How to Get a Joint Mortgage with One Bad Credit Applicant?

What Do Joint Mortgage Lenders Look For?

When applying for a joint mortgage, understanding the lender’s viewpoint can be significantly helpful. They look at a variety of factors, and these factors contribute to the size of the mortgage you may be granted.

The list of factors includes:

• Relationship status (living together, married, family)
• Application in single or joint names
• Each applicant’s age
• Each applicant’s level of experience (first-time buyers, investors, etc.)
• Job status (employed, self-employed, contractor, etc.)
• Each applicant’s income
• The total amount of outstanding credit (if any)

The size of the deposit you can afford plays a role as well. A higher deposit usually means lower monthly repayments, which could boost your chances of getting a mortgage.

But, if your deposit is smaller, say 5%, and one applicant has bad credit, lenders might see this as a high risk. This could lead to your mortgage application being declined.

Fortunately, some lenders are willing to consider single applicants, even if they’re married. Their focus will be on whether the single applicant can manage the mortgage repayments.

Finally, it’s worth noting that joint mortgage applications are often preferred by lenders. Having two incomes instead of one brings an extra layer of stability, making the repayments more reliable.

How Does Bad Credit Impact a Joint Mortgage Application?

When you apply for a joint mortgage, lenders conduct a credit search. Simply put, a credit search is a review of your credit history that lenders use to gauge your financial reliability. It’s an essential process that can significantly influence the outcome of your application.

Adverse credit issues refer to elements in your credit history that may deter lenders from approving your application. Here are some common adverse credit issues:

• Late or missed payments/ Arrears
• County Court Judgements (CCJs)
• Individual Voluntary Arrangements (IVAs)
• Bankruptcy
• Defaults
• Debt Management Plan (DMP)

Long-standing credit issues can be a mixed bag in the eyes of lenders. Some lenders may disregard credit issues that happened a long time ago, especially if you’ve demonstrated responsible credit behaviour since then. Others, however, might still consider these old issues in their assessment.

For instance, a missed payment from five years ago might not be a problem for some lenders, while others might consider it a red flag.

Hence, the impact of long-standing credit issues may vary, and it’s often a case-by-case decision.

Do bear in mind that mortgage lenders will take into account the following elements during your application process:

• The nature and seriousness of your credit problems
• The recency of these credit issues
• The causes for your credit issues (isolated or recurrent)
• The amount of debt involved
• Whether the credit issues have been addressed and settled
• The kind of credit involved (credit card, home loan, utility bill, and so forth)

What Happens to a Joint Mortgage When One Applicant Has Bad Credit? 

The situation becomes more complex when one applicant has a good credit score and the other has poor credit. Each lender has their way of evaluating this scenario.

Some lenders focus on the lower credit score of the two applicants when considering the application. In this case, even if one applicant has an excellent credit rating, the bad credit of the other party could potentially affect the mortgage approval or the interest rate offered.

Other lenders take a different approach. Instead of focusing solely on the lower score, they consider both credit scores to calculate a “joint score.” 

This joint score takes into account both the good and bad credit, and a decision is then made based on this combined rating.

This approach may result in more favourable conditions, especially if one party has particularly strong credit.

What Happens to a Joint Mortgage When Both Applicants Have Bad Credit?

The complexities increase when both applicants have a history of poor credit. Factors such as the severity of the credit issues and their recency come into play.

For example, minor credit issues from a few years ago may not carry as much weight as more recent or severe incidents, such as bankruptcy or repossession.

In such cases, turning to specialist lenders may be a viable option. These professionals work with a range of mortgage products designed specifically for people with bad credit histories.

They assess the unique circumstances of each application and can provide solutions tailored to meet these specific needs.

Refinancing a Joint Mortgage with Bad Credit

Refinancing a mortgage can be a helpful move when aiming for lower interest rates or adjusting the term of your loan, but what if your credit is less than spotless? As challenging as it may seem, it’s not an impossible task.

But, keep in mind that just like with an initial mortgage application, lenders will scrutinise your credit history during a refinance. If one or both parties on the mortgage have a poor credit history, it could affect your ability to secure favourable terms, such as lower interest rates.

Yet, there are still options. Certain lenders specialise in working with individuals who have low credit scores.

Although you may face higher interest rates than someone with a better credit history, these lenders may still offer a deal that improves your current mortgage terms.

Potential Lenders for Applicants with Bad Credit

If you have bad credit, the pool of lenders willing to offer you a mortgage might be smaller. But, a few might be willing to consider your application, depending on your specific credit issues. 

As of October 2023, the following lenders could potentially assist:

• Nationwide Building Society might consider you if your County Court Judgements (CCJs) are more than a year old. But, they might not if you have an active debt management plan.

• HSBC could be an option if you have previously declared bankruptcy but have been discharged for over three years.

• NatWest may be willing to work with you if your property was repossessed more than six years ago. But, your credit score and bank account behaviour will be considered.

• Leeds Building Society could potentially assist if you have a current debt management plan in place, especially if it was a one-off incident and you meet other criteria.

• Barclays might be willing to accept you if you have had a previous Individual Voluntary Arrangement (IVA) that was satisfied over six years ago.

As you can see, several mainstream lenders might consider applicants with past credit issues. But, these issues should ideally be a few years old. 

If your credit problems are more recent, you’ll likely need to explore specialist options. You might also benefit from the support of an experienced broker who specialises in arranging mortgages under such circumstances.

Understanding Mortgage Rates for Applicants with Bad Credit

Let’s be frank. Having a bad credit history can result in higher mortgage rates. The reality is, lenders need to balance the risk of lending to someone with a poor credit history, and this often means higher costs for the borrower.

However, the credit landscape isn’t all bleak. There are deals available for mortgage applicants with bad credit. These deals can vary greatly, so it’s crucial to do your research and compare your options.

[Suggested Image Placement: A table detailing the current mortgage rates for applicants with bad credit. This could include the name of the lender, the interest rate, and any specific lending criteria.]

Improving Your Mortgage Approval Chances

Even with a poor credit history, there are steps you can take to increase your chances of securing a joint mortgage. Here are some practical tips:

Take a look at your credit reports

It’s good to regularly keep an eye on your credit reports. This helps you understand your credit status and spot any errors. Various services can help you do this for free.

Work on lowering your debts

If you can, try to pay off what you owe. This could boost your credit score and make lenders see you as a safer bet.

Put aside a bigger deposit

If you can save up a bigger deposit, it could balance out your bad credit. This could lessen the risk for the lender.

Think about a guarantor

A guarantor mortgage lets a third person, often a family member, promise to cover the mortgage payments if you can’t.

Get advice from a pro

A skilled mortgage broker can point you towards lenders more likely to say yes to your application. They can also haggle for better terms for you.

The Bottom Line: Getting Help

Securing a joint mortgage with bad credit may seem like a tough challenge, but with the right support, it’s far from impossible. 

An experienced broker can be invaluable in these scenarios. Not only can they provide specialist advice, but they can guide you towards lenders that are most likely to approve your application, helping to reduce stress and save time. 

Plus, they might be able to secure better rates than you would alone. Don’t hesitate to reach out. We can link you with a good broker who can help you solve your dilemma about getting joint mortgages with bad credit.