How much can I borrow after bad credit?
In the 10 years since the financial crash, mortgage companies are duty bound to guarantee the affordability of any mortgages they offer. This means that there is much greater focus on the arithmetic involved in how much a person can afford to repay. Typically speaking, the general rule of thumb is that you’ll normally be able to borrow 5 times the value of your gross income, be it self employed or PAYE.
This figure can drop to 4x, should your financial picture be a complicated one.
But what about with bad credit?
If you’ve been in a Debt Management Plan, IVA or even been declared bankrupt in the past, the same basic rules will still apply, with the task of finding a lender who will offer you a mortgage based on your circumstances being the key aspect. The complicated financial picture referred to above will be the factor that will restrict how many multiples of your gross income that you’re able to borrow.
You can boost your gross income figure by adding any income received by your wife, husband or partner when applying for a mortgage. Adding this extra income to your total could mean that your dream home is within your grasp.
With mainstream lenders, this will usually be the limit to what they’re willing to consider as income, which is unfortunate if you have other income that they won’t include. It could be that you receive a share dividend each year as a company shareholder or as a company director, which can be a considerable sum. Not having this included can be very frustrating, especially if the mortgage you want is affordable for you.
The answer, in this case, is to consider using a nice mortgage lender, which can be accessed by talking to one of our carefully selected brokers. They have access to deals you won’t find on the high street and they’re deals that are available to those with more complicated income arrangements. If you can afford the repayments and you have the requisite deposit, there’s no reason why won’t be successful in your application.
If you’d like to find out more, you can speak to one of our recommended brokers now.
Improving your score
If you want to move from the 4x income bracket to the 5x income bracket, a good way to make that happen is to put some effort into raising your credit score. This can only begin once your defaults have dropped off your file, but it can really make a difference. If you have been bankrupt or in an IVA then you can find out much more about this by visiting our IVA credit file cleanup and Bankruptcy credit file cleanup pages.