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How to Remortgage with Bad Credit
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By Pete Mugleston Mortgage Advisor
Last updated: 9th August 2018
"Can I remortgage with bad credit?” - YES, you can!
Over the years we’ve assisted in hundreds of remortgages for people with bad credit history. Almost every time it’s the same story - customers come to us after being declined by a lender, or even worse, having been turned away by their broker.
Below is a list of potential credit issues you may be faced with as a borrower, and later on we delve into each subject in a bit more detail, discuss the implications of each, and how you go about remortgaging with bad credit.
- Adverse credit overview
- Low credit score
- Mortgage Arrears
- County Court Judgements (CCJs)
- Individual Voluntary Arrangements (IVAs)
- Debt Management Plans (DMPs)
The fact of the matter is, yes, bad credit remortgages can be harder to arrange, which often results in otherwise eligible customers being treated badly, messed around by brokers or lenders who don’t (or won’t) understand their circumstances. Sometimes they are even misinformed and told that it is not possible to do what they want.
Fortunately, the advisors we work with offer an expert service for customers of all backgrounds. How do we know? Because we train them ourselves, and only license them to handle your type of enquiry, provided they prove they know exactly what they are doing.
As whole of market brokers, the adverse credit remortgage specialists also have links to lenders who consider bespoke deals for those who don't fit even the most flexible of lender. So, if there is an adverse credit remortgage out there for you, you can rest assured that they'll scour the market to find it.
Bad credit can cause real issues with any remortgage. We are regularly asked the question “Can I remortgage if I have bad credit?” and many borrowers want to know specifically which types of credit issues are acceptable. The good news is, the advisors we work with can usually help.
Why would anyone refinance with bad credit?
There are many reasons why you would want to remortgage with bad credit in the UK. These might include:
- Debt consolidation
- To purchase a buy to let
- Renovations (main residence or BTL)
- Buying a car
- A wedding
- Or almost any worthwhile purpose
If you meet certain criteria, there are lenders who will consider your application, even if you have bad credit. Talk to one of the expert advisors we work with to discover your best options.
Adverse credit history occurs as a result of numerous offences reported to a credit agency on behalf of a borrower. Items that contribute to an adverse credit history include:
- Low credit score
- Late payments
- Mortgage arrears
- Debt management plans
Each adverse event will have a different effect on your credit report and credit score. While it is still possible to renew your mortgage with adverse credit it does make it more difficult, and the severity of the situation will depend on what the offences are, when they were registered, and how much equity you have in the property.
Lenders care about adverse credit history because if a borrower has had credit problems in the past, then they are more likely to have them in the future. If you’re trying to remortgage with adverse credit, lenders may be reluctant to lend you money, or they might only be willing to offer a subprime rate.
But that isn’t necessarily the case; depending on the severity of your individual situation there may be far more options available than you than you have been made aware of previously. We work with a skilled team of adverse credit remortgage specialists that will look into your specific case and find you the best deal on the market.
Can I Remortgage With a Low Credit Score?
Lenders determine your credit score or credit rating by looking at various factors from your credit history, in consideration with other circumstances, such as income, age, loan to value (LTV), etc. Not every lender will give applicants a credit score, but all lenders will assess your credit history, and the two are directly linked. So, if you’re trying to refinance your house but have no credit history or have a poor credit history, the likelihood is that you will have a poor credit score with most lenders.
If you’re worried about your chances of being able to remortgage with a poor credit score, or have little to no credit history, you may be better off searching for lenders who don’t credit score. Many of these types of lenders exist these days, and the good news is that they take a far more flexible view of creditworthy borrowers with perhaps a more “colourful” credit history, or no credit history at all.
To help protect your credit rating, we recommend seeking assistance from a whole of market broker, rather than going from bank to bank requesting quotes.
Many people are worried that using a broker will damage their credit file further, but this is a myth - provided you go with the right one. Reputable whole of market brokers will use their expertise to assess your situation before acting, meaning you should only be subject to one credit search from the most suitable lender throughout the whole process.
Can I Remortgage With Mortgage Arrears?
Almost everyone will have missed the odd payment during their lives. While lenders don’t tend to be particularly sympathetic in these situations, unsecured arrears shouldn’t pose too much of a problem when it comes to applying for a mortgage provided it didn’t happen recently or is a recurring instance.
However, when it comes to remortgaging with mortgage arrears, things become a lot trickier, especially if there are other bad credit issues at play. This is because lenders deem mortgage arrears as one of or the most severe type of late or missed payment.
When someone has neglected to pay their mortgage in the past, especially if it’s fallen into arrears for more than one month, it indicates a real issue in the borrower’s ability to repay and therefore their overall creditworthiness for a new application.
That being said, some lenders will be lenient if the instance(s) are historical, and you have a reasonable explanation as to why they were missed, provided the prior issues have been resolved.
Of course, it is all due to individual circumstances, and lenders will also consider this alongside how much deposit you have (15-25% is probably the minimum in this situation), as well as your loan to value (LTV) and loan to income (LTI) ratio before coming to a decision.
Even if you’re looking to remortgage with arrears that are current, it doesn’t mean there are no options available, as there are lenders that can consider this in the right circumstances. We suggest you take a look at our eligibility charts to help you get a rough idea of your situation, and to get in touch if you’d like some advice from a specialist advisor.
Can I Remortgage with Defaults?
Defaults on a borrower’s credit file are one of the most common reasons for declined mortgage applications. We receive a huge volume of enquiries in this area, so the specialists we work with are very adept at managing such situations.
Default mortgages are more widely available than ever before. This doesn’t mean that the process will be plain sailing, but it does mean that there are lenders out there who specialise in providing mortgages for people with defaults. So, remortgaging with a default is certainly possible, but there are plenty of other influencing factors at play.
Again, lenders will consider:
- Your LTV,
- LTI and deposit
- The type/severity of the default,
- Number of defaults,
- How recently they occurred,
- Whether a default is satisfied or not.
Contrary to popular belief though, it isn’t the end of the world if a default has not yet been satisfied; despite almost certainly having an impact on your credit score. Not all lenders carry out this check and those who accept defaults tend to be more concerned with the date a default was registered.
Your likelihood of being accepted for a remortgage with defaulted credit accounts on your file will very much be determined on how recently they occurred.
Can I Remortgage With a CCJ?
Many customers that approach us with a CCJ on their file fear that their chance of being accepted for a remortgage is unlikely at best.
Fortunately, there are a growing number of lenders who will consider people with CCJs, but as ever, each lender will have their own criteria for what they deem acceptable.
Simply “having a CCJ” isn’t necessarily the reason you may have been declined a remortgage application in the past. As with defaults the date of the CCJ is the most important influencing factor here; if the instance was 2 or more years ago, you stand a far greater chance of being accepted than if it was registered within the last 12 months.
Other influencing factors include:
- How much the CCJ was for (again, this is impacted by how recently the CCJ occurred - check out this eligibility chart to get a better idea),
- The number of CCJs in your history,
- Whether it was satisfied or unsatisfied,
- Affordability considering the financial status of your existing mortgage.
Mortgage type also plays a role, and typically the criteria will be more flexible if you are remortgaging with a CCJ than if you were a first time buyer or applying for a buy to let mortgage.
Can I Remortgage with an IVA?
The criteria is different whether you have a current IVA or you have had one in the past, both still cause issues with a lot of lenders but thankfully there are several lenders happy to consider the mortgage in either situation.
Being in an IVA can limit your options when it comes to remortgaging, but lenders tend to be slightly more flexible in this situation than if you’re applying for new credit.
Depending on your individual circumstances, it most certainly can be possible to remortgage while you’re still in an IVA, after your IVA, or if you need to remortgage in order to pay off an IVA.
In order to appeal to those lenders who may consider IVA remortgages, you’ll usually need to have made repayments satisfactorily throughout the time you've had the IVA, with some asking for evidence of the last 12-24 months payments.
Every lender will have a different criteria in terms of how they interpret the impact, but generally speaking the more recently an IVA was set up, and the more credit issues you have, the greater amount of equity will be required to counteract perceived risk. So as you can see, a remortgage with bad credit and no equity would be quite a challenge.
If you have an IVA then it’s likely you’ll have other associated credit issues which have lead up to the IVA arrangement being made, such as defaults, CCJs and debt management plans. Lenders who consider issuing mortgages to those with IVAs will be aware of the preceding issues and should be understanding, but again this depends on how recently the instance occurred and whether you have kept up with your repayments since. Expect the interest rate and amount of deposit required to be higher, depending on how recently it occurred and the severity of the case.
If you have an IVA on your record you can read more here, or get in touch and speak to one of the advisors we work with about how it will impact your remortgage.
Secured loans to repay an IVA
If you are declined a remortgage because of your IVA, there may still be a few options. Providing you have the equity available several lenders can consider a second charge mortgage to release the money to pay off the IVA, even when specialist mortgage lenders decline, as they can be more flexible in terms of their policy on recent credit history. As well as this, secured loan lenders can be more generous in loan amounts, being known to offer over 10x income where main mortgage lenders tend to cap at 4,5,6x income).
Make an enquiry and one of the experts can review things for you!
Can I Remortgage on a Debt Management Plan?
If you are currently on a debt management plan (DMP), remortgaging can appear a very attractive option to help pay it off.
It is also certainly possible to remortgage after completing a debt management plan, or to switch mortgage / borrow more money whilst you’re still in a debt management plan - provided you meet the relevant criteria.
There are number of factors to consider when looking to remortgage with a DMP, so take your time to think about whether it’s the best move for you.
If you’re still on a debt management plan, you need to ascertain how much of your home do you currently own?
When it comes to remortgaging, the permitted LTV percentage tends to be slightly higher (around 80 - 85% maximum), but if your current LTV is already at the minimum requirements you will not be able to release any equity through remortgaging.
Compare this to a mortgage at 50% for example, in which case you should be able reduce that figure down to around 80% and use the remaining money to help pay off your debt.
Of course, affordability will still be a consideration, and just because you own a large portion of your home doesn’t necessarily mean a lender will automatically accept your remortgage application - the size of the debt covered by the DMP is also a big consideration, so make sure that by remortgaging you will be able to satisfy the requirements.
Some of the above considerations are also relevant even if you are remortgaging after completing a DMP; if you have had one during the past six years you may find your applications are being declined by mainstream high-street lenders - this is where whole of market brokers we work with are definitely your friends.
In general, you will be viewed more favourably if you have completed a debt management plan than if you’re currently in one. Bear in mind that you will be subject to other assessments of affordability, and any other historical or current adverse items on your credit history will also influencer a lender’s decision.
Wherever you’re at with your DMP, we’re here to help. Read more here, or contact us to speak to a specialist.
Remortgage after a bankruptcy
As with any type of bad credit, bankruptcy can cause real problems with many mortgage lenders, who just flat out decline anyone who's ever had one.
The good news is that there are a handful of mainstream lenders (and one or two specialists) that are happy to consider mortgages for people who have been bankrupt. For more information and advice, or fill out a bankruptcy mortgage enquiry form to find out which lenders you may be eligible for.
The specialist brokers we work with have experience in:
- Mortgages with a bankruptcy discharge from 1 - 6+ years ago
- Mortgages with a history of bankruptcy and repossession
- Bankruptcy discharge and just 10% - 15% deposit
- Bankruptcy mortgage with 5% deposit
- Bankruptcy discharge mortgage with a large deposit
- Buy to let mortgages after bankruptcy
- Bankruptcy discharge re-mortgage
- Bankruptcy annulment mortgages and second charges
Remortgage if you’ve had a repossession in the past
“Can I get another mortgage after repossession” is a question we get asked a quite a lot, especially since there’s a high number of people that have recovered and saved enough deposit to buy again since the credit crunch in 2008/9.
Thankfully the answer is a resounding YES, if you:
A) Know where to look.
B) Meet the right lender criteria in terms of deposit and credit conduct since.
Click here for the dangers of repossessed applicants trying to find a mortgage alone.
There are a few specialist lenders considering these applications and many of them at surprisingly attractive and competitive rates. Talk to one of the advisors we work with and they’ll find a broker who has expertise for your particular circumstances.
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Tips to Prepare Yourself for Bad Credit Remortgaging
It can be tricky to give out advice that is relevant to everyone looking to remortgage with bad credit issues as there are so many variables and every situation is different. Lenders have certain criteria but for particular customers it may be possible to overturn a case that would usually be declined.
Below are a few general tips on the best way to approach bad debt remortgaging which should help prepare you for applications and assist you in gathering the necessary information needed to help your case:
Don’t Go to Your Bank.
First and foremost, do not approach your bank. Because the mortgage market is so competitive, single bank advisers are taught to gain commitment from enquiries as soon as possible. As such, they are actively encouraged to credit score any customer willing to sit in their office. This is great if you have clean credit and don’t want the hassle of shopping around, but not so great if you want the best deal and have poor credit history.
Credit scoring with a lender that won’t lend to you is an unnecessary and damaging process and will often leave you in a worse position because a further credit score has been added to your file. Working with a reputable, whole of market broker, who understands and regularly arranges mortgages for people in your situation, is the best way to find the right lender for you without further damaging your credit score.
Get Your Credit Reports.
Next, find out what you’re working with. To remortgage with bad credit history it is vital to understand which issues will affect you, and how to overcome. We advise you sign up for Experian, Check My File, and UK Credit Ratings.
Find links to free trials for all three below:
Each will extract different information, and while this is slightly time consuming, it is very much worth it if you've had problems and have been declined with a lender previously. It’s free, and best of all you will NOT be penalised or scored any differently for searching your own credit file with these agencies.
Establish your LTV.
To calculate your loan to value (LTV), work out the property value and the amount of deposit/equity you have. This figure is important because many lenders base their criteria around it, in the sense that those with higher LTVs are usually required to have better credit ratings than those with lower LTVs, as more deposit / equity = less risk.
Increase Your Credit Score.
If you’re looking to remortgage with a bad credit rating, one of the best things you can do to increase your credit score is to obtain an adverse-specific credit card and then spend and repay in full on a monthly basis. This helps to prove you can borrow and live within your means at the same time, and you'll notice your score improve over the coming weeks and months.
There are two options available, the first of which is a standard credit card specifically for those with bad credit, and the second is for those who are declined for standard cards and need a guaranteed-acceptance card. Most people opt for the Aqua card first, then go for the CashPlus if their application declined.
How Can We Help You?
If you’re looking to remortgage your property but have had credit issues in the past, get in touch with us so we can refer you to a specialist advisor to discuss your current situation and find the best remortgage deals for bad credit tailored to you.
Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.
The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.
Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage.
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background. Pete's presence in the industry as the 'go-to' for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course! Read more about Pete here...
Looking for specialist advice? Read through our articles about different types of remortgage situations, and how best to prepare yourself to find the right mortgage for you