, we’ll explore the differences between bad credit and regular mortgage rates – and how you can still find a deal that’s right for you.

How to get the best rates on a bad credit mortgage

By following these steps you’ll put yourself in the strongest position to secure the best rates on a bad credit mortgage.

Step 1. Get up-to-date on your credit score

Whether you have had a bankruptcy or missed payments in your past, or are simply struggling with high-interest debt, it’s important you are up to date on exactly what type of credit issue occurred and when. Scan through your credit report and take note of all issues, you can download your credit reports through our dedicated credit reports hub.

Step 2. Optimise your credit report and pay off any debts

After you’ve downloaded your credit reports, be sure to challenge any inaccuracies and have outdated information removed. Small changes like this can help improve your credit profile and potentially help you access superior mortgage rates.

It’s also a good idea to clear any debts you’re in a position to pay off before you apply for your mortgage.

Step 3. Speak to a mortgage broker

There are mortgage brokers who specialise in bad credit. They know exactly which lenders have the flexibility to offer finance to customers based on the specific circumstances surrounding their bad credit, rather than turn them down outright or base their lending decision on credit scoring.

We have a free broker-matching service that can assess your needs and pair you with the right broker. The brokers we work with are carefully vetted and prequalified as the best in their field. Get in touch on 0808 189 0463 or make an enquiry to get started.

Speak to a bad credit broker

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How deposit size affects interest rates

The bigger your deposit the better chance you have of getting a better interest rate deal on your mortgage – that’s why it’s so important to know what kind of deposit you’re going to need before starting the application process. The amount of time you spend saving for your deposit should be balanced against the potentially lower interest rate that you could secure.

The table below demonstrates typically how monthly interest rates vary according to deposit size – even when you decrease the monthly repayment sum.

 Deposit Monthly Repayments  Interest Rate
5% £920 4.70%
10% £690 2.50%
15% £620 2.10%
20% £560 1.70%

Watch out for upfront payment fees

One thing to look out for is that some mortgage interest rate offers for people with a bad credit record can come with large upfront payment fees from £1,000-£1,500. In certain cases, this may outweigh any savings you make through getting a low introductory rate.

That’s why it’s best to solicit help from an expert mortgage broker who understands the bigger picture and can take you directly to a mortgage loan with the best overall terms.

Types of bad credit and their impact on rates

Your credit score is one of the most important factors when it comes to getting a good deal on mortgage interest rates. If your credit score has multiple issues and just barely scrapes by for approval, it could mean you’ll end up paying a lot more in interest over your mortgage term.

So it’s worth taking the time to understand how specific issues could drive up your interest rate. To make this easy for you, we’ve listed some credit score issues that will have the biggest impact on your interest rates.

Missed Payments

If you’ve missed 1-2 bill payments, this won’t impact your credit score and interest rates as much as missing several months worth would. And missing a mortgage payment is likely to drive up your interest rates more than missing other types of payments.

You can read more in our guide to getting a mortgage with missed payments on your file.

Debt Management Plans

If you get approved for a mortgage with a debt management plan, the more recent the DMP, the less competitive the mortgage rates are likely to be. So if you’re unhappy with the mortgage rates offered, allowing some time to pass could up your chances of getting a good rate. Read more in our guide to debt management plans and mortgages.

Bankruptcy

Most lenders require a three year waiting period after you have been discharged. Some may accept an application after 1 year of being discharged from bankruptcy, but their interest rates are often quite high.

If you’re worried about how any of these bad credit score issues could impact mortgage interest rates, it’s worth speaking to an expert mortgage broker. A specialist can assess your individual situation, offer advice, and take you directly to a provider with a niche mortgage offer with the best possible interest rate.

You can read more in our guide to getting a mortgage after bankruptcy.

Do bad credit mortgage brokers charge a higher fee?

Yes, they do. Brokers will charge between 1- 3% of the sum that you are borrowing, and this percentage may vary depending on how complex the deal is.

This means that cases with multiple credit defaults will likely cost more than a simple one-off credit score issue, as it will take the broker longer to find a favourable loan option.

Mortgage brokers will charge upwards of £499 on average for borrowers with bad credit histories and will normally only accept payment upon completion of your mortgage loan deal.

Bad credit mortgage lenders and the rates they offer

The table below will provide you with a guide as to which lenders cater for applicants with bad credit….

Mortgage Lenders for Bad credit

Showing a range of the latest UK mortgages from lenders considering applications where one or more applicants have bad credit. Updated as of March 2022

Mortgage amount: £150,000, over 30 years

Mortgage Lender #1

Check your eligibility today

£576

Monthly payment

95%

Maximum LTV

3.05% 3 year discounted

Initial rate

£199

Product fees

4.9% APRC

Overall cost for comparison

Mortgage Lender #2

Check your eligibility today

£664

Monthly payment

95%

Maximum LTV

3.39% lifetime discounted

Initial rate

£0

Product fees

3.5% APRC

Overall cost for comparison

Mortgage Lender #3

Check your eligibility today

£636

Monthly payment

90%

Maximum LTV

3.05% 3 year discounted

Initial rate

£199

Product fees

4.9% APRC

Overall cost for comparison

Mortgage Lender #4

Check your eligibility today

£685

Monthly payment

90%

Maximum LTV

3.64% 5 year fixed

Initial rate

£774

Product fees

4.2% APRC

Overall cost for comparison

Mortgage Lender #5

Check your eligibility today

£504

Monthly payment

75%

Maximum LTV

1.31% 2 year fixed

Initial rate

£995

Product fees

3.3% APRC

Overall cost for comparison

Mortgage Lender #6

Check your eligibility today

£879

Monthly payment

75%

Maximum LTV

5.79% 2 year fixed

Initial rate

£0

Product fees

4.9% APRC

Overall cost for comparison

Which mortgage you’ll qualify for is subject to approval by the lender, and depends on various criteria.

To get the best deal you can, you need to speak to one of the experts - make an enquiry now.

Note: These deals are for illustrative purposes only, and do not constitute financial advice.

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One thing to bear in mind is that not all lenders are upfront about their terms and conditions for bad credit mortgages. And many lenders judge applications on a case by case basis.

That’s why it’s recommended you work with an expert mortgage broker who can save you time, hassle and money by taking you directly to your best option.

Speak to an expert bad credit mortgage advisor today

Even a fraction of a higher percentage interest rate can add up to many thousands of extra pounds paid over the course of your mortgage. That’s why – especially if you’ve got poor or no credit history at all – it’s worth talking with a broker.

They can help weed out what types of loans might not be feasible based on your credit score and other factors like income level and debt ratios. And you’ll have peace of mind, knowing you got the best interest rate possible.

Call us now on 0808 189 0463 or make an enquiry and we’ll connect you with an expert broker for your situation who will be able to answer any questions about the process from start-to-finish.

We don’t charge a fee for matching you with the right broker and there’s no obligation to take things further after an initial consultation.

Ask a quick question

We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in bad credit mortgages. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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