Mortgage Bad Credit Rating - Borrowing Dangerously

Individuals getting mortgage bad credit rating or history is set to be a reality for many homeowners  as well as would be homeowners in England as one of the biggest lender HBOS (Halifax Bank Of Scotland) revealed plans to offer a 125% home loan - meaning five times a borrowers income. This means that borrowers without any savings or deposit can still buy their desired house, pay their tax and legal fees and also have enough left over to splash on furniture.

This offer is opened to all but especially first-time buyers or older single divorcees who have left the family home and have no savings at all. Experts fear this will worsen the current mortgage bad credit rating crisis which has seen 20% more people or families with their properties at risk of foreclosure due to missed mortgage payments.

Although this offer is very tempting, especially with the average house price in England reaching a high of nearly $390,000 (£170,000), it is important for would be first-time buyers especially consider the risk not to their credit rating but also to their personal well-being. 125 percent loans is likely to instantly plunge borrowers into negative equity. For instance, the average first-time buyer needs around $300,000 (£153,000) to purchase the house of their dreams. However, with this offer, you can borrow as much as $400,000 (£190,000), with monthly repayments of around $2500.00 (£1,200.00).

To make matters worse, the cost of borrowing is set to increase as the Bank of England raised its base rate from 4.75% to 5%. Some people suggest this is likely to go up even further to 5.25%.

Having a mortgage bad credit rating can be disastrous as if your home is foreclosed on or repossessed, your credit history can be damaged for a long time in the future. In fact, this is akin to bankruptcy where you are more or less blacklisted for seven years or more.

What people may not realise is that the banks themselves are fuelling this trend crisis by issuing loans without even properly checking the clients ability to repay them. Many loans have been approved this way. Regardless, the responsibility to a certain extent should lie with the borrower. Credit future depends on decisions made today. Mortgage bad credit rating is likely to be a reality if the right steps are not taken. For the banks, the worst is to write of these loans but for the borrower with a mortgage bad credit history, there only lies a gaping credit black hole in the future with little or not let up. Borrowers beware.