Can I Remortgage with Bad Credit?
If you are a homeowner and need to raise cash for something – for example, a new car, a holiday or home renovations – a remortgage is an excellent method of releasing capital in an existing property. You can often also obtain a better deal at the same time, making it a win-win situation.
Remortgage with Poor Credit
If you have suffered financial problems since your initial mortgage was obtained, you might find that certain doors are now closed to you, and that might include the door to your current lender. As your circumstances have changed, the fact they gave you your initial mortgage is no guarantee they will agree to offer a remortgage deal. Even if they do, the terms they offer might be less favourable than your current deal.
Having an adverse credit score can be an obstacle and present a real challenge to be overcome. If you are in this position take heart, as a bad credit score does not necessarily mean that you’ll be unable to remortgage your property. There are likely to be options available to you.
To help you understand the situation, let’s first take a look at why lenders might be unwilling to offer you a remortgage deal.
Most high street lenders will look upon bad credit remortgage applications in the same way they’d consider, and probably turn down, initial mortgage applications from people with bad credit. From a financial standpoint, a history of bad credit or an existing bad credit score is indicative of poor money management skills, and this makes those applicants a high risk for lenders.
However, as with most things involving finance, there are a number of truths and myths which can become blurred. The biggest misconception is that the answer to a bad credit remortgage application will always be a resounding ‘no’. In truth, most homeowners will be able to obtain a remortgage deal, even with a number of credit issues on their record, such as:
- Missed or Late Payment
- Debt Management Plan
- Discharged Bankruptcy
- Defaults (a series of missed payments)
- County Court Judgments (CCJs)
- Individual Voluntary Arrangement (IVA)
Every case is judged upon its own individual merits, which means we can’t guarantee to remortgage with bad credit will be possible. However, having said that, while each adverse credit event represents a black mark on a person’s credit record and has an impact on their credit score, none of them should be considered an immovable barrier to obtaining a remortgage deal.
REMORTGAGE RATES IF I HAVE BAD CREDIT
The interest rate on a remortgage if you have a bad credit record, just like the size of the deposit you’ll be asked for, is likely to be higher than that for a conventional remortgage deal, especially if the bad credit events occured only recently. However, the nature of any previous bad credit events will be as much a factor as the amount of time that has passed – a few missed card or bill payments three or more years ago will carry far less weight than a CCJ or repossession in the last twelve months.
If you still owe money on previous debts – perhaps following a CCJ or IVA – then this will also seriously affect the kind of deals that are open to you, and the interest rates will inevitably be much higher than that for a conventional loan. The longer it has been since the adverse credit events, and the more you have done to keep a clean record and repair your credit score, the less of a perceived risk you will pose, and the more reasonable the interest rates become when you apply. Things usually return to normal after six years, when bad credit events fall off your official credit history.
Due to the dynamic nature of the mortgages market, with products changing frequently, and the variations in individual criteria used by every lender, we are not able to list interest rates on remortgages here.
However, we can say that to get anywhere close to a competitive interest rate while you still have more serious blemishes on your credit record, you will need to approach a non-mainstream lender who specialises in remortgages for people with a poor credit history. Typically, you won’t see these lenders on the high street or online, and you will need to apply through a trusted intermediary, like a specialist mortgage broker.
Here at Just Mortgage Brokers, we have access to all the right lenders who will have the most suitable deals and rates for you – often on an exclusive basis. Call us today to find out exactly which lenders will be able to offer the right remortgage product to suit your circumstances.
Bad credit remortgage lenders
People look to remortgage for a variety of reasons for example, obtaining a new mortgage rate, raising additional funds, removing or adding a party to the loan, maybe even a combination of these or many other reasons. When remortgaging is the chosen route this can have added complications if the applicant has a history of bad credit. The good news is that there are lenders who will consider an application from those that find themselves in this situation and over the last few years the market has seen an increase in their appetite and availability leading to a greater degree of choice. Your overall situation will be used to determine your own possibilities so speak to an adviser today and find out what options you may have.
What is a Credit Score?
Your credit score is the result of an assessment of financial and other information gathered about you by Experian, Equifax and Callcredit – the three main credit reference agencies that operate in the UK. They get their information from two main sources: other lending companies that have agreed to share data about their customers, and public records.
Lending companies share information including how much a customer is in debt to them, how promptly they pay their bills, and if they pay in full, and whether their credit cards are maxed out.
The information gathered from public records includes details of adverse credit events such as CCJs, bankruptcies and IVAs, plus information held on the electoral roll.
High street lenders interpret this data in line with their own criteria and arrive at a credit score, based on which they will say ‘yes’ or ‘no’ to a remortgage application. If the decision isn’t clear-cut, they might say ‘yes’, but charge higher fees and/or a higher rate of interest. They do this for two reasons; to offset what they see as an additional risk and because they know they can, as borrowers with a poor credit rating have fewer options than those with an exemplary record.
IS IT BETTER TO IMPROVE MY CREDIT RATING BEFORE I REMORTGAGE?
If you are looking to remortgage your property but are suffering from a poor credit rating, then it might be possible that you will hit some obstacles when approaching lenders, even the one you are already with. Especially if this is a mainstream lender like a high street bank, they may be unwilling to agree to a remortgage deal, and if they did then it might be on less favourable terms than you have at the moment.
However, you can possibly help your case by taking steps to improve your credit rating before applying for a remortgage. Getting any erroneous entries on your credit record corrected, paying off as many debts as possible, keeping up with your regular commitments, closing any lines of credit you no longer use, finding extra income and perhaps even taking out a credit card to use for everyday spending (and making sure you pay it off every month!) can all go some way to showing you are a reliable borrower and improving your credit score.
A mainstream lender might still have an issue if you do not meet their very narrow criteria, but one of the many specialist lenders on the market could be willing to agree to a remortgage with you, and you might be able to get a competitive rate if you have done everything you can to put your financial management on a sure footing and improve your credit rating. These lenders take a broader view of your circumstances, understand that your financial situation can change over time and take your present position into greater consideration.
We have helped hundreds of homeowners secure a remortgage deal with bad credit events on their records like missed payments, debt management plans, default notices, CCJs, IVAs and discharged bankruptcies. While we can never totally guarantee that a remortgage with bad credit will be possible, we can say that specialist lenders will judge every application on its individual merits. Call us to find out more.
How do i improve my credit score before I remortgage?
Adverse credit events stay on a person’s record for six years, after which they are removed. In the majority of cases, even if the six-year period isn’t up yet, the further in the past something is, the less impact it will have on your credit score and therefore on a lender’s decision. However, even after they have ‘dropped off’ the record if you are asked about certain types of adverse credit events – such as a previous bankruptcy or property repossession – you must declare it.
While there are options available to those with an adverse credit score looking to remortgage a property, it is always recommended that you look to improve your credit score wherever possible.
There are some positive steps you can take that will improve your situation and encourage lenders to look more favourably on your application. Arguably the most important thing you can do is to improve your credit score.
Improving your credit score is a continuous process, not something that can be achieved overnight – you must persevere with it to get results. However, if you are taking the right steps, you will soon begin to see some small improvements.
Having a healthy credit score will make a huge difference to your future financial dealings. We always recommend speaking to a qualified adviser with regard to putting together a plan to improve your credit score; however, there are some immediate actions you can take to put your credit rating back on track. These include:
- Get a copy of your credit report from each of the UK’s three credit reference agencies – Experian, Equifax and Callcredit – and check that the details they hold are correct (they may hold different details, so do get your report from all three, not just one)
- Regularly update the personal details held on your credit report
- Make sure you are registered on the electoral roll
- Keep track of your credit card balances; ideally try to always pay more than the minimum to drive the balance down, and take care not to go over your agreed credit limit
- Use your calendar to make sure you pay your bills on time and manage your monthly income
- Cancel all lines of credit that are not in use, such as store cards or ‘just in case’ credit cards (but see below for an alternative option)
- Build up a positive credit history; for example, if you have a credit card that you don’t use, rather than cancelling it, use it at least once a month, perhaps for buying petrol or groceries – but make sure you pay it off in full every time, don’t build up additional debt
- Resist the temptation to take out payday loans, as they are considered to be a red flag showing that you cannot manage your finances month to month
- Moving forward, leave any good debt on your report
For more suggestions as to how you can repair your credit rating, check out our simple tips page.
How do I improve my credit rating before I remortgage?
Something else to bear in mind if any missed payments show on your credit record is whether they were due to events outside of your control. If, for example, your employer went out of business, leaving you financially stranded, then you should contact each credit reference agency and explain what happened. They have the ability to add a note of correction to your credit file explaining the circumstances, which may well mitigate the effect of the default on future credit decisions.
There are other things you can do that, while they do not in themselves boost your credit rating, will help you to avoid falling into future difficulties, and perhaps to pay things off faster. For example, take on some freelance work or a second job, or look for a job that pays more or is closer to home (so you save money on commuting). Make sure you aren’t paying more than you need to for things like your mobile phone, cable TV, fuel and broadband, and if you have a gym membership but can’t remember the last time you were there, cancel it. The more you have left after paying your bills, the better your chances of passing the affordability test.
Can I Afford to Remortgage
Every application for a mortgage or a remortgage is subject to an affordability assessment, and this is the case no matter what the credit status of the applicant might be. Potential lenders will look at income versus expenditure, taking everything into account, to arrive at a debt-to-income ratio. Since June 2014 the Financial Conduct Authority’s recommendation is that the debt-to-income ratio should be no higher than 45% for an offer of a mortgage or remortgage to be made.
If you want to do a quick, rough calculation to see where you stand, then:
- make a list of all income you will receive over the year and divide by 12 (if all your income comes in monthly, just add it up)
- add up all your monthly bills – mortgage, credit card, etc. – then list all your other bills, whether quarterly, annual or whatever;
add the monthly cost of these additional bills to your original total
- divide your monthly expenses by your monthly income and multiply the answer by 100, which will give you your debt-to-income ratio, expressed as a percentage
The lower the number, the better. You can lower your debt-to-income ratio by either reducing your debt or increasing your income.
How can I remortgage with bad credit?
For those in need of a more immediate remortgaging solution, there are specialist lenders who work with applicants with low credit scores, offering deals that cannot be obtained from high street lenders. So if your need is urgent and you are asking yourself, ‘Can I remortgage with bad credit?’ the answer is ‘yes’.
Get in touch today for free initial advice and no-obligation quotes from our team of experienced bad credit brokers.
Mortgage Broker Specialising in Bad Credit
Just Mortgage Brokers have experience of working with property owners at all levels, from those who are relatively new homeowners to highly experienced landlords with extensive property portfolios.
With exclusive rates and many years of experience of working with a network of bad credit lenders across the country. That means we are not restricted to products from any one particular lender but can work with a diverse range of specialist lenders to secure the remortgage deal you require. This combination of impartiality and unlimited market access gives us the very best chance of obtaining a competitively priced bad credit remortgage.
We know exactly where to turn to find a mortgage to suit the particular needs of each and every client, regardless of their credit history. If you have a history of bad credit and are looking to remortgage a property, speak to Just Mortgage Brokers today to get the right deal for you.
CAN I REMORTGAGE IF I HAVE DEFAULTS?
Trying to get a remortgage when you have defaults registered against your name can throw up the same problems as with other kinds of adverse credit events. It’s likely that, if your current lender is a high street bank, then the change in your financial circumstances will prejudice them against extending any other form of credit, at the very least not on terms as favourable as those that you currently enjoy. In many cases, in order to get a remortgage deal, you will have to go to another lender, one that specialises in dealing with people with defaults and other bad credit items on their financial records.
The terms you are able to get for a remortgage with defaults may be influenced by the amount of money in the default, how long ago the default notice was served, and if there is any amount still outstanding. A settled default (if the settlement was made more than a month after the notice) will remain on your credit record for six years, but a smaller default settled five years ago will obviously cause you far less trouble than any defaults with amounts still outstanding incurred during the last 12 months.
In the eyes of a lender, one or more defaults and other instances where you may have not met the conditions of a financial agreement – landing you with a bad credit rating – demonstrates poor money management skills, therefore making you a high lending risk. The more you have done to remedy your financial management and current fiscal situation, the better.
A lot will depend on your individual circumstances, as we have seen first-hand that no two applicants are exactly the same. Please do get in touch with us, and one of our expert team will be able to talk over your situation and offer free initial, no-obligation advice as to your best course of action. It could mean the difference between getting the remortgage you need, or continuing as you are.
I HAVE A CCJ, CAN I REMORTGAGE?
A CCJ (County Court Judgement) is one of the more severe adverse credit events that can be registered against your name. With one currently on your credit record, you will find it more difficult to apply for a credit card, open a bank account and, unfortunately, obtain a mortgage. A remortgage arrangement is very similar to a standard mortgage, and it’s still possible to get a remortgage even if you have one or more CCJs on your credit file.
Every lender will have their own individual criteria for assessing your case, but they will take into consideration all these factors in combination in order to make a lending decision: when the CCJ was registered, the number of CCJs, how much money is/was owed, if was satisfied, and the age of the CCJs. As ever, the older the CCJ, the less impact it will have. They will also consider the amount of equity already in your property, any increase in value since you originally bought it, and the loan-to-value ratio of the remortgage.
In order to ensure you get the most suitable deal possible, it’s advisable to settle any CCJs still outstanding, if you can, before applying for a remortgage, and to have done what you can to maintain an otherwise clean credit history.
After six years, as per most other forms of bad credit issues, the CCJ will drop off your credit file. In the meantime, to learn more about getting a mortgage with a CCJ on your record, whether shown as satisfied or not, please contact our team. Our expert advisers will be able to explore what your CCJ will mean for your circumstances and advise you of your options when you need a home loan.
I AM A DISCHARGED BANKRUPT, CAN I REMORTGAGE?
If you have been declared bankrupt in the past, and the bankruptcy has been discharged, then yes, you should be able to apply for a remortgage, but your options could be restricted depending on a few factors. Mainstream lenders continue to be highly cautious and tend not to lend to borrowers who fall outside their narrow lending criteria, but there are an increasing number of specialist lenders catering to the needs of people with a poor credit history who could be willing to grant a remortgage to someone in your position.
These specialist lenders will consider your whole current financial situation in order to make a decision, based on their individual criteria and how your financial position and credit score has improved since you were declared bankrupt. You will need to work with a specialist mortgage broker, who will be able to assess your circumstances and advise you exactly what will be the right option for you going forward.
The most pressing factor will be time – how long it has been since your bankruptcy was discharged will have a big influence on your chances with a lender. As with all adverse credit events, a bankruptcy will finally slip off your credit reference file after six years, but even after this if you are asked if you have ever been declared bankrupt, you will need to answer honestly. You could have access to a decent amount of choice after three years, but it becomes more difficult the more recent the bankruptcy was discharged – especially if it has been just twelve months, or less. Some lenders are prepared to offer a mortgage on the first day after discharge, but you will need to provide a larger deposit, or show that you have a high level of equity in your property, as well as accept a higher interest rate.
From experience, we know that it is definitely possible for someone with a discharged bankruptcy to obtain a property loan – it all depends on your individual circumstances, the amount of time that has passed, the level of equity you are able to show, your financial conduct since the bankruptcy was discharged, the steps you have taken to rebuild your credit score and your financial status at the time of applying.
CAN I REMORTGAGE WITH A DEBT MANAGEMENT PLAN?
Having been, or to be currently in, a Debt Management Plan (DMP), you might think it would be impossible to get a remortgage. However, we have seen that it is entirely feasible for people with a DMP to successfully apply for a new home loan on their property – you might have to go to a little more trouble than for a standard remortgage, but with access to the right lender, you should be able to find the right product to meet your needs.
With a Debt Management Plan, you are working with a practitioner or solicitor in a non-formal arrangement between you and any parties you may owe money to, for the repayment of what are classified as non-priority debts. You will be paying agreed instalments to the practitioner, who will then be forwarding monies on to your creditors. The main difference between a DMP and an IVA (Individual Voluntary Arrangement), apart from its legal status, is the debt(s) are not frozen once the arrangement is in place, and interest can still accrue. It may take a long time to finally clear debts.
With this in mind, a remortgage could, in part, be a useful way to pay off existing debts and replace them with the new mortgage on your house. The interest rate on a remortgage could be significantly more favourable than that on any unsecured loan, and settling the debts named under a DMP would help improve your credit rating in the future.
While mainstream high street lenders may shy away from dealing with potential borrowers with any kind of black mark on their credit history, including Debt Management Plans, there are an increasing number of niche-market lenders who often specialise in working with people with bad credit events on their files. These lenders do not advertise to the general public and will only take applications via a trusted intermediary or broker, such as ourselves here at Just Mortgage Brokers.
Specialist lenders will take a broad view of your finances into consideration – your current position and your conduct since the DMP was put in place – before making an assessment on whether to lend. To find out more about your options, please do get in touch with our team, who will be happy to help.
I AM HAVE FINISHED AN IVA - CAN I NOW REMORTGAGE?
Trying to obtain a remortgage after completing an Individual Voluntary Arrangement (or IVA) can seem like a huge challenge – banks and high street lenders are very cautious when it comes to lending, and usually only offer loans or mortgages to people who will fit their strict lending criteria, or who come up with a bill of clean health from the credit reference agencies. This might mean that your current lender will decline your application for a remortgage, in which case you may need to search elsewhere.
Fortunately, there are a range of specialist lenders who cater to the needs of people who may have experienced financial difficulties in the past and unfortunately received black marks on their records.
With an IVA, you will have been in a legally-binding agreement between you and your creditors drawn up by an insolvency practitioner, during which time the debts and charges were frozen, and you paid regular instalments via the practitioner towards the debts. An IVA usually lasts for a period of 5 years. Provided you keep up with the payments, any debt not completely paid off before the IVA period comes to an end is written off, and you will not owe any of the creditors any more money. The record of the IVA will then be removed from the Insolvency Register. The IVA remains on your credit records for six years.
The key factor with getting a remortgage after an IVA will be affordability – although if you have just been through a period of time where you were paying instalments to service debts that has now come to an end, this should show you are now in a position to make repayments on a new mortgage.
Another factor with getting a home loan after an IVA is the level of deposit you are able to supply. In the case of a remortgage, this will usually be the amount of equity already in your property – if you have a decent amount of equity in your home, and perhaps it has risen in value since you first purchased it, then this will put you in a stronger position when making an application for a remortgage.
It’s always best to get expert advice when looking to get a remortgage after an IVA, as only a specialist mortgage broker will have access to the kinds of lenders that will be able to offer an affordable remortgage package to suit your needs. Get in touch with our team today.