Bad Credit Mortgages: A Complete Guide for 2025

Getting a mortgage is often seen as one of the biggest milestones in life.But what happens if your credit record has a few blemishes? Many people assume that having poor credit completely rules out the possibility of buying a home. The truth is, it doesn’t. Bad credit mortgages exist, and while they work differently from traditional home loans, they can still help you secure the property you want. This guide explores everything you need to know about bad credit mortgages, from how they work to tips for improving your chances of approval.

Table of Contents

What Is a Bad Credit Mortgage?

A bad credit mortgage is a type of home loan specifically designed for borrowers with low credit scores or poor financial history. Lenders use credit scores to assess risk, and a lower score signals higher risk. Instead of rejecting these applications outright, some lenders offer specialized mortgage products with adjusted terms.

These mortgages may come with higher interest rates, stricter eligibility requirements, or larger deposit demands. However, they give people with financial setbacks such as late payments, defaults, or bankruptcy an opportunity to own property.

Who Needs a Bad Credit Mortgage?

Not everyone with a less-than-perfect score will require a specialist loan. But certain financial histories often make lenders cautious. You might need a bad credit mortgage if:

You’ve had CCJs (County Court Judgments)
You’ve been declared bankrupt in the past
You’ve entered into an IVA (Individual Voluntary Arrangement)
You’ve faced repossessions
You’ve had multiple missed payments on credit cards or loans

Even those with thin credit files meaning little to no credit history may benefit from such products, since lenders see the lack of data as uncertainty.

How Do Bad Credit Mortgages Work?

Bad credit mortgages function in the same basic way as standard mortgages: you borrow money to purchase a property and repay it in installments with interest. The difference lies in the terms:

Interest Rates: Higher than conventional loans to compensate for the perceived risk.
Deposit Requirements: Many lenders ask for a larger deposit (often 15%–30%) compared to the 5%–10% for prime borrowers.
Limited Lender Options: Fewer banks and building societies offer them, making the market more niche.
Stricter Affordability Checks: Lenders carefully assess income, spending habits, and existing debts

Benefits of Bad Credit Mortgages

Despite their challenges, these mortgages come with unique advantages:

Access to Homeownership: Even with poor credit, you can still buy a home.
Credit Building Opportunity: Making consistent payments helps rebuild your credit history.
Flexible Criteria: Specialist lenders often consider your full financial story, not just your score.
Range of Options: From fixed-rate to variable-rate products, choices still exist.

Risks and Drawbacks

Before committing, weigh the downsides carefully:

Higher Costs: Interest rates and fees can be significantly more expensive.
Lower Loan-to-Value Ratios: You’ll often need a much bigger deposit.
Limited Lenders: Less competition means fewer deals to choose from.
Financial Pressure: Missing payments on a bad credit mortgage can worsen your situation.

Factors That Affect Eligibility

When applying for a bad credit mortgage, lenders consider multiple elements:

1. Credit Score

While the score isn’t everything, it does provide a baseline. A higher score even within the “bad” category may unlock better deals.

2. Deposit Size

The larger the deposit, the safer you appear to lenders. It reduces their risk and can sometimes offset poor credit history.

3. Income Stability

Regular, provable income is crucial. Self-employed applicants may need two to three years of accounts.

4. Debt-to-Income Ratio

If your existing debts are too high compared to your income, lenders may decline the application.

5. Reason for Bad Credit

Some lenders differentiate between one-off mistakes (like a missed payment) and severe issues (like bankruptcy).

Steps to Improve Your Chances of Approval

Even with poor credit, you can take steps to strengthen your application:

Save a Larger Deposit – Aim for at least 15%–20%.
Clear Outstanding Debts – Pay off or reduce balances where possible.
Avoid New Credit Applications – Multiple applications can lower your score further.
Show Stable Employment – Stay in your job for at least 6–12 months before applying.
Use a Mortgage Broker – Specialist brokers know which lenders are more flexible.
Check Your Credit Report – Correct any errors before applying.

Types of Bad Credit Mortgages

Different products are available depending on your circumstances:

Fixed-Rate Mortgages

These keep your interest rate stable for a set period (2, 3, or 5 years). Ideal for budgeting, but usually start with higher rates.

Variable-Rate Mortgages

Interest rates may fluctuate in response to changes in the market. Riskier, but you may benefit if rates drop.

Tracker Mortgages

Linked to the Bank of England base rate. More predictable than variable but still subject to change.

Guarantor Mortgages

A family member steps in to cover the payments if you fall behind. This often increases a lender’s willingness to approve your application.

Comparison: Bad Credit vs. Standard Mortgages

Feature	Standard Mortgage	Bad Credit Mortgage
Interest Rates	Lower (e.g., 4–6%)	Higher (e.g., 7–12%)
Deposit Required	5%–10%	15%–30%
Lender Availability	Wide range	Limited specialists
Eligibility Checks	Moderate	Stricter
Credit Building	Maintains score	Helps improve over time

Common Myths About Bad Credit Mortgages

“They don’t exist anymore.” – False. They’re less common but still widely available.
“You can only get them from shady lenders.” – Many reputable banks and credit unions offer them.
“Approval is impossible.” – Approval is harder but not impossible with the right preparation.
“They’ll ruin your finances.” – Mismanagement can, but responsible handling can actually improve credit.

How to Apply for a Bad Credit Mortgage

Step 1: Assess Your Finances

Check your income, debts, and affordability before applying.

Step 2: Get Your Credit Report

Review all three main credit agencies (Experian, Equifax, TransUnion).

Step 3: Save for a Deposit

The more you save, the better your chances.

Step 4: Speak to a Broker

Specialist brokers have access to niche lenders.

Step 5: Submit Your Application

Prepare all documents: ID, proof of income, bank statements, and credit reports.

Step 6: Wait for a Decision

Approval may take longer than standard mortgages, but patience is key.

How Long Does Bad Credit Stay on Your Record?

Most negative marks remain on your credit file for six years. However, their impact lessens over time if you maintain good financial habits. Lenders are often more lenient toward older issues compared to recent defaults.

Alternatives to Bad Credit Mortgages

If you don’t qualify, consider:

Personal Loans (with caution) – Only as a short-term fix, not a long-term solution.

Shared Ownership Schemes – Buy part of a property and rent the rest.

Government Help-to-Buy Programs – Some schemes may assist low-credit buyers.

Credit Repair Before Applying – Delay your purchase while you improve your score.

FAQ Section

1. What is the minimum credit score needed for a bad credit mortgage?

There’s no fixed number. Some lenders may accept scores under 550, but higher scores will always unlock better deals.

2. Can I get a mortgage if I was bankrupt?

Yes, but usually not until you’ve been discharged for at least 12 months. Some lenders require longer.

3. Do bad credit mortgages always have high interest rates?

Not always. Rates depend on your overall profile, deposit size, and lender choice.

4. How much deposit do I need with poor credit?

Expect to provide 15%–30% of the property value, though some lenders may accept less with a guarantor.

5. Will applying for a mortgage hurt my credit score?

A hard credit check may temporarily lower your score, but multiple rejections hurt more. Using a broker minimizes unnecessary applications.

6. Are bad credit mortgages safe?

Yes, provided you choose reputable lenders regulated by the Financial Conduct Authority (FCA).

7. Can I switch to a standard mortgage later?

Absolutely. After building your credit and equity, you can remortgage to a standard product with better terms.

8. How long does approval take?

Specialist lenders may take longer than mainstream banks, often 2–6 weeks depending on complexity.

9. Do self-employed people with bad credit qualify?

Yes, but you’ll likely need 2–3 years of accounts and proof of steady income.

10. Can I use your mortgage calculator tool to estimate affordability?

Yes! Our tool can help you estimate repayments, compare options, and see what fits your budget before applying.

Conclusion

Bad credit mortgages may not offer the best rates, but they make homeownership achievable for people who would otherwise be excluded. With careful preparation, larger deposits, and guidance from a mortgage broker, even those with poor credit can secure a deal. The key is to approach the process strategically, improve your financial standing where possible, and choose lenders who understand your situation.

If you’re exploring your options, use our mortgage calculator tool to get a clearer picture of affordability before taking the next step. Owning your dream home may be closer than you think even with bad credit.