Joint Mortgage with Bad Credit

Joint Mortgage with Bad Credit

Securing a joint mortgage with bad credit can seem challenging, but it’s not impossible. Many couples or co-applicants find themselves in situations where one or both have poor credit scores, raising concerns about whether they can successfully apply for a mortgage. The good news is that while having bad credit can limit your options, there are specialist lenders in the UK willing to offer joint mortgages to applicants with a less-than-perfect credit history.

In this article, we’ll discuss what lenders look for when assessing joint mortgage applications, how bad credit impacts your chances, and which lenders in the UK are open to working with applicants who have bad credit.

What Is a Joint Mortgage?

A joint mortgage is a mortgage taken out by two or more people, typically a couple or business partners, to buy a property. Each person involved in the mortgage application is equally responsible for repaying the loan, and their combined income is used to determine the mortgage amount they can borrow.

The main benefit of a joint mortgage is the pooling of resources for a higher borrowing capacity. When applying for a joint mortgage, the lender will assess both applicants’ financial situations, including their credit scores, income, and overall affordability.

How Does Bad Credit Affect a Joint Mortgage Application?

Bad credit can complicate a joint mortgage application. Lenders will typically look at the credit histories of all applicants, so if one or both applicants have a bad credit score, it can raise red flags. Bad credit is usually a result of missed payments, defaults, County Court Judgments (CCJs), Individual Voluntary Arrangements (IVAs), Debt Management Plans (DMP) or even bankruptcy. Life events such as illness or separation can lead to missed or late bill payments, resulting in bad credit.

Here are some of the ways bad credit can impact your joint mortgage application:

1. Higher Interest Rates: Lenders may view applicants with bad credit as higher risk and may offer a mortgage at a higher interest rate to offset that risk.
2. Smaller Loan Amounts: If one applicant has bad credit, the lender may offer a smaller loan than you would receive if both applicants had good credit.
3. Larger Deposit Requirement: Lenders may require a larger deposit, often around 15-30%, if one of the applicants has bad credit, to reduce their risk.
4. Limited Lender Options: High street banks may decline your application, but specialist lenders are more likely to consider your circumstances.

What Do Lenders Look for in Joint Mortgage Applications with Bad Credit?

When assessing a joint mortgage application, especially where bad credit is involved, lenders look at a range of factors to determine whether to approve the loan. Here’s a detailed explanation of what lenders evaluate:

1. Credit History of All Applicants

Lenders will check the credit reports of both applicants. If one person has poor credit history while the other has a strong credit profile, this might balance out the risk. However, the applicant with bad credit may affect the overall interest rates or mortgage terms. Most lenders will assess the lower credit score in a joint application when one applicant has bad credit. A joint mortgage with one good credit rating and one bad credit applicant is more likely to be approved than if both applicants have poor credit.

2. Type and Severity of Credit Issues

Not all bad credit is treated equally. Some lenders may be more lenient with minor credit issues like a few missed payments, whereas more severe issues such as defaults, CCJ”s, or bankruptcy may require a longer waiting period before approval. Most credit issues disappear from a credit report after six years. Lenders will want to know:

• How long ago the bad credit occurred.
• What type of credit issue it was (e.g., missed payment vs. bankruptcy).
• Whether the credit issue has been resolved.

3. Income and Employment Status

Lenders will assess both applicants’ income to determine how much they can afford to borrow. If one applicant has bad credit but a high and stable income, it may offset the risk associated with their credit history. Stable employment with a consistent salary will increase the chances of approval, even if one of the applicants has bad credit.

4. Deposit Size

The larger your deposit, the less risk there is for the lender. Applicants with bad credit will often be asked for a larger deposit, typically 15-30%, to reduce the lender’s exposure to risk. A substantial deposit not only increases your chances of being approved but can also lead to better mortgage terms, such as lower interest rates.

5. Affordability Assessment

Lenders will carry out an affordability check to ensure that both applicants can afford the monthly repayments. This includes evaluating your income, outgoings, and existing debts. Even if one applicant has bad credit, a strong affordability profile for both applicants can help mitigate the risk.

6. Time Since Credit Issues

The age of your credit problems matters. Lenders will generally be more flexible if your bad credit events happened several years ago, and your financial situation has since improved.

For instance, some lenders are willing to offer mortgages to applicants whose defaults or CCJs occurred more than three years ago, especially if they’ve had no further credit issues. Lenders may only consider the most recent six years of credit history during the mortgage assessment.

Which Lenders Offer Joint Mortgages with Bad Credit?

While most mainstream lenders may be reluctant to approve a joint mortgage with bad credit, this will depend on the amount and the registered date of adverse credit. There are several specialist lenders that cater to applicants with credit problems. These lenders have more flexible criteria and are willing to assess applicants on a case-by-case basis. Below are some lenders that may consider offering a joint mortgage to borrowers with bad credit:

1. Aldermore

Aldermore is known for offering mortgages to borrowers with complex credit histories, including bad credit. They look at individual circumstances and may offer a joint mortgage if one or both applicants have bad credit, provided they can demonstrate affordability and financial stability.

2. Precise Mortgages

Precise Mortgages specialises in offering mortgages to applicants with adverse credit, including defaults, CCJs, and IVAs. They are flexible with bad credit histories, particularly if the issues occurred several years ago and the applicants have since rebuilt their finances.

3. Kensington Mortgages

Kensington Mortgages is a lender that focuses on applicants with non-standard credit profiles. They offer joint mortgages for people with bad credit and have competitive rates for those who can provide a larger deposit and demonstrate good affordability.

4. The Mortgage Lender

The Mortgage Lender offers products specifically for those with a history of bad credit, including missed payments, defaults, and CCJs. They look at each application on an individual basis, making them a viable option for joint mortgage applicants with bad credit.

5. Bluestone Mortgages

Bluestone Mortgages is a lender that specialises in bad credit mortgages, including joint mortgages. They assess each case individually, and if you can show a steady income and have a significant deposit, they are more likely to approve your application.

If your bad credit is historical there could be a chance that a specialist broker maybe able to approach a high street lender. This will allow a smaller deposit and better interest rates.

Steps to Improve Your Chances of Securing a Joint Mortgage with Bad Credit

If you’re applying for a joint mortgage with bad credit, there are several steps you can take to improve your chances of approval:

1. Improve Your Credit Score

If possible, work on improving your credit score before applying for a mortgage. Pay off any outstanding debts, avoid missing payments, and reduce your credit card balances to show lenders that you’re improving your financial management.

2. Save for a Larger Deposit

The larger your deposit, the more attractive you’ll be to lenders. A bigger deposit reduces the lender’s risk and may help you secure a mortgage with more favourable terms, even if one applicant has bad credit.

3. Consider a Specialist Mortgage Broker

A specialist mortgage broker can help you find lenders that are more likely to approve joint mortgage applications with bad credit. Brokers have access to a wider range of lenders, including those who may not be available directly to borrowers.

4. Maintain Financial Stability

Ensure that both applicants have a steady income and manage their finances responsibly. This demonstrates to lenders that you’re capable of meeting your mortgage payments, even if one of you has a bad credit history.

Conclusion

While securing a joint mortgage with bad credit can be more challenging, it’s certainly not impossible. Specialist lenders such as Aldermore, Precise Mortgages, and Kensington Mortgages, are willing to consider applicants with bad credit, provided they meet certain criteria like a larger deposit and stable income.

By taking steps to improve your credit score, saving for a bigger deposit, and working with a specialist broker, you can increase your chances of finding the right mortgage and getting on the property ladder.

Get help from an experienced mortgage broker.

You can speak to one of our specialist mortgage brokers who would be able to guide you through the process. They will advise if there is a lender available and the maximum loan amount based on your circumstances. We are a whole of market mortgage brokerage with access to all lenders. Call us on 01332 470400 or complete the form with your details for us to give you a call back.

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