Mortgage Advice

Problem Mortgages

What are Problem mortgages?

It doesn't matter how many home owners there are in the UK, it is still very difficult for many people to get a mortgage. For these people, the search for a mortgage can result in much frustration, and meeting brick walls. You can be turned down for a mortgage for so many reasons that you may end up in a situation where you are desperate, and you would do almost anything to be able to buy a home. These people have problems getting a mortgage, and so needed "problem mortgages".

Some US companies, hungry for a new market, started to open up offices in the UK, and targeted those who had been excluded from the mortgage market. These companies had operated very successfully in the US, offering mortgages to the sub-prime population there.

Of course, these lenders asked the borrowers to pay for their generosity. The media jumped straight onto their back, claiming that they were exploitative and in the market for a fast buck. It was true that borrowers did have to pay a few percentage points higher than normal banks and building societies charged them, but at least they offered a mortgage, which was better than nothing.

Like any market which showed a profit, the sub-prime problem mortgage market found itself entered by UK companies looking for a piece of the action. This brought the market into respectability. Halifax has a subsidiary called Birmingham Midshires which deals in sub-prime mortgages, and Abbey National has a company called First National, and the Britannia Building Society set up Verso as a subsidiary to target self-employed borrowers and Platform home loans for the credit-impaired sector.

The problem mortgage market breaks down into these distinct sectors, the impaired credit market and the self-certification market where the borrower can't provide three years of accounts.

The impaired credit market involves those with an imperfect credit history, with maybe a few County Court Judgements against them. Maybe they have previous mortgage arrears or have been made redundant and thus have had to make reduced payments.

Any self-employed people with less than three years accounts, or who have understated their income for tax reasons, yet have a perfectly good credit record, are also in need of problem mortgages.

These people are categorised as 'complex prime' as they can easily afford the payments yet are regarded as a problem.

Another reason why rates are high is that customers don't stay with sub-prime lenders for a long time. Should they have made all their payments on time, they will have their credit record repaired and may be able to get a mortgage from a mainstream lender. So don't think of sub-prime lenders as a desperate option. The reality is that they offer you a great opportunity.

Problem Mortgages

What are Problem mortgages?

© AskFinancially.com 2008

Insurance & Loans

Copyright

Problem Mortgages

What are Problem mortgages?

© AskFinancially.com 2008

Mortgage Advice

Insurance & Loans

Copyright