Adverse credit mortgages

When it comes to buying a home, some lenders can take on a rather sanctimonious attitude. They want to deal only with those who have faultless credit histories, perfect work records and adequate deposits.

But money problems can affect everyone. Adverse credit problems can be linked to a loan default, county court judgements or being a discharged bankrupt.

Sometimes people get into debt through no fault of their own and, even if they have been to blame, want to sort things out. Certainly no-one taking out a mortgage wants to see their property repossessed.

However, there is some good news in that there is now a relatively large group of lenders willing to provide adverse credit mortgages. And this competition now means better deals.

Better does not mean the same as for standard mortgages, however, and lenders in the adverse credit market- which is also sometimes described as sub prime or non-conforming - will charge higher rates.

Adverse credit mortgages are invariably sold by mortgage brokers. If you choose to see one, you should make sure they are regulated by the mortgage code. Should you prefer to go direct, then some of the larger lenders such as Halifax and Abbey National, will have specialist divisions they can direct you to. These are set up under separate brands: in the case of Abbey National, it's First National; while Halifax sells under the Birmingham Midshires brand.

While the lenders clearly want to keep some degree of separation between their standard and adverse credit divisions, the deals they are offering are less punitive than in the past. Most lenders will also cut the interest rate if borrowers keep up a good payment record. And, after three years, it may be possible to switch to a standard loan.

Your application will be thoroughly vetted and the interest set according to the risk the lender believes you pose.

Most adverse credit mortgages will expect a 10% deposit, although a few will accept 5%. You will also be subject to redemption penalties, but these should not be for longer than three years.