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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 15th October 2020*

If you need to remortgage with bad credit, you may have already been declined by a lender or, worse, found yourself being turned away by their mortgage broker.

Unfortunately, as many mortgage brokers don’t understand how to help customers with bad credit and aren’t aware of the specialist lenders who may help, this occurrence isn’t unusual.

Which is why we’ve written this article.

Read on for a comprehensive overview of bad credit remortgages or click a link to jump ahead to the info you want:

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Can I remortgage with bad credit?

Yes, you can, even if you’ve previously defaulted on your mortgage payments or built up large unsecured debts. Bad credit remortgages can be harder to arrange, and while you won’t typically be offered the same competitive rates as someone with cleaner credit, this doesn’t mean that you should settle for less – the trick is knowing where to look.

Borrowers in this scenario usually have two options: a full remortgage to pay off debts or taking out a second charge mortgage for borrowers with bad credit.

The bad credit mortgage brokers we work with are adverse credit remortgage specialists and know all the providers who can 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.

Will it make a difference if I own the property outright?

Not really. This is often referred to as an unencumbered mortgage and they would usually be treated the same as a standard remortgage or a regular purchase mortgage, depending on why you’re borrowing.

Bad credit mortgages on unencumbered properties are subject to the same criteria and assessments as regular mortgages. Read our guide to unencumbered mortgages for more information.

What are the reasons for remortgaging?

There are many reasons why you would want to remortgage a property with bad credit in the UK.

These might include:

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.

What would be classed as adverse credit on your credit file?

Adverse credit history occurs as a result of numerous factors reported to a credit agency on behalf of a borrower.

Items that contribute to an adverse credit history include:

  1. Low credit score
  2. Late payments
  3. Mortgage arrears
  4. Defaults
  5. CCJs
  6. Debt management plans
  7. IVA
  8. Bankruptcy
  9. Repossession

Each adverse credit issue will impact your credit report and credit score in different ways. While it’s still possible to renew your mortgage with adverse credit it will make it more difficult.

The severity of the situation will depend on what the offences are, when they were registered, and how much equity you have in your property.

Lenders care about your 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 your home 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 always necessarily the case. Depending on the severity of your individual situation, there may be far more choices available 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.

If you would like to talk to an expert about how your particular circumstances will influence your ability to remortgage, get in touch for a free, no-obligation chat and we’ll match you with a broker experienced in helping customers in similar situations.

If you’d like to understand more, read on and learn how each bad credit situation is handled by the specialist lenders serving borrowers with different issues on their credit files.

As a brief overview, the main thing to be aware of when you start looking to borrow with any kind of bad credit on your file is that even specialist lenders will be more vigilant about who they can lend to.

As part of their lending decision process, mortgage lenders will consider all of the following:

  • Your loan-to-value, or LTV – this is a calculation on the value of your property versus how much money you are asking to borrow. In simple terms, the more equity you have in your home or the higher your deposit, the lower the LTV. The lower your LTV, the better the mortgage terms you’re likely to receive.
  • Deposit – how much money you can pay to the lender as a deposit against the house. The more you can put down, the better the terms you’re likely to receive.
  • The loan-to-income, or LTI – this relates to how much money you need to borrow in relation to your income. Most mortgage lenders will start their lending decision based on 3.5 or 4 times your annual salary, although there are circumstances where lenders might increase this level.
  • The type/severity of the bad credit on your file
  • The number of bad credit reports on your file
  • How recently you received the marks on your credit report
  • Whether you are still experiencing financial difficulties

What lenders will want to see in your application for a remortgage will depend on all of the above, to varying degrees depending on your circumstances.

We go into more detail for each bad credit situation below…

If I have a low credit score, can I remortgage my house?

Lenders determine your credit score or credit rating by looking at various factors from your credit history, in consideration with other circumstances, as we outlined in detail above. In the case of low credit scores, your age will be taken into consideration too since many young people looking for a mortgage may have low credit scores. However, if you are looking to remortgage with a low credit score this is more unusual and is likely to raise some concerns with lenders.

While not every lender will give applicants a credit score, all providers 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 refinance your mortgage with a poor credit score or have little to no credit history, you may be better off searching for mortgage providers who don’t credit score.

There are many lenders who will approach their lending decision this way, and they generally take a far more flexible view of creditworthy borrowers with a poor credit history, or no credit history at all. The expert brokers we work with know the lenders to approach in situations like this and will be able to help you find the right lender for your particular set of circumstances and will ensure that no unnecessary credit checks for a mortgage are completed as these can harm your credit file as well.

Is remortgaging a house with mortgage arrears possible?

When it comes to remortgaging a home with mortgage arrears, things can become a lot trickier, especially if there are other bad credit issues at play. This is because providers deem mortgage arrears as one of or the most severe type of late or missed payment.

When someone has missed payments on their mortgage and 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.

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 now been resolved.

Lenders will consider the reasons for your past arrears alongside how much deposit you have. 15%–25% is probably the minimum you can expect to need for your deposit. As already mentioned, your loan-to-value (LTV) ratio and loan-to-income (LTI) ratio will be a crucial part of their lending decision and the more you can do to reassure a lender the better your chance of securing competitive rates.

Can I remortgage a house with defaults?

A mortgage with defaults are now 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.

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.

Along with the overarching areas of LTV, LTI and the size of your deposit, lenders will also want to know about:

  • The type/severity of the default
  • The number of defaults
  • How recently they occurred
  • Whether a default is satisfied or not

Even where a default has not yet been satisfied, there are still chances of getting a mortgage. 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 home remortgage with defaulted credit accounts on your file will be determined on how recently they occurred.

Can I remortgage my home with a CCJ?

You may be able to remortgage your property with a CCJ depending on a number of factors, including:

    • When the CCJ(s) was first issued
    • How much the CCJ was for (this is also impacted by how recently the CCJ occurred—check out this CCJ 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

If your CCJ was issued more than two years ago you have a greater chance of getting approved, though the longer it was issued, the better. However, there are a select number of providers who will offer a mortgage with a CCJ and potentially accept satisfied CCJs zero to six months after being registered or one in the last 24 months up to a maximum amount (for example £1,000).

Most lenders would require a higher deposit amount, and where applications exceed 75% loan to value, you may be referred to the lender’s indemnity insurer for consideration. Written documentary evidence that explains your circumstances could also support your application.

There are some providers who would consider lending with a higher loan-to-value ratio – for example, a lender may approve a 90% LTV refinance mortgage if the CCJ was satisfied more than three years prior to your application.

Can I remortgage my property with an IVA?

The criteria will be different, depending on whether you have a current Individual Voluntary Arrangement (IVA) or you have had one in the past. Both still cause issues with a lot of lenders but thankfully there are several providers 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 they might be with customers applying for new credit.

Depending on your individual circumstances, it can be possible to remortgage a property while you’re still in an IVA, after an IVA, or if you need to refinance your mortgage 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 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. As you’ve probably figured out, 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. Again, this depends on how recently the instance occurred, the severity of the case, and whether you have kept up with your repayments since. In these cases, the interest rate and deposit requirements will likely be higher.

Can I get a mortgage if my partner has an IVA?

It may be possible to get a mortgage if your partner has an IVA, both of your circumstances will be reviewed by the lender and as mentioned above an IVA can restrict you both when it comes to remortgaging or applying for a new mortgage on a different property.

How long your partner has been in the IVA will also have an impact, lenders may want to see that it has been conducted satisfactorily for 12-24 months.

Secured loans to repay an IVA

If you’ve been declined a remortgage because of your IVA, providing you have equity available several lenders could consider loaning a second charge mortgage to release the money to pay off the IVA, even when specialist mortgage providers 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 providers tend to cap at 4x, 5x, or even 6x income.

Can I remortgage a home on a debt management plan?

If you are currently in a debt management plan (DMP) a remortgage with a debt management plan could be possible and is often considered an option to help to pay off debt.

It is also certainly possible to refinance your mortgage after completing a debt management plan, or to switch mortgage or borrow more money while you’re still in a debt management plan, provided you meet the relevant criteria.

There are a 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 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 requirement, 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 to 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.

Even if you are remortgaging after completing a DMP, some of the above considerations remain relevant. If you have had one during the past six years, you may find your applications are being declined by mainstream high-street lenders; the whole-of-market mortgage brokers we work with can help by finding the specialist providers who aren’t on the high-street.

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 influence a lender’s decision.

Remortgaging a house after a bankruptcy

As with any type of bad credit, bankruptcy can cause real problems with many mortgage lenders, who may just flat out decline anyone who’s ever had one.

The good news is that there are a handful of mainstream providers (and one or two specialists) that are happy to consider mortgages for those who have been bankrupt.

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

Remortgaging a property if you’ve had a repossession in the past

It certainly may be possible for you to get another mortgage after a repossession, especially since there’s a large number of people who have since recovered and saved enough deposit to buy again following the 2007-08 credit crunch.

The more time that’s passed since your previous repossession the better. In order to find the best deals, you’ll need to:

  1. Know where to look—a mortgage expert, like those we work with, will be able to find appropriate lenders via their whole-of-market access
  2. Meet the right lender criteria in terms of deposit and credit conduct since one of the experts we work with will be able to advise you about what you will need to comply

Find out more about the dangers of repossessed applicants trying to find a mortgage alone.

There are a few specialist providers considering these applications and many of them at surprisingly attractive and competitive rates. Get in touch to talk to one of the advisors we work with and they’ll find a broker who has the expertise for your particular circumstances.

Can a bank repossess your house?

If you have any kind of mortgage on your house and fail to meet the payments then yes, you may be at risk of having your property repossessed by your lender.

All mortgage lenders must follow pre-action protocol rules and must provide you with clear information regarding your debts and give you opportunities to pay your arrears.

Having your property repossessed is a last-resort action after all other options have failed, and they can only do so after taking you to court.

However, there are ways to protect yourself if you’re unable to meet your remortgage payments. Mortgage Payment Protection Insurance (MPPI) can cover your payments in the event you should fall sick, have an accident or become unemployed.

Tips to get the best bad credit remortgage rates

If you have any kind of mortgage on your house and fail to meet the payments then yes, you may be at risk of having your property repossessed by your lender.

All mortgage lenders must follow pre-action protocol rules and must provide you with clear information regarding your debts and give you opportunities to pay your arrears.

Having your property repossessed is a last-resort action after all other options have failed, and they can only do so after taking you to court.
However, there are ways to protect yourself if you’re unable to meet your remortgage payments.

Mortgage Payment Protection Insurance (MPPI) can cover your payments in the event you should fall sick, have an accident or become unemployed.

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 a poor credit history.

Credit scoring with a lender that won’t lend to you is an unnecessary and damaging process that could 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. Make an enquiry to get started.

Get your credit reports

Next, find out what you’re working with. To remortgage with a bad credit history, it’s vital to understand which issues will affect you, and how to overcome them.

You can sign up to Experian, Check My File, and UK Credit Ratings to see your ratings through our credit check page

Each agency 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.

Get your credit rating


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 means 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.  It’s effectively a loan that you’re spending and repaying 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 choices 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.

the Card by Aqua here aqua card score builder

or the MasterCard Cashplus Gold Activeplus HERE…

Speak to an expert

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 remortgage broker to discuss your current situation and find the best remortgage deals for bad credit tailored to you.

If you like anything in this article or you’d like to know more, call us on 0808 189 2301 or make an enquiry.

 

Updated: 15th October 2020
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. 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. Some types of buy to let mortgages are not regulated by the FCA. 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. Equity released from your home will also be secured against it.

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