Mortgage Advisor & Director
Mortgage Advisor & Director
Bad credit mortgages often have stricter deposit and loan-to-value (LTV) requirements than standard mortgages. However, your individual credit history can impact whether you need to use a small or large deposit.
Here we cover what you need to know about deposits for bad credit mortgages and whether you can get a bad credit mortgage with no deposit.
How much deposit do you need for a mortgage with bad credit?
Typically, deposits for bad credit mortgages are slightly larger, and the average bad credit deposit is around 15%. But, some lenders will approve a mortgage with just a 10% deposit, or even 5% (depending on the age and severity of your credit issues).
Deposit requirements for types and ages of adverse credit
Here are some examples of the sort of mortgage deposit differences you might come across for different types and ages of adverse credit:
|
Type of credit issue |
Typical deposit % |
Age of bad credit impact |
|
No credit history/score |
5% - 10% |
There’s no impact from age other than the time it takes to build a solid credit profile. |
|
Late payments |
5% - 10% |
Less impact if older than 12 months, but recent late payments are more significant. |
|
Defaults |
5% - 15% |
Defaults older than 2 years are less of an issue, but more recent defaults may require a higher deposit. |
|
Arrears |
5% - 15% |
Recent arrears from existing mortgage payments, rent, or utility bills can mean a larger deposit, but older arrears from over 12 months ago have less impact. |
|
Missed payments |
10% - 15% |
Recent missed payments can be an issue, but payments older than 12 months will have less impact. |
|
Debt Management Plans (DMP) |
10% - 30% |
Lenders prefer DMPs active for over a year (or settled for 2 to 3 years). |
|
County Court Judgements (CCJs) |
10% - 30% |
CCJs older than 2 to 3 years have a smaller impact. Recent CCJs (within 12 months) will likely mean a higher deposit. |
|
Individual Voluntary Arrangements (IVA) |
10% - 30% |
Recent or ongoing IVAs require higher deposits, but lenders can be more flexible if the IVA was completed at least 3 years ago. |
|
Multiple credit problems |
10% - 40% |
Issues older than 3 years can be more favourable, but deposits can be on the higher end of the scale. |
|
Repossessions |
10% - 40% |
A recent repossession might require a higher deposit, but repossessions from over 6 years ago will have less impact. |
|
Bankruptcy |
10% - 40% |
Usually, the bankruptcy will need to be discharged for 3 to 6 years before you can be considered for a mortgage. The more recent the bankruptcy, the bigger the deposit you’ll need. |
Keep in mind, these figures are just to give you a rough idea. The strength of the rest of your application, your individual credit and finances, and the property you’re looking to buy can all impact how much deposit is needed for a bad credit mortgage.
Getting a bad credit mortgage with a low deposit
While larger deposits might be necessary for certain bad credit mortgages, with some lenders it’s still possible to get a mortgage with a low deposit:
- 95% LTV (5% deposit): Only a few lenders can offer 95% LTV mortgages, and they’re usually reserved for those with a solid credit history. However, some lenders may approve a bad credit mortgage with a 5% deposit, depending on the age and severity of your bad credit.
- 90% LTV (10% deposit): A 90% LTV mortgage can be easier to qualify for, even if you have bad credit. Again, the type of adverse credit and the age of the issue can make a difference. If it’s a minor issue or something from years ago, using a 10% deposit can be realistic.
Can I get a mortgage with bad credit and no deposit?
In most cases, no. It’s rare to get any kind of mortgage with a 100% LTV and no deposit. Unfortunately, it’s harder to do this with bad credit, because it's too risky for lenders.
There are alternative options you can explore if you want to get a mortgage with bad credit and no deposit. For example, guarantor mortgages or schemes like Right to Buy can be worth exploring. Your best bet is to discuss your circumstances with a bad credit mortgage broker.
How a bad credit broker can help your deposit go further
A skilled bad credit advisor can be extremely helpful when applying for a mortgage, especially if your deposit is on the smaller side. Our experienced bad credit brokers can introduce you to specialist lenders, which can mean:
- Smaller deposits: Using an expert broker means dealing with lenders that are willing to accept a small mortgage deposit for particular types of bad credit.
- Negotiate better deals: They can negotiate on your behalf and find more flexible lenders with better rates and terms available for deposits of all sizes.
- Increased chance of approval: Skilled brokers will match you to the most suitable lender, helping your deposit go further and ensuring there are no unnecessary rejections or further unwanted marks on your credit file.
You can compare bad credit mortgage rates for free on Teito. Select the 'Choose Your Own Mortgage' option below to browse rates from 90+ lenders in real-time, or select 'Speak To An Adviser' if you’d like specialist advice first:
Compare bad credit mortgage rates for FREE
Will you get a better deal with a large deposit?
With most lenders, yes. For example, with a 40% or 50% deposit (50-60% LTV ) it’s easier to find a better deal and lower rates. Attempting to get a mortgage with bad credit but a larger deposit definitely helps, although that’s the same for most types of mortgage.
For specialist bad credit lenders, whether you’ve got a small or big deposit may not make a huge difference to the rates. Some lenders will still prefer a large deposit because it lowers their risk. But certain lenders offer competitive deals for bad credit mortgages with smaller deposits too.
Why choose Teito for your bad credit mortgage?
As a whole-of-market mortgage brokerage, our advisors can find you the best bad credit mortgage for your situation - regardless of whether you’ve got a small or large deposit. Our bad credit mortgage experts can use their specialised industry knowledge and lender contacts to secure you a great deal.
Here are some more of the reasons people choose us to find them a bad credit mortgage:
- You can compare bad credit mortgage rates and deals online for free
- We can introduce you to specialist lenders with exclusive rates
- Our bad credit mortgage brokers are 5-star rated
- Your first chat is free with no obligation to proceed
Ready to compare rates for free and take advantage of a free, no-obligation chat with a bad credit broker who specialises in mortgage deposits? Get started here.
FAQs
It’s possible to use a deposit as low as 5% for a Right to Buy mortgage. And in some cases, this can also be the minimum requirement if you’ve got bad credit.
However, the type and age of any adverse credit will impact your application. Some lenders may request a higher deposit, depending on the severity of your credit issues, but it may be possible to use your Right to Buy discount to cover the deposit.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.