Joint Mortgage with One Bad Credit Applicant
If you or your partner are looking to get a joint mortgage but one of you has bad credit, it can be an incredibly frustrating experience. You may have approached a lender to find your mortgage application declined or be struggling to find a lender that offers a competitive product.
The good news is there are lenders in the UK that provide mortgages for people with bad credit and if one of you has bad credit there are options available to you.
This guide explores the ins and outs of getting a joint mortgage where one applicant has bad credit and explains how you can get a mortgage. Let’s jump in.
What is Bad Credit?
The term bad credit refers to individuals who have had difficulty meeting financial obligations in the past. When you apply for a mortgage, you will ordinarily be credit scored twice during the process. The first scoring is at Decision in Principle (DiP) stage and the second when you make a full mortgage application.
Credit reference agencies compile your financial information and share it with lenders. A lender will look at your credit history and decide whether you meet their risk appetite. Sometimes your score will be too risky for a lender, and they will decline a mortgage application. Unfortunately, if you are making a joint application, if one of you has bad credit and is considered too risky by a lender, the mortgage application may be declined.
There are several factors that can impact your credit score, but the most damaging are outlined below.
If you miss a payment on a debt, this will normally have a negative impact on your credit score. A single missed payment can be problematic but should not normally cause a lender to decline your application – unless it has been registered within the last 12 months. Multiple missed payments can cause a mortgage application to decline as a lender will be concerned that you might miss your mortgage payments.
If you fail to catch up on missed payments and allow three or more missed payments to accrue, your account with a creditor will likely have a default registered. Defaults are considered an even higher risk to lenders as it indicates that you have not only failed to manage your income and expenditure properly, but you have also been unable to catch up on the missed payments.
Once a default is registered, a creditor will approach you to arrange to have the payments caught up or the debt settled. If they are unable to arrange an agreement with you or feel you are unwilling to pay, they will apply to a court for a County Court Judgement (CCJ). A CCJ is a serious financial mark on your record, and it increases the risk for mortgage lenders significantly.
Bankruptcy is the most serious financial mark you can have on your credit record. There are only a handful of mortgage lenders who will consider applicants with a bankruptcy and even those lenders have strict criteria before they will lend money. A good rule of thumb is to ensure that the bankruptcy has been fully discharged before applying for a mortgage. Despite a bankruptcy being discharged, a lender will still ask the question if you have ever been made bankrupt during your mortgage application.
How Can Bad Credit Affect a Joint Mortgage Application?
Bad credit can prevent you from obtaining a mortgage and most lenders in the UK market have tight credit score criteria. There are some lenders who are much more flexible, and you can still obtain a mortgage in most instances. The downside is that lenders offering mortgages to people with bad credit scores have higher interest rates to cover the risk.
Because of the variance in these interest rates between lenders who accept bad credit applicants, it is important to use a whole of market mortgage broker to find the best deal for you. Comparing all bad credit lenders and finding the best interest rate available to you can save you hundreds of pounds per month.
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Can You Add Someone with Bad Credit to a Mortgage?
Yes, it is possible to add someone with bad credit to a mortgage. There are three complications that you should consider before adding someone with bad credit to an existing mortgage:
- Does your lender accept bad credit applicants or will you need to remortgage and find another lender?
- Remortgaging might achieve the goal of adding a bad credit individual to your mortgage, but it could make your mortgage much more expensive.
- Will the person be able to afford the mortgage?
An often-overlooked fact about joint mortgages is the debt is joint and severally liable. This means if the lender needs to chase the debt for any reason, they can pursue one person for the full amount.
What if Both Applicants Have Bad Credit?
If both applicants on a mortgage application have bad credit histories, you should still be able to obtain a mortgage depending on the severity of the bad credit.
A lender will apply the same credit scoring threshold and if you are deemed an acceptable risk, they will consider the case. There are a limited number of lenders offering bad credit mortgages and you should consult with a whole of market mortgage broker.
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Obtaining a mortgage with bad credit can be difficult but it may be possible. An adverse credit specialist mortgage broker will have access to lenders who will consider offering you a mortgage.