Remortgaging with Bad Credit
A lot of people may consider getting their hands on a property as the end of their mortgage journey. However, it’s not so frequently acknowledged that this isn’t the case. Namely, when your mortgage term comes to an end you’ll be placed on your current lender's standard variable rate (SVR). SVRs typically entail rather high interest rates, and therefore higher monthly repayments on your part.
Remortgaging is the solution to ensuring that you’re always on a mortgage plan which is suited to benefit you the most. Remortgaging singularly represents the sheer versatility that can be utilised on the housing market. Indeed, remortgaging is commonly used as a way of reducing one’s monthly repayments when an initial term comes to an end, whether that implies staying with the same lender (a product transfer), or rather coming to an advantageous agreement with another (a mortgage switch).
Albeit, the above doesn’t fully account for all the various reasons you might consider remortgaging. The reasons are several, with their applicability depending on your individual circumstances and financial situation. But, if you’ve recently run into financial troubles, and are therefore classed as having adverse credit, the remortgage process is inherently a little trickier due to the rigid criteria that the majority of mainstream high street lenders subject their candidates to. Having said that, this doesn’t go to say that you can’t remortgage with bad credit altogether, just that you may need a bit of added support on the matter.
As such, if you’re thinking of remortgaging with bad credit, then we highly suggest you hire an expert mortgage broker who can thoroughly assess your position before finding the remortgage package that’s right for you. We at The Mortgage Genie have assisted many of our UK clients by getting them a remortgage when they’ve had bad credit, including by taking care of all the administration involved. If you’re interested in joining those among our success stories, then be sure to reach us at 01915809890 today.
Though, despite what our mortgage services can do for you, it remains very much worth informing yourself on all the details surrounding remortgaging with bad credit. So that you can learn everything there is to know on the subject, we’ve put together this piece which goes over all the important details while answering the standout questions. We’ll cover:
How does bad credit affect remortgaging?
Before being accepted for a remortgage, all lenders will carry out a hard credit check to ensure that you meet their eligibility criteria, just like when you took out your initial mortgage loan. In essence, being previously approved for a mortgage doesn’t necessarily guarantee that your remortgage application will be successful too. That is, because most lenders will look at your application as if you were applying for the first time.
This owes to how over the course of your mortgage term, there’s a chance that your financial health might have deteriorated in some way. For example, this could refer to whether you’ve recently taken out payday loans and failed to fully repay them. In this instance, your credit score will have dropped significantly. Consequently, this may mean that you no longer qualify for a particular lender’s remortgage deals, due to a poor credit score indicating that there’s a ‘high-risk’ associated with you as a candidate.
It’s notable that hard credit checks leave a mark on your file. As such, if you want to get an idea of your current eligibility before you apply for a remortgage, you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you to discern any potential mistakes or fraudulent activity on your profile, so that you can deal with such problems effectively. The trial and subscription can be cancelled at any time.
Can I remortgage with bad credit?
To provide a general answer, yes, it’s entirely possible to remortgage with bad credit. Although, whether or not your application will be successful is heavily determined by the context around both your choice to remortgage and the specific financial mishaps you encountered.
When a lender carries out their aforementioned credit check to view your credit history, they will be primarily looking for instances of:
A court county judgement (CCJ)
Failures to meet payday loans
an IVA
A past repossession
A previous bankruptcy claim
Some of the mentions in this list will have a greater negative influence on your remortgage application than others, with their severity growing if multiple appear, the latter often leading to rejection. On the other hand, if they occurred more than 6 years ago and you’ve maintained a clean track record since, then their impact will be substantially reduced.
Moreover, your chances of securing a good remortgage deal also depend on if you’ve given valid reasoning for the remortgage. Such reasons include using a remortgage to improve your existing interest rate, raising capital for a large purchase, buying a second home, and to make home improvements.
Can I remortgage to pay off debt?
Another way in which a remortgage can be instrumental is for paying off any debts you currently have. This certain type of refinancing is what’s known as a debt consolidation remortgage, named so because it literally consolidates your debts under one single rate. This has the benefit of making what you owe singularly easier to manage.
It’s vital if you opt for a debt consolidation solution that you simultaneously move onto a more affordable low interest rate, given that they have the potential to increase the scale of your monthly repayments. Again, that being said, they do make a debt repayment situation inherently less complex.
There are two ways to approach a remortgage to pay off debt, you can either take a lump sum of cash out of the portion of the property you own, what’s labelled as a remortgage to release equity. In this case, the effectiveness of the remortgage will depend upon the amount of equity you have access to. Or alternatively, you can choose a standard remortgage, but one that decreases your monthly repayments considerably in order to afford you with the financial stability necessary for handling other debts.
Will it take longer to remortgage if I have bad credit?
Strictly speaking, no it will not take longer to remortgage if you have bad credit. Even if you have a poor credit rating, gaining approval for a remortgage is typically a lot more efficient and straightforward than securing a mortgage on a new home, for instance. Reason being, that the level of risk you carry in the eyes of lenders is minimised owing to you having a sizeable asset, i.e., your property.
Yet, it may take a little longer to find a suitable lender because the degree of options available to you will be slightly narrowed. Usually, the process demands between four to eight weeks for completion, barring any major delays.
Will my interest rate be higher if I remortgage with bad credit?
If you’ve encountered bad credit since your initial mortgage term began, then it can be so that the deals you’re now offered come with slightly higher interest rates. However, it’s worth bearing in mind that this is wholly determined by the extent of your financial issues and how long ago they happened.
As discussed, if they occurred longer than 6 years ago and your credit score has improved overall since, then they may not have an effect on the interest rate you’d be subject to at all. Furthermore, having evidence as justification for past poor finances will work in your favour. In the end, it depends on your personal situation and individual circumstances.
Having a defined strategy will help your remortgage application a lot, while subsequently increasing the quality of the deals you’re offered. This means checking your credit reports, calculating your LTV, organising your income and affordability documentation, and speaking with a mortgage advisor to assist you with everything involved.
Should I improve my credit score before remortgaging?
Regardless of whether you’re purchasing your first property or remortgaging, improving your credit rating before submitting an application is always advisable. As you can gauge from all we’ve spoken on so far, your credit history is the principal way mortgage providers measure you against their lending criteria.
Having a healthy credit score will not only widen the options open to you, but will also prove integral in getting the best remortgage rates on the market. You can do this by paying off any outstanding debts you may have, making sure you’re listed on the electoral roll, reviewing the number of credit card accounts you have under your name, and by waiting for a lengthy period of time if you experienced something rather financially severe like a repossession.
Will all lenders let me remortgage with bad credit?
The answer to this question is determined by your specific case. Having said this, in general not all lenders will let you remortgage if you have bad credit. This is because, as we mentioned at the beginning, most high street lenders and mainstream building societies aren’t equipped to take care of applications with extra complications. Their lending criteria is often characterised as being very inflexible when it comes to individuals with bad credit, given that it is fundamentally designed to minimise risk as much as possible.
And so, many people with bad credit who are looking to remortgage tend to feel hesitant for fear of being met with reluctance. Fortunately, there are specialist lenders geared to cater to potential borrowers who have bad credit and want to remortgage. Such lenders consider mortgage and remortgage applicants on a case-by-case basis, representing a much more understanding approach towards those who have had recent financial instability.
The only caveat is that you won’t be able to find a specialist lender directly via the web, like you would a high street bank. Instead, you’re virtually required to have a specialist mortgage broker at hand. Specialist mortgage brokers (such as ourselves) have a pool of specialist lenders from which they can select to find the best remortgage product for your specific situation. As a bonus, any cost associated with hiring a broker ends up being negated by the long-term savings you accrue throughout your new mortgage term.
We at The Mortgage Genie have an in-depth knowledge on how to get a mortgage and are committed to helping people secure loans of all types, including - but not limited to - remortgages with bad credit. We hope that this piece has answered all of your burning questions and cleared up any concerns you may have had surrounding remortgaging with bad credit.
Each day we support an increasing number of people in obtaining housing happiness by finding the remortgage product that’s right for them, one which is tailored to their personal situation and individual circumstances, as well as by helping them through every step of the process. If you’re in need of a team of expert mortgage brokers, then be sure to get in touch with us at 01915809890 and we guarantee to get the best remortgage rate for you. And why not get a quote today by using our remortgage calculator?
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.