Is there such a thing as second charge mortgages for bad credit, and can you get one? Potentially, yes.
How do Second Charge Mortgages Work?
Second charge mortgages are secured loans. This means your property is used as collateral and, rather than your credit score, a lender will consider your:
Property value – How much your property is worth.
Property equity – How much of your property you own, and how much is owed on a first-charge mortgage.
Affordability – How much income and savings you have, and how much your existing first-charge mortgage is, to determine whether you can comfortably pay off a second loan.
How Much Can I Borrow Using a Second Charge Mortgage if I Have Bad Credit?
How much you can borrow, at what interest rate, and at what cost will come down to your personal circumstances.
Generally, lenders face a lower risk with second-charge mortgages than other types of loans because they’re secured against your property. Therefore, there’s more flexibility, and a broker (like us) can build you a bespoke deal with a specialist lender that works for both parties.
That’s not to say lenders won’t review your credit history. During the application process, you will be asked to declare any adverse credit history, and any defaults or CCJs could push up the rate you are offered. But, by being upfront about this, we may even be able to consolidate your debt to make managing this easier.
Read more: £1,700 Monthly Savings Secured Through Second Charge Mortgage
How to Get a Second Charge Mortgage with Bad Credit
To improve your financial options, we’ll work hard to make you look desirable to lenders. That may require some input from your end. For example, here are some ways you can improve your chances of being accepted:
Improve Your Credit Score
If you’re reading this blog, then you already recognise you have adverse credit, and that this may affect what you can borrow. You can begin to increase your credit score by:
- Paying all your bills, credit cards, and loan instalments on time.
- Not opening any other credit cards or taking out more loans.
- Reducing the debt owed by paying off existing loans.
- Ensuring you’re on the electoral roll.
- Keeping your credit utilisation low – less than a third of your total available credit across all accounts.
- Fixing any errors or fraudulent activity on your report.
Clean Up Your Spending
Lenders will not only be able to see how much you’ve been spending, but on what. So, to make yourself desirable to a lender and improve your affordability, cut back on any risky spending (gambling, for example), close inactive accounts and cards, and try to stay out of your overdraft.
Provide a Big Deposit
If you are able to save more, you’ll need to borrow less, which could be the difference between being approved for a second-charge loan or not.
Maintain a Stable Job
Things happen and, unfortunately, sometimes people lose their jobs through no fault of their own. However, maintaining stable employment helps prove you can afford to pay off a second-charge loan. So, where possible, try not to make any drastic changes in your career for a few months before applying.
Prepare Your Paperwork
Lenders will ask you for evidence to process your application. So, gathering these beforehand can make the process smoother and make you appear prepared. They may ask for pay slips, bank statements, or a P60.
Learn More About Second Charges
Explore this site to learn more about second charges and how we secure our clients bad credit mortgages of all types, or get in touch (details below).
