The Disadvantages of No Credit History Mortgage
Advertising Disclosure is an independent, advertising-supported web site. receives compensation from many credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. has not reviewed all available credit card offers in the marketplace.
Credit Card Applications » Research » Guides » Building Credit History » The Disadvantages of No Credit History Mortgage

The Disadvantages of No Credit History Mortgage

Add to Favorites:

When an individual does not have a credit history or has a bad credit history, then it becomes virtually impossible to avail any loan either from banks or a mortgage loan etc... Even if there are loan offers, the terms and conditions have more disadvantages than advantages.

The interest rates that are charged on these kinds of home loans are at least 5 points higher than the average home loan. This is due to the fact that the lender is under a higher risk when the individual has a no or bad credit history.

Another point to consider is that with this type of home loan, the interest rates are variable and not fixed. This way, the interest is automatically reset every time there is a change in the financial market. When there are periods where the interest rates are lowered, the borrower might stand to gain. However, when the interest rates go higher, then the borrower is burdened with the hike in interest rates. Although there are caps on the periodic increase on interest rates during a 12-month period, it still does not help, as there can be changes in interest rates as many as six times a year.

Due to the fluctuating interest and high interest rates, a person with no credit history will usually end up with very high monthly payments. It becomes more difficult for people who are already struggling to pay off their mortgages. As such, a person with no credit history to take a home loan in itself would be quite a burden, add to that the high monthly payments and the fluctuating interest rates.

The down payments for a no credit history mortgage are the biggest issue; this is because lenders want to take a larger down payment. When the average down payment in today's market is between ten to twenty percent (of the price of the purchase) a person with no credit history will have to payout at least 25% to around 40% as down payment, in order to mitigate the risks for the lender. This is an additional security for the lender in case the borrower defaults on the loan. In case the borrower wishes to foreclose the loan, then the lender has the down payment. These home loans are getting more difficult to avail, and are definitely more disadvantageous than regular home loans.

Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

5 Reasons to Get the Capital One Venture Miles Rewards Card

By Herbert Moore, Posted: January 18, 2017

If you’re looking for a great travel rewards credit card—one that offers unlimited earning opportunities, flexible redemption, and lots of perks—look no further. This card from Capital One has you covered. Continue reading

Credit Card Tips For Holiday Shopping 2016

By Herbert Moore, Posted: November 23, 2016

November and December are the busiest months as gift shopping reaches its peak. People rush around looking for the best gifts and the best deals leaving a lot of money in the shops. Holiday season may force you to go over the household ... Continue reading

Credit Cards to Save More on Holiday Shopping

By Herbert Moore, Posted: November 22, 2016

Discounts and special offers are available all year round. Werther you are a bargain hunter or an impulse buyer, make sure you check online discounts and special offers. Also, if you are a cardholder, see if your credit card opens the door ... Continue reading