Last Updated on 22nd September 2020
If you want to know whether it’s possible to remortgage with bad credit, the answer is yes. Although it may not be as easy as remortgaging with good credit, it’s still highly possible. Our advisors have secured remortgages for many clients with bad credit, even if they’ve been declined previously.
Can I remortgage with bad credit?
The majority of high street lenders tend to shy away from bad credit remortgages. The main reasons they do this is because:
- Bad credit applicants are deemed high risk by lenders
- Bad credit remortgages are harder to get approved
- There’s more work involved in bad credit remortgages
- Brokers feel as though they could be wasting their time
As a result, bad credit applicants may get the cold shoulder and not receive the adequate advice they need. This often means a perfectly suitable applicant could be declined or told that they’re not eligible to remortgage.
A remortgage with bad credit is easier than getting a mortgage on a property that you haven’t owned before. This is because you already have an asset in your existing property, which minimises a lender’s risk. Lenders are also able to check your prior conduct to see how you’ve been repaying your mortgage.
The good news is that our expert advisors specialise in mortgages with adverse credit. Furthermore, we also have access to the whole market and aren’t tied to any specific lenders. It also means our advisors have access to lenders who specialise in bad credit, for the really tricky applications! If it’s possible for you to remortgage, there’s no doubt our expert mortgage advisors will find you a lender.
Does the type of credit issue affect a remortgage?
We’re often asked if certain credit issues have more or less of an impact when applying to remortgage with bad credit. To keep things simple, severe credit issues will make you appear higher risk than if you have light bad credit issues. However, every situation is different and there isn’t one right answer for everyone.
What we can say is that we’ve secured bad credit remortgages for many people, all with different credit issues. The issues vary from having little or no credit history, missed payments, defaults, CCJ’s, IVA’s, debt management schemes, mortgage arrears, use of payday loans, bankruptcy and even repossession. Even if you have multiple credit issues, it’s still possible to remortgage.
Is a remortgage with bad credit advised?
Remortgaging can have different types of benefits, but it all depends on your current financial situation and the reason for your remortgage. It’s always best to speak to a qualified advisor who deals with remortgages on a daily basis.
The various benefits and reasons for a remortgage are:
- To obtain a better mortgage rate
- Debt consolidation (bad credit mortgage refinance)
- Raise capital for a purchase or expense
- Release equity (for investment, home improvements, etc)
- Relationship breakdown (remortgage to buy out an ex-partner)
- Let to buy (remortgage your home to a buy to let mortgage and move home)
If you’re looking to remortgage with bad credit for any of the above reasons (or similar), you can make an enquiry today.
How can I remortgage with bad credit?
As every situation is different, the route for each person may differ. A remortgage with bad credit can be pretty straightforward with other cases proving difficult. So what we’ve done is outlined a guide which explains how to get a remortgage with bad credit and what to do to get started.
1. Check your credit report
The first thing we’ll always recommend in any adverse credit issue is to check your credit report. The simple reason is that lenders will check your credit report. Having a copy of it first allows you to understand your own situation further which can provide you with guidance. In some instances, your credit file might be so bad that you may be advised to repair your file before applying for a remortgage.
Having a copy of your credit file will allow you to see everything that has been registered. You may be surprised to find some credit issues aren’t even on there. Nonetheless, you may be asked to declare credit issues with some lenders.
If you’ve had issues with your own bank, for example, problems with your overdraft, then your bank will usually log these issues for their own record, but won’t register issues such as these with credit agencies. This can result in your own bank giving you a lower credit score than another credit agency.
On some occasions people won’t even consider a remortgage as they think their credit file will be an absolute mess, only to check it and realise it isn’t even that bad. Lenders generally use three main credit agencies to check your credit report. These are Call Credit, Equifax and Experian. You can also use sites such as Check My File that check multiple reports for you. Don’t worry, simply checking your report won’t leave any kind of footprint or affect your credit score.
2. Consider your options
To get the best remortgage deal, a tactful approach is always advised. A lot of people with bad credit go straight to their bank or another high street lender only to be declined or offered a mortgage at an extortionate rate. This is probably the worst thing you can do. High street lenders generally tend to deal with clean credit applicants and as a result, isn’t the best place to go if you have bad credit.
To remortgage with bad credit, you’ll typically require a specialist advisor. If you decide to take your chances but get declined, this can further damage your credit report along with a waste of time and money. We’d highly recommend speaking to an advisor to help you with the steps below.
3. Calculate your LTV
In order to establish your loan to value, you’ll first need to establish the value of your property. You can always enlist the services of an estate agent to do this for you. Estate agents usually provide free market valuations which can give you an approximate value of your home. Please note, when remortgaging, lenders will send their own surveyor to assess the value of your property.
Once you have your property value, you can calculate the amount of equity you’ll have once you remortgage. This will provide you with your LTV. This is important because a low loan to value holds a lot less risk than a mortgage with a high loan to value. In terms of a bad credit remortgage, it’s a lot easier to get approved with a low LTV. If you’re looking for an LTV of around 75% or less, then getting approval on a remortgage shouldn’t be that difficult, even with severe credit issues. Our expert advisors can also calculate this for you over the phone.
4. Calculate your affordability
Your affordability is based on your income. This is important as it will allow you to understand the financial limits to which your mortgage can go. A broker can assess your income to give you the exact amounts various lenders may offer. As a general rule of thumb, a maximum mortgage amount is usually around 4x your annual income, although some lenders may lend up to 5x.
Again, as every lender is different, the way they assess income can vary. Some lenders only account for contracted hours, whereas other lenders will consider bonuses and overtime. The same goes for self-employed applicants. Some lenders may require three years accounts whereas other lenders may accept you with accounts for just one year.
5. Place your mortgage application with the best-suited lender
Once you’ve established the above, you should have a lot more clarity regarding your remortgage. However, even having all that information doesn’t make it any easier to understand which lender to go to. Lenders rarely display the criteria they use to assess applications. That being said, advisors do this on a daily basis so we’re able to spot the right lender quite easily.
At this stage, brokers will usually research the market for you and then come back to you with some available products and rates you’re eligible for. This is truly the best way to ensure that you’re likely to be approved and likely to be getting the best possible remortgage.
What if my credit isn’t good enough to remortgage?
If you’ve been declined by another lender or broker, you may need a specialist mortgage advisor. If we can’t find you a mortgage due to recent and severe credit issues, we won’t just say no. We’ll help you to repair your credit score until you’re able to remortgage.
Sometimes it’s just a matter of adjusting your LTV to minimise your risk in the eyes of a lender. As discussed earlier, obtaining an LTV of 75% is a lot easier than aiming for an LTV of 90%. Bad credit mortgage rates aren’t always the most competitive, so be prepared for slightly higher rates than normal.