Bad Credit Remortgages

The 4 types of bad credit remortgage

We usually divide the remortgage borrower into four types. This distinction is important because the advice will be very different depending on which one you are.

Here’s some headline info on this:

A quick note about “equity release”.

When a homeowner of any age increases their mortgage to borrow more money, this is sometimes referred to as “releasing equity.” It’s a standard, normal, everyday remortgage. Often, this gets conflated with the term “equity release,” which is a type of lifetime mortgage for people over the age of 55. Both are very different things!

So if you want a lifetime mortgage please let us know so we can get you to the best channel-expert.

How lenders treat different credit issues

Remortgages with bad credit are typically assessed in the same way as purchases – the issue you’ve had and when it was are the most important factors, and they dictate which lenders will consider you, at what loan-to-value (LTV) limit, and what rate/product range they’ll offer.

We have more on eligibility here if you jump to the specific article for you for more information on this:

• Late payments
• Defaults
• County Court Judgements (CCJs)
• Debt Management Plans (DMPs)
• Independent Voluntary Arrangements (IVAs)
• Debt Relief Orders (DROs)
• Repossessions
• Bankruptcy

If you’re ready to see the rates you’ll be eligible for, you can get a quote with our team here, and if you’re ready to get approved and apply for the best deal whether borrowing more and you want to consider a remortgage and a secured loan, or just a remortgage, go here.

Maximum Loan to value (LTV)

Under normal conditions with a clean credit file, it’s possible to remortgage and borrow up to 90% with most lenders (some will do 95%). If you have credit issues, your LTV may be limited, depending on what they are (as mentioned above, a secured loan lender might be the best option at this point). It’s impossible to write down exactly what LTV you can get, as it depends on your profile and what lenders are offering on the day.

Your best bet is to get a quote from the team here or play with our amazing comparison tool here! Make sure you add the right filters for your credit file, and if you’re not sure how to do this, then reach out. Our verify service might be best for you, as one of the team will check what you’re eligible for.

What is the money for?

The reason for the borrowing is also actually a key factor in who will lend to you.

Some lenders are very liberal and offer additional borrowing for any legal purpose, others less so, and some are very restrictive (limiting LTV to certain reasons or blocking it altogether).

Some of the most common reasons here:

• Home improvements (generally accepted by most)
• Debt consolidation (can be capped to lower LTV limits)
• Tax bill (often a problem with many lenders)
• Gifts (can be widely accepted)
• Purchases (cars, bikes, holidays)
• Investment property (for BTL deposit, most lenders are fine with this)
• Investments (assets like classic cars, gold, etc, many lenders OK depending on what it is. Higher risk investments like crypto, etc, can be blocked by some lenders).

Affordability & how much you can borrow

LTV aside, it’s also important to establish what you can borrow from an affordability perspective with the lenders that will consider you.

Most lenders will calculate based on your income and net disposable income, but also apply an income multiple limit to what they’ll offer – it can get really complex as they will all treat different income types, amounts and any debts or commitments differently. Rather than you running affordability calculators with all of them, you are well advised to get an expert to help with this!

The general rule of thumb as a guide for max borrowing is 4- 4.5x your annual income. Some lenders will do 5-6x depending on the situation, and some have been known to lend more than this (with secured loan lenders more flexible and generous too).

The actual remortgage process

This is a condensed run-through of the process in our remortgage guide

1. Decide broker or go direct and arrange it yourself (tip: brokers do all the below for you!)
2. Establish where you are (you’ll need a copy of your credit report to get exact issues and dates – we love Checkmyfile)
3. Find lenders to match (research for lenders that accept your issues)
4. Check affordability and LTV limits (check with those lenders if they’ll lend what you need)
5. Shortlist all accepting lenders and compare rates
6. If you are borrowing more money, repeat steps 3, 4, and 5 again, but from secured loan lenders, so you can compare their options against your favourite main mortgage deals, including fees and any repayment penalties.
7. Agreement in principle (make the initial application to see if they’ll approve you).
8. Full Application (submit all remaining info and documents; the lender may then value your property).
9. Offer, completion, money released (going from offer to remortgage completion can be pretty quick—days or weeks, not months, usually).

Buy-to-let remortgages

Bad credit will typically affect you in the same way, regardless of whether you are remortgaging a residential or buy-to-let property. However, buy-to-let lenders tend to be a little bit more flexible, given that the mortgage is repaid through rental income.

You can expect to pay higher rates than on a typical buy-to-let remortgage, and the level of equity in the property, or your deposit, will likely need to be higher if you have bad credit, but it’s certainly possible to find a lender with the right advice.

Can I remortgage without a credit check?

Sticking with your current lender

If you are remortgaging with your current lender and your circumstances have remained unchanged since you took out the original mortgage, they may not carry out a credit check, though this is not guaranteed. If your circumstances have changed in a way that may have impacted your credit files, you should be honest and upfront about this.

If this is the case, your lender will likely check your credit to review the extent of the changes.

Moving to a new lender

If you remortgage with a new mortgage provider, they will almost certainly carry out a credit check as part of the process. We want to be clear here, though: Some lenders will credit “check” but not credit “score”—the difference being that you may be able to get approved with an awful score so long as your profile fits the lender’s policy.