Mortgage Loans for People with Discouraging Credit History

| April 23, 2014

Mortgage loans for people with poor credit rating might sound absurd. But the fact is, there are provisions for mortgages for individuals rated poorly by credit agencies. Faulting in credit card repayments, missing of EMIs for your car or being adjudged bankrupt are typical cases of poor credit rating. Despite having a poor credit rating it is still possible to obtain mortgage loans for your new home.

Here it needs to be understood that since such loans are out of the ordinary the guiding regulations are different from normal mortgage loans. These extraordinary mortgages cannot be taken in conjunction with other loans, which is a definite possibility with normal borrowings. Under normal circumstances you could apply for multiple loans at any single moment, of course subject to terms and conditions set by respective loan provider. Such liberties, however, are not possible with bad credit mortgages. Once you opt for a bad credit borrowing scheme, your possibilities of applying for an additional loan particularly from nationalised organizations are politely turned down.

Normally, it would be unwise to opt for such borrowings; but eventualities cannot be ruled out. These borrowings also termed adverse credit mortgages are made available to you, when all your standard avenues of taking loans are closed.  This is the good part of bad credit borrowings. The bad part is that borrowing rates are higher as compared to normal personal loans. Considering the fact, that your credit rating is low this premium is reasonable.

Calculation of bad mortgage loans

For lenders of bad credit loans, your regular income is the primary criterion for lending. For all practical purposes your monthly debt payment must not exceed 30 percent of your total earnings. In fact, monthly payments are calculated on that basis. If required the tenure of a loan might be extended to accommodate for this payment quantum of not more than 30 percent. The higher interest is the price that you must bear for your adverse credit rating.

After you begin paying your EMIs (equated monthly instalment) a track of your repayments are maintained. In case your repayment record is good, terms of lending may be revised to normal market borrowing rates or easier repayment periods. A good repayment record may also improve your ratings.

Ways of improving your credit ratings

Your efforts should always be directed towards improving your credit rating. You must make it a point to pay bills within their due dates, such as energy bills, fuel bills, and debt repayments. Each of these carries a definite value both qualitatively and quantitatively and affects your borrowing ratings. While on mortgage loans you must not keep any other loan account open. Any such account must be closed for smoother operation of your new mortgage account. It is important that you make a regular check of your new credit report so that data generated is error free. Another aspect that you need to consider is inclusion of your name in current electoral list.

Correcting flaws in debts and credits

For all practical reasons it is always advisable to open and maintain a new record for your new mortgage loan. It is better to make your repayments within a definite date. In addition to regularising your repayment, there is a possibility of betterment of repayment terms. A low credit rating also acts as an encouragement for low spending. Once your expenses get controlled, there is greater chance of your rating getting revised for the better. As running a single loan account is more convenient than operating several such accounts, it is advisable that you maintain this with care and caution.

About the author – Harrry Fleming owns a lawyers’ firm specialising in financial issues such as loans, advances, and bad credit mortgages. Fleming is a regular writer in lawyers’ blogs and other online sites. He spends his pastime in mastering piano and sharing his experiences with kids

Category: Loans

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