What we cover in this guide
Remortgaging with poor credit?
Remortgaging might sound simple, as you are staying in the same place. If your credit score dropped after getting your mortgage, your existing lender is less likely to approve a new mortgage. If they did, it would likely be on less favourable terms than your current situation.
There are many more lenders than those on the high street, meaning there are more options than you think. A bad credit history need not be an obstacle to getting a remortgage deal to suit your needs.
How do I improve my credit score?
Your credit score will improve naturally with time if there are no more financial issues added to your credit file. Adverse credit events stay on your records for six years, disappearing after that time. Yet, they carry less weight with a lender’s decision the more time has passed since they occurred.
There are a number of ways you can rebuild your credit score while waiting for time to pass. This is a continuous process that will encourage lenders to see your application in a favourable light. It’ll take a little time, but if you persevere, you will see results.
- Contact the three main UK credit reference agencies for copies of your credit reports:
- Check your credit reports contain information that is correct and up-to-date. They may hold different information, so it’s important to get one from each agency.
- 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. Make sure you do not go over the agreed limit.
- Always pay your bills on time by setting up direct debits, so 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 positive credit by using a credit card for your spending, making sure you pay off the balance monthly.
- Never take out payday loans. 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.
Read more suggestions on how to repair your credit rating.
Can I afford to remortgage?
Regardless of your credit status, lenders always run affordability checks before deciding whether to offer a remortgage. They take all aspects of your finances into account to arrive at a ‘debt-to-income’ ratio.
In 2014, the FCA advised that debt-to-income should be no more than 45% when lenders make a mortgage offer. You can get a rough idea of where you stand by doing this simple calculation:
Monthly expenses / Income * 100 = Debt-to-income ratio.
Increasing your income or reducing your outgoings will lower your debt-to-income ratio.
To get a clear idea of your monthly expenses, MoneyHelper have a helpful, free budget planner tool.
Bad credit mortgage broker
The team at The Mortgage Centres deals with clients from every background and level of property ownership. As unlimited mortgage brokers, we are not tied to products from any mainstream branded lender.
We 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. They are able to find deals that aren’t on the high street, with access to exclusive rates.
Whatever your credit history, we know who to turn to, and how to best present your case in your application.
Can I remortgage with a default?
It is not impossible to remortgage your property if you have a default on your file. A default can be a slightly more serious issue than a simple string of missed or late payments.
As with other bad credit items, an official default notice will remain on your financial history for six years. It will have a negative effect on your chances of a remortgage on the same terms you have right now.
You will have far better chances of finding a remortgage with one of the many specialist providers in the market. They have more flexible criteria and take a broader view of your finances when deciding on a mortgage.
Read our guide on Mortgages with a Default.
I have a county court judgment – can I remortgage?
As with a standard mortgage, it is still possible to remortgage while you have one or more CCJs against you. Your options will be more limited, and the process is likely to be more involved.
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.
Check out our CCJ mortgage guide.
I am a discharged bankrupt – can I remortgage?
I am a discharged bankrupt – can I remortgage?
If you have been declared bankrupt and seen it through to discharge, you should be able to remortgage. You may find your options are restricted but there are a number of specialist mortgage lenders in the UK market.
They tend to apply far more flexible criteria to applicants than their mainstream counterparts. They will take your whole circumstances into consideration when making an assessment.
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.
Read our helpful guide on Mortgages after Bankruptcy.
Can I remortgage with a debt management plan?
Our experience has shown us that having a DMP to your name does not preclude you from applying for a remortgage. You will be successful if you know the right lender to approach and are willing to go the extra mile.
The advantage of being able to remortgage is the opportunity to clear your DMP. This will allow you to rebuild your credit profile and put yourself in a better position for the future.
There are specialist mortgage lenders in the market who will look at your case and decide based on:
- your current affordability,
- your current financial status,
- your conduct since the DMP came into place.
If you’re affected by a DMP and looking to remortgage, read our guide on Mortgages with a DMP.
Can I remortgage after an IVA?
An Individual Voluntary Arrangement (IVA) is more serious than a Debt Management Plan. If you are applying for a remortgage with your existing lender with an IVA, they will likely turn you down. However, this does not mean your search for a remortgage is at a dead end.
If you already own a home with sizable equity or it has increased in value, it can serve as security instead of a deposit. 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, you’ll need to work with a professional mortgage broker. This will get you access to specialist lenders who will provide the kind of remortgage products to meet your requirements.
If you’re looking to remortgage with an IVA, read our guide.
Remortgage with bad credit FAQs
- Do I need a solicitor to remortgage?
- 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?
A solicitor is required to carry out the necessary legal work to remortgage. However, unless you are making any legal changes, the conveyancing solicitor will typically just act for the new lender. They will ensure that all legal matters are in hand and are correct on behalf of the new lender before the change over can occur. Many lenders offer specific remortgage deals whereby they will cover much of the costs involved.
Remortgaging to raise funds for business investment can seem like a useful plan. Most mainstream lenders will not offer you a remortgage for these purposes.
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.
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.
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 are 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 the most favourable options in your circumstances could be 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 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.