Remortgaging With Bad Credit

Yes, you can remortgage with bad credit. It's more difficult than remortgaging with a clean file, and your choice of lender narrows considerably, but it's far from impossible, and for many people it's still the right move.

When your current deal ends, you're moved onto your lender's standard variable rate (SVR), which typically carries a noticeably higher interest rate and therefore higher monthly repayments. Remortgaging is how most homeowners avoid that, whether by staying with their existing lender on a new deal (a product transfer) or switching to a new lender entirely.

If you've run into financial difficulty since you took out your current mortgage, and are now classed as having adverse credit, the process is trickier, because most mainstream high street lenders apply fairly rigid criteria. That doesn't rule remortgaging out. It usually means you need the right lender, not just any lender, and that's where a bit of expert support makes the real difference.

If you're thinking about remortgaging with bad credit, we'd suggest speaking to an expert mortgage broker who can assess your position properly before finding the remortgage that's right for you. We've helped many UK clients remortgage with bad credit, handling the administration along the way. Call us on 01915809890 if you'd like to talk it through.

How does bad credit affect remortgaging?

Before accepting a remortgage, every lender runs a fresh hard credit check, the same as when you took out your original mortgage. Being approved once doesn't guarantee approval again, because most lenders assess a remortgage application as though you were applying for the first time.

Over the course of your mortgage term, your financial position can change. If you've taken out payday loans and struggled to repay them, for example, your credit score may have dropped significantly, which can mean you no longer qualify for a particular lender's remortgage deals.

A hard credit check leaves a mark on your file, so it's worth getting a clear picture of your situation before you apply. Our free credit check tool (£14.99 per month after the free 30-day trial) can help you spot mistakes or fraudulent activity on your file so you can deal with them before a lender sees them. The trial and subscription can be cancelled at any time.

What loan-to-value can you get with bad credit?

This is one of the biggest factors in whether, and how well, you'll be able to remortgage, and it's worth understanding upfront.

Put simply, the more equity you have, the lower your loan-to-value, and the more options and better rates open up to you. The most competitive bad credit remortgage deals are generally reserved for people with at least 25% equity, an LTV of 75% or below. If your equity is tighter than that, you're not excluded, but you're likely looking at a smaller pool of specialist lenders and less competitive pricing.

Can I remortgage with bad credit?

Yes, in general it's entirely possible. Whether your specific application succeeds depends heavily on the context: why you're remortgaging, and exactly what went wrong with your credit.

When a lender runs their credit check, they're primarily looking for:

• County Court Judgements (CCJs)
• Failures to repay payday loans
• Individual Voluntary Arrangements (IVAs)
• A past repossession
• A previous bankruptcy
• Missed payments or arrears on your current mortgage

Not all credit issues are treated equally

Some of these carry far more weight than others, and it's worth knowing which. Arrears on your existing mortgage are generally treated as the most serious issue of all, more so than an old, unsecured default. Lenders read mortgage arrears as a direct signal about how you'll handle exactly the kind of debt you're asking them to take on. A single old default from a mobile phone contract five years ago is a very different picture to a missed mortgage payment six months ago, even though both might appear as a mark on your file.

Multiple issues appearing together, or several occurring recently, will narrow your options further and often lead to rejection with mainstream lenders. On the other hand, if the issue happened more than six years ago and you've had a clean record since, its impact is usually substantially reduced. Recency and severity both matter independently: a 12 month old missed payment and a 5 year old CCJ are not treated the same way, so it's worth being specific about your own situation rather than assuming a single cut off governs everything.

Your reason for remortgaging matters too. Lenders respond well to sensible, well-evidenced reasons: improving your rate, raising capital for a significant purchase, buying a second home, or funding home improvements.

Can you remortgage if you're currently in mortgage arrears?

It's possible, but harder, and your current lender may be unwilling to help you remortgage while you're behind on payments with them. In this situation you'll usually need a specialist lender who is comfortable assessing your full circumstances rather than applying an automatic decline. The sooner you address this, the more options you'll have, so speak to a broker as early as possible rather than waiting for the situation to improve on its own.

Can I remortgage to pay off debt?

Yes, this is one of the most common reasons people remortgage. This particular type of refinancing is called a debt consolidation remortgage, so named because it rolls your existing debts into a single rate, making what you owe considerably easier to manage.

If you go this route, it's important that you're also moving to a more affordable rate at the same time, since a debt consolidation remortgage can increase your monthly repayments if it isn't structured carefully. That said, it does make an otherwise complicated debt situation simpler to handle.

There are two ways to approach it. You can take a lump sum from the portion of the property you own, known as remortgaging to release equity, where the amount available depends on your equity. Or you can take a standard remortgage that simply lowers your monthly repayments, giving you more breathing room to manage other debts.

Will it take longer to remortgage if I have bad credit?

Strictly speaking, no. Even with a poor credit rating, a remortgage is typically quicker and more straightforward to arrange than a mortgage on a new property, because the risk to the lender is reduced by the fact you already hold a sizeable asset, your property.

That said, it may take a little longer to find the right lender, since your options are narrower. The remortgage process itself usually takes four to eight weeks to complete, barring any major delays.

Will my interest rate be higher if I remortgage with bad credit?

Often, yes, though it depends entirely on the extent of your financial issues and how long ago they happened. Lenders price bad credit remortgages to reflect the additional risk, so the more serious and recent your credit issues, the more you're likely to pay.

As above, if your issues occurred more than six years ago and your credit score has genuinely improved since, they may have little to no effect on your rate at all. Having a clear, honest explanation for what happened also works in your favour.

The best way to put yourself in a strong position is to check your credit reports, work out your LTV, get your income and affordability documents organised, and speak to a mortgage adviser who can guide you through the rest.

Does a product transfer avoid a credit check?

Sometimes, and this is worth knowing if your credit has taken a hit. If you stay with your current lender on a product transfer rather than switching, they may not run a fresh credit check at all, since you already have a proven track record with them. This isn't guaranteed, some lenders will still check, particularly if you're borrowing more or changing the term, but it's a genuinely useful route to explore first if bad credit is your main concern.

Should I improve my credit score before remortgaging?

Whether you're buying your first property or remortgaging, improving your credit rating before applying is always a good idea, since your credit history is the main way lenders measure you against their criteria.

A healthier credit score widens your options and helps you access better rates. Practical steps include paying off outstanding debts, making sure you're on the electoral roll, reviewing how many credit card accounts you hold, and, if you've experienced something more serious like a repossession, allowing enough time to pass before applying.

Will all lenders let me remortgage with bad credit?

No, not all of them. Most high street banks and mainstream building societies aren't set up for applications with added complexity, since their criteria are built to minimise risk as far as possible.

This puts many people with bad credit off applying at all, for fear of being turned down. Fortunately, there's a genuine market of specialist lenders who assess bad credit remortgage applications on a case-by-case basis, taking a considerably more flexible view than the high street.

The catch is that you generally can't access specialist lenders directly online, the way you would a high street bank. You'll usually need a specialist mortgage broker, who can select from a panel of lenders to find the product that actually fits your situation. Any broker fee is typically outweighed by the savings you make over the life of the deal.

If a mainstream application has already been declined, it's worth speaking to a specialist broker before applying elsewhere, since repeated declines leave their own mark on your file.

We at The Mortgage Genie have an in-depth knowledge of 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.

Each day we support people in finding the remortgage product that's right for them, tailored to their personal situation, and help them through every step of the process. If you're looking for a team of expert mortgage brokers, get in touch with us at 01915809890 and we'll work to find the best remortgage rate for you. And why not get a quote today by using our remortgage calculator?

The above blog has information contained within which was correct at the time of publication but is subject to change.