Bad Credit Mortgage

What is a Bad Credit Mortgage?

A bad credit mortgage can help if your credit record is less than perfect. A bad credit mortgage is a home loan that is granted to consumers with a poor credit rating. It usually features a fixed introductory interest rate. This rate may be fixed for two to three years and is generally much higher than a regular home mortgage loan over thirty years.

After this short introductory period the interest rates on a bad credit mortgage will fluctuate with the markets. Because lenders are at more risk on this kind of loan, interest rates are going to be higher. Obviously a lender will want to make sure that it is covered should you default on your repayment of the loan. A bad track record on the part of a consumer does not bode well for the future so lenders must secure their risk appropriate to your financial history.

However, you may not have to pay higher rates for the entire thirty year term. Over time you can use this kind of loan to improve your credit score. After a two year period of prompt repayments you can refinance a bad credit mortgage with a conventional loan that offers lower interest rates based on an improved track record. So there is scope for improving your financial future, even if it means paying higher fees initially.

Fees that are charged on a bad credit mortgage loan are also going to be higher than on a conventional home loan. Fees on this kind of loan range from 1% to 6% of the loan value. But borrowers should not complain about higher fees. It is certainly a better prospect than being locked out of mortgage loans completely.

Unfortunately you will pay higher fees for a bad credit mortgage, but this is based only on your debt management history. Over time you can improve on the way in which you manage your debts and qualify for a better deal. Higher rates should not be a reason for avoiding this kind of loan. Loans of this nature can go a long way toward improving your financial outlook in the future. So pay your debts on time and make the changes you need for success in the future.