Joint Mortgages & Bad Credit

If you have already spent hours trawling the internet after searching for something to the effect of ‘joint mortgage bad credit’ we hope that this comprehensive guide will help you to locate the information you are looking for and give you the confidence that securing your dream property might be more achievable than you initially thought.

Our mortgage advisers are frequently asked if it is possible to get a joint mortgage when one partner has bad credit. As the term ‘bad credit’ covers many different scenarios and circumstances, we understand that accessing the correct advice isn’t always as simple as it should be. The right advice from specialist mortgage brokers can make all the difference, which is why we will cover so many different variations of bad credit in this article.

Types of Bad Credit that Can Cause Problems for Joint Mortgages

There are a variety of different types of bad credit that can cause problems for joint borrowers seeking to obtain a mortgage. Incomes are being subjected to increasing numbers of financial pressures, which means that credit problems stemming from circumstances that lie outside of your control are sometimes unavoidable.

 You might, for example, have experienced or are currently experiencing one of the following issues:

  • Defaults
  • CCJs
  • Late payments
  • Repossessions
  • Bankruptcy
If you have a history of bad credit, lenders will typically ask for more detailed explanations of your circumstances. They might, for example, ask some of the following questions:

  • What type of credit problem have you experienced?
  • Why did this issue occur?
  • Was it a one-off or a recurring problem?
  • When did it happen?
  • How large was the debt?
  • Has the debt now been repaid or subject to a current repayment plan?
 Additionally, most lenders will also want to understand a range of other factors before they will make their final lending decision, including:

  • Age of applicants
  • Marital status
  • Requested mortgage term 
  • Deposit amount 
  • Whether applicants are employed or self-employed
  • Credit commitments currently outstanding
It is normal to feel overwhelmed by the level of information that lenders will request, however it is important to remember that it is still possible to successfully secure a joint mortgage if one partner has bad credit.

Let’s take a closer look at some of the credit issues mentioned above to see how they might impact any lending decisions that could ultimately be made following your joint mortgage bad credit application.

Late Payments

If you have missed a credit card, utility, mobile phone, loan or credit agreement payment, lenders might request a reason as to why this situation occurred and will likely look into your payment history to see whether it was a one-off or a more regular occurrence.

Late payments are often taken as a sign that a borrower is finding the managing of their finances difficult and if you frequently miss payments, you could be considered a higher risk borrower. Some lenders specifically state that they will only consider applicants with a 6-year clean payment history whereas others might request 3 years or 12 months. Equally, however, there are some lenders that will consider applications from borrowers who are presently behind on their payments.

Defaults

If you haven’t kept up with credit agreement repayments and the lender views the contractual relationship to have ended, a default will occur. Defaults typically occur if no payments are made in 6 months, but they can be applied at any time. Some lenders accept mortgage applicants with defaults on their record, however, they will want to know:

  • When a default was registered
  • The default amount, as some lenders will impose an upper limit
  • Whether the default was registered on an unsecured or secured account. Secured defaults, such as a secured loan or mortgage are considered much higher risk than unsecured defaults including credit cards
Recent defaults will be considered a higher risk than older occurrences and while some lenders will look for a 3-year clean default history, others will consider applicants with recent defaults.

County Court Judgements (CCJs)

CCJs are court awarded judgements issued to those who haven’t kept up repayments on an agreement. Following the issue of a CCJ, a detailed plan is usually implemented which will set out how the borrower will repay the outstanding debt. If you have a CCJ, lenders will want to understand:

  • When the CCJ was registered
  • The circumstances that led to the issuing of a CCJ
  • The number and monetary value of CCJs you have
  • Whether they have been satisfied Every lender has its own set of CCJ criteria.
Some will consider up to 3 satisfied CCJs provided that the debt owed did not exceed a certain amount. Alternatively, other lenders won’t set out a maximum limit and might not be overly concerned as to whether they have been satisfied or not.

Debt Management Plans (DMPs)

Debt management plans are agreements made between unsecured creditors and borrowers that set out affordable monthly payments that need to be made until a debt is fully cleared. Some lenders are happy to accept mortgage applications from people with DMPs but they will want to know:

  • When the DMP started
  • How many payments have been made
  • The number of creditors listed and the total value of the DMP
Lenders will typically view DMP payments as a regular monthly commitment and will, therefore, include them in their routine affordability calculations. In most cases, you will be required to prove that your repayments have been made on time either via bank statements or official documentation that can be obtained from a debt management company.

Individual Voluntary Arrangements (IVA)

IVAs are formal arrangements made between a person and a creditor that set out what percentage of an outstanding debt will be paid over a specific period. An IVA will remain on your record for 6 years, which is significant as some lenders require borrowers to be IVA free for 3 years.

Although every situation is unique, borrowers with an IVA on their credit history will often be required to pay a larger deposit, typically between 15% and 35%.

Bankruptcy

Bankruptcy orders are issued by the courts to people who don’t have enough assets or money to clear their outstanding debts. If you want to obtain a mortgage after being declared bankrupt, lenders will want to understand:

  • How long you have been discharged from bankruptcy
  • Your post-bankruptcy credit record
  • The circumstances surrounding your bankruptcy
Discharge usually occurs 12 months after the date of issue. While some lenders will consider applications from borrowers after 12 months, others will have criteria that state you must be discharged for at least one year before submitting your application.

Payment Problems and Repossessions

Mortgage companies issue repossessions when borrowers cannot meet their monthly mortgage payments. Repossession does not automatically mean that securing a future mortgage is impossible, however, lenders will want to understand:

  • When the repossession happened
  • The circumstances surrounding the repossession
  • Whether there are any outstanding repayments
Lenders will generally want to see a period of at least 2 years between the repossession and any new mortgage application. Additionally, most lenders will require there to be no outstanding payments relating to that repossession.

How do lenders treat joint mortgage applications where one partner has bad credit and the other has good credit?

Lenders have their own individual guidelines and criteria that they will consult when viewing this type of joint mortgage application. Most lenders will prefer that both applicants are detailed on the joint application and often make decisions based on the credit profile of the weakest applicant. In these cases, the poor credit profile will outweigh the good credit profile. Many high-street lenders perform credit checks for joint mortgage applications.

The application will be scored jointly, which means that borrowers are required to meet the lender’s joint credit score criteria before being accepted. There are lenders who don’t use joint credit scores at all, instead preferring to search the credit histories of both applicants to look for any problems that may conflict with their policy guidelines.

Credit Scores, Credit Searches and Joint Mortgage Bad Credit Applications

It is crucial to understand the differences between the terms ‘credit score’ and ‘credit search’.

Lenders will look at your credit score to determine whether you are a ‘good risk’ and will be able to meet your repayment requirements. Points will be awarded for every piece of information detailed on your credit report, which will determine your overall credit score. There is no universal minimum credit score required to obtain a mortgage as each lender determines its own tolerance levels.

Credit searches or credit checks are made by lenders to understand your credit history. Credit searches generally fit into one of two categories: ‘soft search’ and ‘hard search’.

Soft searches allow lenders to conduct an initial credit check, but they won’t have access to your full credit report. Soft searches will not appear on your credit file and will not negatively impact your credit score.

Hard searches are detailed on your credit report and will give lenders full access to your credit file. If you make multiple credit applications close together, this might have an adverse effect on your credit score.

How do lenders treat joint mortgage applications where both partners have bad credit?

If both applicants have bad credit, lenders will fully assess the circumstances surrounding those credit issues. Often running worst case scenarios, lenders will collate every adverse credit event to determine whether anything on your credit histories violates their lending criteria.

If, for example, you have previously had a CCJ and your partner has some recent late credit repayments, lenders would apply their criteria to both of those events. If their criteria state that historic CCJs are acceptable but late credit repayments are not, your application would be denied.

Is it possible to add someone with bad credit to a mortgage?

Lenders are often willing to consider applications to add someone to an existing mortgage however the process is typically trickier if that person has a history of bad credit. Some lenders will still consider your application, however they will want to know:

  • The circumstances surrounding the credit issues
  • The value of any debts
  • Whether the problems have been satisfied
  • The loan to value (LTV) or equity currently in the property
Adding someone to a mortgage will often incur additional costs, including solicitors’ fees, administration fees and land registry listings.

How do lenders treat joint mortgage applications where one partner has no credit?

If you don’t have a credit history, lenders will have no way to accurately establish whether you are a responsible borrower or a ‘good risk’. If you are in this situation you will likely find it beneficial to seek out lenders who conduct credit searches as opposed to lenders who base their decisions on credit scores.

Is it possible to leave a partner with bad credit off the mortgage?

Lenders will usually want the mortgage application to include the details of both partners who will be living at the property. This isn’t always the case, however, and some lenders will consider a single applicant provided that they meet the lending and affordability criteria.

 The source of the deposit can make this situation more complex as a person gifting a deposit is typically required to declare that they don’t have any interest in the property itself. This justification is trickier to make if they will be living in the property, however there are lenders who will accept gifted deposits on the condition that documents waiving property rights are signed should a future repossession occur.

The Impression Bad Credit Types can have on Joint Mortgages

Bad credit can impact the ways in which potential lenders view your joint mortgage application. Most lenders consider applications using a sliding scale and will offer a selection of products with a range of interest rates. Some lenders also have products designed specifically for applicants with credit issues and some might require a larger deposit depending on the types of credit issues you have experienced.

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