Bad Credit Remortgage

Can you remortgage with bad credit?

Yes, you absolutely can remortgage with bad credit. There may be a few additional hoops to jump through, and it could mean that you face slightly higher interest rates, depending on the type of bad credit you have.

Every lender has a specific policy regarding types of bad credit. Some will allow you to remortgage to consolidate some debts and get yourself back on a steadier footing, some won’t.

There are plenty of options, but it all depends on the type of bad credit, when it happened and how severe it was – because it’s a big spectrum. We also need to know how much you want to remortgage for, and explore your exact circumstances.

How can I remortgage with bad credit?

Generally, when you’re coming to the end of a mortgage deal, you have two options. Depending on your existing lender, you may be able to do what’s called a ‘product transfer’, which is taking a new deal with your existing lender. Typically, you won’t have any underwriting or additional credit checks for this.

The alternative is a remortgage, where we switch from one lender to another. This is typically used when you want to change your mortgage terms, such as raising additional capital, changing your mortgage term, or adding or removing someone from the mortgage. It really depends on the rationale for the remortgage.

A remortgage with bad credit is the same process as any other remortgage. We’re going to need all the same documentation – ID, proof of address, income documentation, bank statements and a credit report, along with your existing mortgage statement. We also need to understand your circumstances, what has led to the bad credit, and if you need help getting out of that situation.

From there, we determine the right lender and make that application. There’s a legal process of moving from lender A to lender B, so we must also factor in those costs. There could be additional fees with the new mortgage lender, which will depend on the type of mortgage that’s right for you.

The plan going forward is also important. What are we doing and why? Where are we aiming for?

Can you be declined a remortgage due to bad credit?

You can be declined a remortgage with bad credit, so it’s all about selecting the right lender. Doing this yourself may be very difficult because you might not be aware of the policy each lender has around this.

The point of using a mortgage advisor or mortgage broker (they’re the same thing just different titles for what we do) is to ensure that your application will proceed to the point of completion. Whilst it’s possible to get declined, the chances of that decline are markedly lower with a mortgage broker.

Of course, I am a bit biased, so everyone should take that into account. But by getting all the information upfront, we can quickly understand your options and what’s beneficial for you, and we make recommendations based on all that information.

Can you get a remortgage after bankruptcy or with a CCJ, IVA or default?

You can get a remortgage after you’ve been made bankrupt, or you’ve had a County Court Judgment (CCJ), an Individual Voluntary Arrangement (IVA) or a default. However, it will really depend on when those things happened and whether they’ve been settled or satisfied.

For example, if you’d been made bankrupt, once that bankruptcy is discharged, some lenders will consider you after a further 12 months. Lenders have very specific policies around bankruptcy and what’s possible.

With remortgaging, loan-to-value (LTV) is key. This represents the value of your property compared to the outstanding balance of your mortgage. If your home was worth £200,000 and your remaining mortgage was £100,000, you would have a 50% loan-to-value.

When someone has had bad credit, whether that’s due to bankruptcy, IVA, CCJ, default, missed or late payments, lenders like to see plenty of equity in the property. It helps mitigate the additional risk they think you may pose as a potential customer.

Typically, you need at least 15%, 20% or in some cases 25% equity in the property to proceed. You may want to raise additional capital to clear off some additional debts or put you in a better financial position – you should always think very carefully about doing that.

Generally, you can only raise up to 75%, 80% or 85% Loan to Value. That can be the determining factor of what’s possible and if it’s a good idea.

The type of adverse credit or bad credit that you’ve had is important, too. A CCJ is treated very differently to an IVA, because that’s a form of insolvency, a bit like bankruptcy.

In theory, you get a remortgage after those four things, but it will depend on when they’ve happened, whether they have been satisfied and the amount of equity in your existing property.

Can you remortgage with a debt management plan?

Yes, you can remortgage with a debt management plan (DMP), but it ultimately depends on the amount outstanding. How much would you need to repay to clear the debt management plan? Additionally, what is your home worth, and what is the balance of your existing mortgage?

We need to factor all that in together. As always, you would need to demonstrate sufficient income to pass a mortgage lender’s affordability checks for the mortgage you need.

When we speak to people who want to remortgage with a debt management plan, they’re typically raising additional money to pay off that DMP. In some cases, they may be unable to obtain a product transfer with their existing lender, which could force them onto the standard variable rate (SVR). That could be much higher than a new mortgage with a lender that specialises in bad credit.

You can remortgage with a debt management plan, but it’s essential to understand the process, as it’s slightly different. Again, this is a form of debt consolidation. Think very carefully about securing previously unsecured debts against your property, because you’re reducing your equity stake.

There are several reasons why people may enter into debt management plans. It’s possible that something happened at work or a relationship separation led to you accumulating debt.

The most crucial factor for any potential client with a debt management plan or any bad credit is to be brutally honest with your broker. Give us all the information, warts and all, because that way we can make the appropriate recommendations and hopefully help get you back on track.

What deals and rates are available if you are remortgaging with bad credit?

The specific mortgage deals and rates depend on the type of bad credit, when it occurred, whether it has been satisfied, and also the Loan-to-Value ratio for the remortgage.

Given that mortgage rates, deals, and products change on a daily or weekly basis, as do lending policies, it is impossible to provide any details here. Whatever I say would be out of date within five minutes.

However, a mortgage broker’s job is to ensure that you understand what you’re doing and the options available to you. Then you can make an informed decision as to the right course of action.

Are there many bad credit remortgage lenders?

Most mortgage lenders have a lending policy for borrowers with bad credit. It ranges from very minor missed payments on a phone bill, all the way up to recent bankruptcy, an IVA, a CCJ or default. Mortgage arrears is another one.

Every lender has a policy around the credit profiles they will and won’t accept. Some lenders are geared up to specifically support people with bad credit – customers that high street lenders can’t or won’t accept.

It’s about understanding your specific circumstances to determine which lender is most suitable. I’ve worked with people who claim to have bad credit, but when we investigate, the issue is often minor and occurred a long time ago. That might still be suitable for a high street lender.

If we can’t use the high street, you might face higher interest rates and an increased monthly payment. However, if that helps you improve your credit, you can eventually return to mainstream lenders, which is a really good thing.

Is it better to improve my credit rating before remortgaging? How do I improve my credit score?

It can be quite challenging to improve a credit rating before remortgaging without dedicating a significant amount of time to it. They don’t improve just overnight.

The primary way to improve your credit profile is to resolve any existing adverse credit situations. If there’s a CCJ or default that hasn’t been repaid, settle that. Sometimes that’s not possible, I know, depending on the value.

Not every single mortgage lender will need you to do that. However, bad credit often results from job loss or a relationship breakup or some other life event. Something has happened in your life that’s brought you to that point. Mortgage lenders will appreciate seeing that you’ve understood how the issue happened and you’re taking steps to rectify it.

Improving your credit score can take a considerable amount of time. If there are a few years to run on your existing mortgage before it’s due for renewal, there’s a good chance you can improve your credit score by then. But if your mortgage deal ends in the next few months and you’ve only just had a CCJ, that’s often very difficult to change – unless you’re able to pay the CCJ off straight away.

It’s always good to ensure your outstanding credit is satisfied, that you’re on the electoral roll, and that your payslips, bank statements, and credit cards are all registered to your current address. That helps strengthen a credit profile, but there is no quick fix – no silver bullet.

How do I apply for a remortgage with bad credit?

The main difference for a remortgage with bad credit is ensuring we’ve got all the relevant information, along with an up-to-date credit profile and a good understanding of how the bad credit occurred. Was it due to a life event, or did you simply lose track of your spending?

Other than that, the process is basically the same. We’re still going to get your payslips, bank statements, credit report and your ID. We’ll just be using a lender that will allow whatever has happened on your credit profile. They will charge an interest rate based on the credit history and the circumstances that led to that.

Is there anything else to add before we come back with part two?

I’d like to add that sometimes people feel embarrassed about bad credit. But the reality is that life can throw curveballs at all of us. We don’t often plan for them.

People sometimes bury their heads in the sand. It can seem the most sensible option to protect their mental peace. However, in reality, the best approach is often to face it head-on and create a plan, as it won’t last forever.

It’s essential to understand your options. Don’t feel embarrassed – there can be a stigma with this kind of thing, but we’re not here to judge. We’re here to listen and help. That’s the vital thing to bear in mind.

Key Takeaways:

• Remortgaging with bad credit is possible, though it may involve additional steps and potentially higher interest rates.
• There are two main options when a mortgage deal ends: a product transfer with the existing lender (often without new credit checks) or a remortgage to a new lender (typically for changing terms or raising capital).
• Being declined a remortgage due to bad credit is possible, but using a mortgage advisor or broker significantly lowers the chances of rejection.
• Remortgaging is possible after bankruptcy, CCJs, IVAs, or defaults, but it depends on when these occurred, if they’ve been settled, and the Loan to Value (equity) in the property.
• Honesty with a mortgage broker about all aspects of bad credit is crucial for receiving appropriate recommendations and finding the right solutions.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.

YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.