1. Approach a mainstream mortgage lender
Even if you have experienced bankruptcy or mortgage arrears, or have other reasons to suspect you may have a bad credit rating, it makes sense to visit a standard mortgage lender first, as they may accept your application and will generally offer you a lower interest rate than a bad credit mortgage lender (or sub prime mortgage lender).
2. Shop around
Most high street mortgage lenders which cater for the mainstream market also have a subsidiary or affiliated company that deals with bad credit mortgages. If a high street lender rejects your application, they may then refer you to their subsidiary. But be aware that the bad credit mortgage market is highly competitive these days, and their own subsidiary may not offer the best deals.
3. Visit a mortgage broker
A mortgage broker or independent financial adviser should be your next port of call. They have access to a wide range of bad credit mortgage deals from many lenders, and should be able to get you the best deal to suit your needs.
4. Choose the right product
One of the biggest decisions you will make when selecting a mortgage, whether a bad credit deal or not, is whether to go for a fixed rate, a variable rate or a flexible deal, for example. You must decide whether to opt for the security of a fixed rate, which can help you with your budgeting if you are not very financially disciplined, or a discounted variable rate, which may offer lower repayments to start with, but is more risky.
5. Repair your credit
As a general rule, after three years with a bad credit mortgage, paying a slightly punitive interest rate, your bad credit rating should have been restored to good health. So you should look at remortgaging back to a standard mortgage lender, which should be able to offer you more competitive interest rates.
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