A credit repair mortgage or a bad credit mortgage is for people who have a bad credit history and are therefore not eligible for a standard mortgage. A credit repair mortgage allows people with arrears or CCJs to borrow and prove they can make the repayments; making regular mortgage repayments starts to ‘repair’ their credit history, making them more attractive to lenders again. Due to the risk involved in lending to people who have had financial problems in the past, lenders protect themselves by making the terms and conditions far stricter, and the interest rates much higher than on other types of mortgage.

Payments have to be timely and reliable for a number of months or years for the mortgage to be considered a success. Credit repair mortgages are in some cases the only option for those who are affected by bad credit histories or have had their mortgage run into arrears. They can be used to save mortgages that might otherwise have to be abandoned and also provide for some the only option for a first step into the mortgage market. Their stringent terms means they can help develop disciplined repayment habits for those who have had troubles with more lenient programs in the past. In some cases repossession of a property can be prevented with careful negotiation onto a credit repair mortgage.

There are many advantages and disadvantages of a credit repair mortgage, which include the following. A credit repair mortgage will have far more stringent terms and higher interest rates than a standard mortgage. Payment flexibility is unlikely to be available in any form, with the aim of proving that the borrower can adhere to a regular and rigid system of repayments. Due to the nature of a credit repair mortgage failure to keep up with repayments can also lead to serious consequences. Finding the right adviser also becomes more crucial when dealing with credit repair mortgages. Failure to keep to the restrictive terms and conditions of credit repair mortgages can carry high penalties and/or excessive fees, which is one way in which credit repair mortgages can be more expensive than other mortgages.

Another cost is the higher rate of interest charged by a credit repair mortgage. But it is possible to find better deals through research and by shopping around. Independent financial advisers (IFAs) can also advise on appropriate products and different lenders will supply different rates of interest. Credit repair mortgages are supplied by a number of organisations. As well as specialist companies that deal exclusively with credit repair mortgages there are a number of mainstream non-standard lenders such as banks and building societies that can also offer appropriate products.

The more serious the problems with your credit history the more likely it is you may need to go to a specialist lender. As well as the considerations that apply to standard mortgages, such as interest rates and fees, there are a number of factors that can be used when deciding between different credit repair mortgages: A number of banks, building societies and mortgage companies will offer credit repair mortgages directly. It is also possible to work through an intermediary such as an agent or broker. Some of the more specialist companies may only work through intermediaries, rather than take direct business.

Bear in mind finding a good agent or broker can be a difficult process and many of them will work on a commission basis, allowing them to profit from making a sale rather than improving your circumstances. Be sure to ask the background and affiliations of any intermediary you use, and ask what products they earn commission from.