Securing a mortgage with bad credit can be challenging, but it’s far from impossible.

If you’re looking to buy a home in Bristol and have a less-than-perfect credit history, understanding the deposit requirements is crucial. Here, we will explore the factors that influence how much deposit you need for a mortgage with bad credit in Bristol.

The Importance of a Large Deposit

When applying for a mortgage with bad credit in Bristol, lenders often require a higher deposit compared to those with a good credit history.

Typically, you should expect to put down at least 10% of the property’s value. However, the exact amount can vary depending on several factors, including the severity of your credit issues, the amount of the loan, and the lender’s specific criteria.

What Affects the Deposit I Need For a Bad Credit Mortgage in Bristol?

Nature and Timing of Credit Issues

One of the primary factors influencing your deposit requirement is the nature of your credit issues. The type and severity of your credit problems play a significant role in determining your deposit.

Minor issues, such as a few missed payments, might require a lower deposit compared to more severe issues like defaults or County Court Judgements (CCJs). Lenders assess the risk associated with your credit history, and more significant problems typically necessitate a higher deposit to offset this risk.

The timing of your credit issues also affects the deposit you need. Lenders are more likely to favour applicants whose credit issues occurred further in the past. Recent problems might necessitate a larger deposit to mitigate the perceived risk.

For example, a default that occurred several years ago and has since been resolved may be viewed more favourably than a default from the past year. Demonstrating that your credit issues are behind you and that you have taken steps to improve your financial situation can positively influence lenders’ decisions.

Source of Your Deposit

Another important aspect is the source of your deposit. Lenders prefer deposits sourced from your own savings, as it shows financial discipline and the ability to save.

However, they also accept gifted deposits from family members, provided the source is clear and well-documented.

Ensuring your deposit source is transparent and properly recorded can help smooth the application process and provide lenders with the confidence they need to approve your mortgage in Bristol.

Loan-to-Value Ratio (LTV)

The loan-to-value ratio (LTV) is a critical factor in mortgage applications.

If you have bad credit in Bristol, you might need a lower LTV, meaning a larger deposit relative to the property’s value. For instance, instead of a typical 90% LTV (10% deposit), you might need an 85% LTV (15% deposit) or lower.

The LTV ratio reflects the risk a lender takes on by offering you a mortgage; a lower LTV reduces their risk and can make your application more attractive.

Steps to Strengthen Your Mortgage Application

While a larger deposit can improve your chances of securing a bad credit mortgage in Bristol, there are other steps you can take to strengthen your application.

Before applying, take steps to improve your credit score. Pay off any existing debts, avoid new credit applications, and ensure all payments are made on time. Demonstrating a stable income and employment history can also positively influence lenders.

Lenders look for evidence of financial stability, so showing a consistent income stream and a secure job can enhance your application.

Working With a Bad Credit Mortgage Broker in Bristol

Working with a mortgage broker in Bristol like us who specialises in bad credit mortgages can provide valuable guidance and access to a wider range of products.

A specialised broker like us understands the intricacies of bad credit mortgages in Bristol and can help you navigate the complexities of the market.

By working with us, you can increase your chances of finding a suitable mortgage product that meets your bad credit mortgage needs.

Date Last Edited: July 24, 2024