Remortgage with Bad Credit
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Remortgage with Poor Credit
Remortgaging might sound simple, as you are staying in the same place, but if you have suffered credit problems since you applied for your initial mortgage and your financial situation has changed, then your current lender (like many other mainstream lenders) may not be willing to agree a remortgage deal. And if they did, then it might be on less favourable terms than you have at the moment.
Have a bad credit rating and blemishes in your borrowing history can throw up difficulties in securing a remortgage package. However, there are many more lenders than those on the high street, meaning there will be more options available than you think, and a bad credit history need not be an obstacle to getting a remortgage deal to suit your needs.
It will help to understand why lenders may not be willing to offer you a remortgage, so let’s go through the circumstances you and they will be working around.
Remortgaging with Bad Credit Information
Bad Credit Remortgage Lenders
Aside from freeing up funds for larger items or projects, clients have also remortgaged to get a better deal or interest rate on their mortgage, as terms available on the market have shifted over time, or to have someone’s name added or removed from the loan. In the eyes of a lender, a history of bad credit and instances where you may have not met the conditions of a financial agreement, leading to a bad credit rating, demonstrates poor money management skills, making you a high lending risk. Most high street lenders will view remortgaging options with bad credit as they would any new mortgage application, and turn you down.
Fortunately, the growth in the mortgage market to meet the need for financial products for those with a chequered credit record means that there are many more lenders who will now consider applications from people with a poor credit history, giving you a greater degree of choice. These specialist lenders will take into account your entire situation, rather than just the scores on a report, when assessing your application, and it’s worth going over your circumstances and personal story with an experienced bad credit mortgage adviser before applying for a remortgage deal.
We have helped hundreds of homeowners secure a remortgage deal with bad credit events on their records like:
- Missed or late payments
- Debt management plans
- Default notes
- County Court Judgements (CCJs)
- Individual Voluntary Arrangements (IVAs)
- Discharged bankruptcies
While we can never absolutely guarantee that a remortgage with bad credit will be possible, we can say that the lenders we deal with consider every mortgage application on its own individual merits. Black marks on your credit history will affect your credit score, but should not be viewed as insurmountable obstacles to getting a reasonable remortgage arrangement.
What is a Credit Score?
Your credit score is generated as a result of information gathered by the three main credit reference agencies in the UK: TransUnion, Equifax and Experian. Each obtains data on your credit habits from other credit agencies who have agreed to share information on customer borrowing and spending, and public records available from local authorities.
The kind of information that credit companies share includes how much a customer has borrowed and owes, whether they keep up with instalments, pay in full and/or pay on time, and if their lines of credit are at maximum.
The information available through public records will be relating to legal arrangements like County Court Judgements (CCJs), Individual Voluntary Arrangements (IVAs) and bankruptcies, as well as details on the electoral register.
Each of the credit reference agencies report in slightly different ways, and lenders will also create a score based on what they find according to their own criteria. The decision to offer you a remortgage, and if so on what terms, will be based on this assessment. If the information does not give them a clear-cut choice, they may well still offer a remortgage deal, but with a larger deposit and possibly a higher interest rate. This is reflects their perception of increased risk, and wanting to make sure they get their money back, but also market forces – they can charge more because people with bad credit records have less options.
How do I improve my Credit Score?
On one hand, your credit score will improve naturally with time (if there are no more financial issues added to your records). Adverse credit events stay on your records for six years, disappearing after that time and, while they show on there, any bad credit issues carry less weight with a lender’s decision the more time has passed since they occurred. But remember, even if they no longer appear on your records, if you are asked about any previous serious events like a bankruptcy or repossession, then you must answer honestly. If not, your mortgage will be sure to be refused when they find out.
In the meantime, there are a number of ways you can rebuild your credit score while waiting for time to pass and keeping up with all your current financial commitments. This is a continuous process that will encourage lenders to see your application in a favourable light, as well as improve your circumstances in general. It’ll take a little time, but if you persevere, you will see results.
Creating a healthy credit rating will make a big difference to all your financial dealings in future. While we would recommend getting professional financial advice about your own particular circumstances, there are a few steps you can start taking immediately to help get your credit score back on track:
- Contact the three main UK credit reference agencies (Experian, Equifax and TransUnion) for copies of your credit reports, and check that everything they contain is correct and up-to-date. They may hold different information, so it’s important to get one from each.
- Keep your personal details on the credit report updated regularly.
- If you are not already registered, make sure your name is on the electoral roll. This is easily done via local authority websites.
- Closely manage the balances on your credit cards. Try to pay a little more than the minimum each month, so that the debt goes down, and make sure you do not go over the agreed limit.
- Use your calendar to set reminders for paying your bills, so you are never late. Better still, set up direct debits, so you no longer need to remember and payments are made automatically.
- Close down and cancel any unused cards or lines of credit that you may have been keeping ‘just in case’.
- Build up a positive credit history by using a credit card for your household spending and making sure you pay off the balance promptly every month.
- Never take out any payday loans – they may seem like another way to prove you can pay back on borrowing, but these loans are viewed as a sign that you cannot manage your finances effectively.
- Make sure all responsible borrowing and repayments show on your record.
We have a few more suggestions on how to repair your credit rating on our tips page.
Improving my Credit Rating
The simple figures on a credit report do not always tell the whole story. There may have been mitigating factors beyond your control behind any previous financial difficulties – such as your employer going bust, or you were a victim of fraud.
In these cases, you should contact each of the credit agencies, explain what happened and ask for a note to be made on the records so that any companies making future credit searches will be able to take it into account. You will need any supporting evidence, and it might not be possible in all cases, but it is worth asking.
Another obvious way to boost your finances is to find extra income, maybe through freelancing or a part-time job, or making savings on existing outgoings. For example, you could cancel a gym membership you don’t use, make sure you are on the best mobile and energy tariffs, save money on travel by getting work closer to home, or use a bike rather than a car, etc. While this does not improve your credit score in itself, you could use the money to pay off your debts more quickly, and simply having more money left after paying bills will help credit agencies and lenders to look upon any remortgage application more favourably.
Can I afford to Remortgage?
Regardless of an applicant’s credit status, lenders will always make an affordability assessment before they decide whether to offer a mortgage or remortgage. They will take all aspects of your income, outgoings, borrowing and spending into account to arrive at a ‘debt-to-income’ ratio. In 2014, the Financial Conduct Authority recommended when lenders make an offer of a mortgage, that the debt-to-income ratio should be no greater than 45%.
You can get a rough idea of where you stand with this by following these steps:
- Work out your monthly income. Add together everything that comes in to you each month, and if you have sums that arrive annually, add them up and divide by twelve before adding to your monthly total.
- Add up your monthly outgoings. If you have any annual or quarterly bills, calculate what it works out to per month and add them to your monthly payments – mortgage, council tax, credit card, etc.
- Take you monthly expenses, divide them by your income, and multiply by 100. This will be your debt-to-income ratio as a percentage.
Increasing your income or reducing your outgoings will lower your debt-to-income ratio. The lower it is, the better!
How can I Remortgage with Bad Credit?
If you want to remortgage to free up money for renovation work, investment or a special holiday, but have a poor credit history that might deter mainstream lenders from offering you a deal, then there are quite a few alternative options on the market.
Specialist lenders who work with people who have suffered past adverse credit events offer deals and rates that you will not typically find on the high street. If you can’t wait for more time to pass and let certain items drop off your record, you will be happy to know that you can get a remortgage deal with bad credit.
You’ll need to talk to a mortgage broker who knows the market and can identify which lenders will be able to provide what you need.
Bad Credit Mortgage Broker
The team at The Mortgage Centres deals with clients from every background and level of property ownership – from experienced landlords with multiple mortgages to first-time buyers and couples in established homes looking to remortgage to fund renovation work.
As unlimited mortgage brokers, we are not tied to products from any mainstream branded lender and can access the whole of the UK mortgage market to choose the best deals and rates for our clients. Our specialist advisers work with a wide network of bad credit lenders, often able to find deals would won’t see on the high street, and get access to exclusive rates. This blend of independence and unlimited market access means we can offer you the very best guidance moving forward, as well as the best chance of securing a competitively-priced bad credit remortgage.
Whatever your credit history, we will know who to turn to, and how to best present your case in your application. If you are looking for a remortgage with bad credit, please get in touch with our team today to get a free initial consultation and a no-obligation quote.
Should I Improve my credit rating before I Remortgage?
If you are considering remortgaging your property for whatever reason – perhaps to raise funds for home improvements, to pay off other borrowing or to simply get a better deal – and you have bad credit events on your records, then you might be wondering what your chances will be of your application being accepted and if it would be worth trying to improve your credit score before applying. You may have already tried approaching your current lender, possibly a high street provider, and been declined.
Whether you need to take action will depend on how negative your credit rating is and what lenders you approach. Some lenders may forgive a low score, or a few late or missed payments if you have an otherwise clean record, but any more serious issues will be likely to cause a problem. Even if you take steps to improve your credit rating, most high street lenders will still hesitate to offer you a mortgage while you have black marks on your record, and while it is possible to remortgage with bad credit, you’ll need to work with one of the specialist mortgage lenders in the market.
Either way, to improve your chances of remortgaging, it is always advisable to do everything you can to improve your credit rating, so that you present yourself and your finances to lenders in the most positive way. You can try checking your credit records and getting any incorrect entries updated, paying down your existing debts as much as you can, finding extra sources of income, closing any unused credit or store cards, or even taking out a new credit card to use for everyday spending and paying off the balance promptly each month.
The measures you take to improve your credit rating prior to a remortgage application may simply depend on how urgent your need is for the money. While many of these actions are fairly straightforward, others could take weeks or months to have an effect on your credit score. For a deeper discussion on what could be the right course of action for you when applying for a remortgage with bad credit, get in touch with our team for a free initial discussion.
Remortgage rates If I have Bad Credit
If you have a bad credit score and adverse credit events on your file, then the interest rates lenders will offer you on a remortgage deal will inevitably be higher than if you were applying with a clean credit record. It’s an unfortunate fact that lenders will see you as a higher risk if you have experienced financial problems in the past, whether or not they were your fault, especially if they occurred more recently.
The exact rate that a lender may offer will be down to your personal circumstances and the nature of the bad credit – what type of financial issue it was, how much money was involved, how long ago it happened and the steps you have taken to maintain a clean record ever since. A few missed card payments from three or more years ago with no further black marks in the meantime will cause far fewer problems than an active IVA or CCJ within the last twelve months.
Whether those debts are now settled or still marked as outstanding will also have an impact on the rates offered. However, with credit records only covering the last six years, your bad credit events will naturally drop off your file after that time (although a bankruptcy may show up for longer, depending on if it was paid off), causing less or no concern to lenders and allowing you access to products with more favourable rates.
The one other way to possibly get a competitive interest rate while applying with bad credit is to supply a large deposit or already have a significant amount of equity in your property without remortgaging too great a portion of its full current value. The lower the loan-to-value (LTV) ratio, and the more security you can offer on the loan from your own assets, the more favourable the lender’s deal will be.
The mortgages market is highly competitive and very dynamic, with offers being created, evolved or withdrawn on a regular basis and interest rates rising and falling as the economy dictates. With this in mind, it would be foolish to try to give actual figures for any ‘best’ interest rate deals here, but to get an idea of the most favourable rate you would be able to achieve in your circumstances, you should get in touch with our team and talk your situation over with one of our expert advisers.
Can I Remortgage with a Default?
A default can be a slightly more serious issue than a simple string of missed or late payments, and will have arisen because your creditors already issued warnings that overdue balance instalments needed to be repaid urgently or they would need to take more serious action. As with other bad credit items, an official default notice will remain on your financial history for six years (unless you paid it off within a month of it being issued), and will have a detrimental effect on your chances of a remortgage, at least on the same terms you have right now, and especially with your current lender if they are one of the mainstream high street providers.
However, while there will be issues, it is not impossible to remortgage your property while you have a default on your file. Instead of approaching the high street lenders, you will have far better chances of finding a home loan to meet your needs with one of the many specialist providers in the market, who have more flexible criteria for those with adverse credit, and take a far broader view of your finances than the mainstream lenders when making a decision on a mortgage.
The terms and conditions a specialist lender will offer you will depend on the details of your default; how historic the notice is, the amount of money involved and whether the debt was settled or not. A comparatively small amount paid off four years ago will obviously carry far less weight than a significant sum still unsettled within the last twelve months, especially if you have taken steps to ensure a healthy credit record since.
There are several measures open to you if you want to improve your credit score, and you may find it useful to do so to show that you can now be trusted to exercise responsible money management after a time when you may not have had so much control over your finances. This will reduce the perceived risk lenders may feel you pose when considering your remortgage application and give you a greater chance of success.
We know that every customer’s circumstances are unique, and the guidance we are able to give you will vary according to a number of individual factors. To find out your options for a remortgage with bad credit, please get in touch with our team today to arrange a free, no-obligation meeting.
I have a CCJ - Can I Remortgage?
As with a standard residential mortgage, it is still possible to remortgage while you have one or more County Court Judgments (CCJs) against your name, but your options will be more limited and the process is likely to be more involved. Being one of the more serious adverse credit events, the presence of a CCJ on your records can mean you find it a lot more difficult to take out new lines of credit, open a bank account and apply for a mortgage or remortgage.
There are a number of factors that will influence a lender’s decision when it comes to arranging a remortgage, including:
- The number of CCJs to your name
- When they were registered
- How much money was owed
- Whether it is still outstanding or has been satisfied
- How long the CCJ is/was in effect
It’s also likely that a lender will need to know other details relevant to your situation, such as the amount of equity you already have in your property, any gains in value you have seen since the initial purchase and of course the loan-to-value ratio of the remortgage you’re applying for.
Lenders each have their own criteria for assessing a prospective borrower, but as with all kinds of adverse credit issues, the more historic yours are the better. This said, in order to ensure you are able to access the best deals available, we advise that you settle any outstanding CCJs as soon as possible, if this is within your means, take as many steps as you can to rebuild a healthy credit history and keep your current record as clean as possible.
To get more insight on your options for a remortgage while having a CCJ on your file, please contact our team today and arrange a free, no-obligation initial discussion.
I am a Discharged Bankrupt - Can I Remortgage?
As you will no doubt be aware, due to changes in regulations and substantial losses around the last credit crunch, high street lenders have tended towards extreme caution when it comes to granting mortgages to people who have suffered financial problems in the past. If you have been declared bankrupt at some point, and have seen the bankruptcy through to discharge, then there is no reason why you cannot apply for a remortgage scheme, but you may find your options are restricted. It’s unlikely that mainstream lenders will want to help you, but you may find the finance you need through one of the number of specialist mortgage lenders in the UK market.
Specialist lenders are geared up to offer help to people with bad credit records looking to obtain a mortgage who get shut out by the more major lenders on the high street. They tend to apply far more flexible criteria to applicants than their mainstream counterparts, and will take your whole circumstances into consideration when making an assessment rather than just focusing on the unfortunate events on your file or a numerical credit score. They understand how your finances and money management can improve over time.
Time is the most crucial factor when it comes to remortgaging following a discharged bankruptcy. There are a handful of select lenders who will be prepared to offer you a mortgage the day after the discharge, but their conditions around the deposit or level of equity acting as security will be quite tough and the interest rate high. After three years, you should have access to more reasonable deals, and the terms will continue to improve the more time passes. After six years, the bankruptcy will fall outside of the scope of your credit records (although in some cases it may stay on record for as long as ten years), and will cause much less of a problem. However, if a lender asks you if you have ever been declared bankrupt, you must answer honestly.
To access a specialist mortgage lender, you will need to work with an established, experienced mortgage broker – one with an excellent reputation with lenders across the board, who is able to make assessments of your financial status and affordability that mirror those used by the lenders, and then advise exactly which mortgage provider will have the right product to meet your needs.
To find out where you stand as a discharged bankrupt looking to remortgage your property, why not get in touch with our team and arrange a meeting with one of our expert advisers? It will be free of charge and carries no obligations.
Can I Remortgage with a Debt Management Plan?
If you have been, or are currently in a Debt Management Plan (DMP), this means that you have taken steps to bring what may have once been a stressful and unmanageable financial situation under control and are working with a qualified practitioner or solicitor to arrange an agreeable way to satisfy your debts with your creditors. A DMP differs from an IVA in that it is not legally binding (but nevertheless makes you responsible) and the outstanding credit is classified as non-priority debt but is not frozen. This means interest can still accrue and it may take a long time to finally pay off what is owed.
As a DMP will have revealed failings in your money management and limited your spending, saving and access to further credit, you might be forgiven for thinking this would put an end to any ideas of being able to remortgage your property. However, experience has shown us that having a DMP to your name does not preclude you from applying for a remortgage, and you will be successful if you know the right lender to approach and are willing to go the extra mile for your application.
The advantage of being able to remortgage will of course be the opportunity to pay off your debts and clear the DMP, with the interest charged on the home loan likely to be less than what you are being charged under the Debt Management Plan or an unsecured loan. This will also allow you to start to rebuild your credit profile and put yourself in a far better position for borrowing in future.
You’ll be unlikely to find a mainstream lender willing to offer a remortgage deal while you are under a DMP, but there are a number of specialist mortgage lenders in the market who will be prepared to look at your case and make a decision based on your current affordability and financial status, as well as your conduct since the DMP came into place. You will not find these lenders on the high street or in any online listings, as they prefer to consider applications made only through trusted intermediaries, such as professional unlimited mortgage brokers like our team here at The Mortgage Centres.
If you’d like to know more about your options for remortgaging your property while in a DMP, contact our offices today and arrange a free initial consultation. One of our expert advisors will be able to give you guidance on the most suitable next steps, but the advice comes with no obligations.
Can I Remortgage after an IVA?
An Individual Voluntary Arrangement (IVA) is more serious than a Debt Management Plan, and it can appear to be quite a difficult obstacle when trying to secure a mortgage or remortgage, even when the IVA is spent and settled. Mainstream lenders tend to only be interested in supplying finance to those in the most conventional situations with the cleanest of credit records, meaning anyone who has unfortunately experienced financial problems in the past (no matter how impeccable their borrowing patterns have been since) will fall outside their narrow lending criteria. If you are applying for a remortgage even with your current lender with an IVA on your file, they could be likely to turn you down.
However, this does not mean your search for a remortgage is at a dead end. There are many more options available than those on the high street, and it could be that the remortgage scheme to meet your needs will be found with one of the number of specialist mortgage lenders in the market today. Responding to the gap in the market left by mainstream lenders, specialist lenders cater specifically to the needs of people in less-conventional circumstances or who are trying to get a mortgage with adverse credit.
An IVA is a legally binding plan whereby you have entered into an agreement to make regular payments to your creditors towards monies owed through an insolvency practitioner – usually a solicitor or professional IVA firm. The IVA period usually lasts five years, during which time all debts are ‘frozen’, with no more interest accruing or additional charges being added.
The IVA is designed to draw a line under the debts it covers, and as long as you keep up the agreed repayments while the plan is in effect, then any debts not completely repaid when the arrangement has run its course will be written off. Once the IVA period is concluded, your name will be taken off the insolvency register, but the IVA will still appear on your credit history for another six years. The more time that passes, the less weight it will carry.
There are two important factors to getting a remortgage after an IVA: affordability and the level of deposit you can supply. If you are in the position of already owning your home and have a decent amount of equity held within it, or it has gained significantly in value since you bought it, then this will act as security instead of a deposit and will put you in a more advantageous position when you apply. The fact that you have also come out of an arrangement where you were paying a significant amount of your income each month to service your debts will show that you are now also able to make regular payments on a new mortgage.
As with any finance linked to your home, you should always seek expert guidance before committing yourself. In the case of a mortgage after an IVA, it’s certain that you’ll need to work with a professional mortgage broker to access the specialist lenders who will provide the kind of remortgage products to meet your requirements. Don’t hesitate to get in touch with our team today to find out your options.
Remortgage With Bad Credit FAQs
- Can I Remortgage for business purposes?
- Can I Remortgage my house to pay off a tax bill?
- Can I Remortgage my house to pay off my debts?
- Can I Remortgage to pay of my Bad Credit?
Remortgaging to raise funds for business investment or to temporarily aid your business’s cash flow can seem like a useful plan, but most banks and mainstream lenders will not be willing to offer you a remortgage for these purposes, preferring to keep business and domestic arrangements separate.
If you are certain that raising funds through remortgaging your home is the route you want to go down, then there are a number of specialist lenders who will be likely to help you, if you meet certain criteria. To access these specialist lenders, you’ll need to work with an established unlimited mortgage broker, who will connect you with the right provider for your circumstances and manage the application to give it the best chance of success.
Please do bear in mind that securing finance for your business against your residential property may mean your home is at risk of repossession should you experience further cash flow problems or your business fails, and you are not able to keep up repayments.
If you have received a particularly large or unexpected tax bill, then remortgaging your property to raise funds to pay off what you owe to HMRC can seem like the most sensible idea, particularly if the interest charged on the remortgage is less than that for a personal loan. However, lenders all work to their own particular criteria and, while circumstances may change with time, you might find that most mainstream providers will not extend borrowing for the purposes of settling a tax demand.
While you might not find what you need on the high street, it could be possible that one or more of the growing number of specialist lenders in the UK mortgage market will be more willing to help you, especially if you have a bad credit issue. These lenders do not advertise their services publicly, so you’ll need to work with a specialist mortgage broker to access the remortgage deal to meet your immediate requirements at the most favourable rate. But you’ll be able to settle what you owe and get your finances back on an even keel.
Remember that securing any additional finance against your property comes with risks. If for whatever reason you become unable to keep up repayments on the mortgage, you could end up losing your home.
With the interest rates on credit cards and personal loans usually significantly higher than that for a mortgage, if you are having trouble keeping up with repaying what you owe on various borrowing or lines of credit then it may seem sensible and responsible to pay off all your accounts by consolidating your debts into one single, more manageable home loan.
As all lenders adopt differing criteria, you may be able to negotiate a remortgage with your current provider, or if that is unlikely due to adverse credit issues or their particular policies on lending to pay off other debts, then you’ll need to remortgage to a new deal with a different lender. In doing this, you may be able to raise additional funds to help settle your accounts, depending on how much equity you already hold in the house, any increase in value since the initial purchase, the loan-to-value (LTV) ratio of the proposed remortgage and what level of monthly payments you will be able to afford.
It’s worth bearing in mind that while you are switching to borrowing at a lower rate of interest, you could be paying off this sum over a much longer period of time, and could therefore end up paying more in the long run. As always with finance secured against your home, it’s worth looking over the figures with an experienced mortgage adviser, who will be able to let you know what could be the most favourable options in your circumstances and connect you with a lender that can meet your needs.
As with remortgaging to pay off your debts or various loans, if you have sufficient equity already in your home, you should be able to remortgage and possibly borrow extra money to pay off what you owe arising from any bad credit issues, such as a default notice or a CCJ. However, problems might arise when you apply for a remortgage – especially if your current mortgage is with a mainstream high street provider – as many lenders will be unwilling to offer you a new home loan with one or more adverse credit events on your files.
This is when you will likely need to enlist the services of one of the many specialist mortgage lenders in the market, whose business is geared around providing mortgages or remortgage schemes to customers who have suffered bad credit issues in the past. To access their offers, you’ll need to work with a specialist unlimited mortgage broker who will be able to connect you with the most suitable lender and product according to your exact circumstances, and use their experience to ensure you get the most favourable deal on the loan.
You should be aware though, that lenders will perceive you as a higher risk due to the bad credit issues and you may be charged a higher rate of interest accordingly. If for whatever reason you are unable to meet the new mortgage repayments in the future, your home could also be at risk, so do consider all the options carefully.