Bad Credit Remortgages
Everything you need to know about remortgaging with bad credit and how to get the best possible rate
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We’ll look at what is viewed as bad credit in the eyes of a lender, how it will affect your remortgage application, and how to find a competitive deal if you’re in these circumstances.
Can you remortgage with bad credit?
You absolutely can, although it’s not going to be as straightforward as it would be if you didn’t have credit issues. There will be fewer lenders available to you, so approaching the right one is the difference between being accepted and declined for a remortgage.
Can I remortgage without a credit check?
If you are remortgaging with your current lender and your circumstances are unchanged since you took out the original mortgage, there is a possibility that they will not carry out a credit check, though there is no guarantee of this.
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.
If you are remortgaging with a new mortgage provider, they will almost certainly carry out a credit check as part of the process.
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How to remortgage with bad credit
Your first step should be finding a broker who specialises in bad credit remortgages to boost your chances of approval and landing a favourable rate.
Make an enquiry to access our free broker-matching service.
The advisor we pair you with will guide you through the following steps to full application:
- Calculating your LTV: You can do this yourself by using a Loan to Value (LTV) calculator, but your broker will help you further by finding the best deals based on your LTV.
- Downloading and optimising your credit reports: Your mortgage broker can help you do this for free, and it is an important step in the process if you have bad credit. Any improvements you can make could increase your chances of remortgage approval.
- Finding the best bad credit remortgage deal for you: Your mortgage broker’s knowledge, experience and lender contacts will boost your chances of securing the best rate, and they’ll even help you file the perfect application.
How credit problems can affect your mortgage renewal
The term ‘bad credit’ is fairly vague as it covers a wide range of situations, from having paid your mobile phone bill a few weeks late to bankruptcy and repossession. Although mortgage lenders assess the risk attached to each type of poor credit differently, a general sliding scale from least to most severe type of debt is observed by most.
Those with circumstances matching credit issues higher up this list will generally find it easier to secure a mortgage than those with the more severe issues towards the bottom.
The following credit issues are not considered severe and may not significantly impact your remortgage application, especially if they occurred long ago and/or you have a healthy amount of equity in your home.
Most mortgage lenders consider the following credit issues to be severe and may ask for a higher amount of equity or charge you a higher rate when you remortgage.
- CCJs (County Court Judgement)
- DMPs (Debt management plans)
- IVA (Individual Voluntary Agreement)
- Mortgage arrears
The below issues are considered very severe and can have a major impact on a remortgage. Only those with a high amount of equity are likely to be approved and the issues will need to have occurred a long time ago. Expect to pay higher rates too.
Alongside the severity, the age of the credit issue, the amount of debt involved, and whether or not it has since been satisfied (repaid) will all impact whether the lender considers your adverse credit issue to be an acceptable lending risk.
How mortgage rates and terms are affected
The most impact bad credit will have on your remortgage across all lenders is higher interest rates. There is no standard bad credit rate or percentage above the lender’s standard variable rate that will apply, as applications are assessed on a case-by-case basis, and the rate will be bespoke to your individual circumstances.
You should certainly expect to be offered higher interest rates if you have an IVA, than if you have a low score due to having barely any previous credit agreements, for example.
The term length you qualify for won’t be directly impacted by your credit history, but as having bad credit limits the number of lenders and deals that you qualify for, you might find it more difficult to get a longer-term mortgage.
What if you’re releasing equity?
If you’re remortgaging to raise capital, you may find that the LTV (Loan to Value) will be capped by many lenders at around 70-80% of the value of your property. This is where having more equity in your home, or an equivalent deposit will be helpful, as it will mitigate some of the risks for the lender.
Will the rates improve if you wait to remortgage?
Not everyone will be in a position to delay their plans as this could mean you’ll end up on your lender’s standard variable rate, which will almost certainly be higher than any remortgage rate you will be offered.
However, the impact of having bad credit will reduce over time. Assuming you’ve maintained a clean credit profile since the most recent issue, the interest rates offered should be more favourable in 2-3 years with most lenders. After 6 years, the credit issue will completely disappear from your credit file, no matter how severe, or whether it has been resolved, so at this point, you’ll be able to take advantage of the same rates as any other creditworthy applicant.
What could minimise the impact of bad credit?
There are certain things that could lead to some lenders seeing your credit issues as less problematic, depending on your broader circumstances.
- Increasing your equity: Applicants with substantial equity in their property will find it easier to remortgage with poor credit. If you don’t have a lot of equity but have a cash deposit or some other form of asset that can be used as security for the loan, this may also be acceptable to some lenders.
- Paying off any debt you’re in a position to clear: As your overall affordability is also likely to be looked at, those with a lower debt-to-income ratio will typically fare better than those with high debts and a lower income level.
- Reviewing your credit reports: You can do this by accessing a free trial below. Once you have them, look over them and challenge any inaccuracies and request for outdated information to be removed.
Can you release equity with poor credit?
It’s certainly possible, however, it will depend on how much equity you have, how much you want to borrow, and how significant your credit issues are. To some degree, the purpose of the equity release will also influence the lenders’ decision.
For example, if you’re in substantial debt and are planning to use the equity for debt consolidation, this may be viewed more favourably than if you were planning to buy a new car.
Which lenders will let you remortgage with bad credit?
There are both high street and specialist lenders who can help applicants with bad credit but high street lenders are more likely to lend on less severe issues, and will typically have stricter criteria.
Depending on the type and extent of adverse credit you have, the following lenders and criteria may be available to you, although if you have more than one issue, it will be less straightforward.
Most lenders will consider them, although there are various caveats depending on the lender, for example, HSBC will only consider late payments occurring within the last 2 years if they can be shown to be due to an error on the part of the provider, other than that it would need to be more than 2 years ago.
Virgin Money has the same rule, but they also won’t consider more than 2 consecutive missed payments in the past 6 months. Specialist lenders are far more flexible with this issue.
Defaults and CCJs
When it comes to defaults and CCJs, some lenders will only consider satisfied (repaid) defaults, and to a lesser extent, others will consider unsatisfied as well. In both cases, there will be additional criteria to meet.
For example, Metro Bank will potentially consider unsatisfied debts, however, there must be a maximum of £1,000 outstanding and no more than 2 missed payments in the past 24 months. Halifax, on the other hand, is potentially willing to accept satisfied CCJs and defaults with no specific minimum time frames quoted.
Debt management plans (DMP)
Similarly to the above, some lenders will consider completed DMPs, and others will consider applicants with a current DMP in place.
More lenders are willing to consider satisfied plans, but, of course, additional criteria will apply, such as with HSBC, who may be willing to look at this type of application if the DMP was cleared 3 or more years ago
There are far fewer lenders willing to consider applicants with current DMPs and there are no high street lenders in this niche. Far fewer lenders are willing to consider applicants with current DMPs.
Criteria with the more specialist lenders typically include that the DMP repayments must be up to date and some lenders will only accept them if they were entered into a minimum of 12-36 months ago.
Most lenders will require that IVAs are complete and that a certain time has elapsed since they were registered, however, there are a handful that will consider current IVAs, assuming they are in good standing.
Some lenders, however, consider IVAs to be as serious as bankruptcy, for example, TSB, who will only lend when the IVA was completed more than 6 years ago.
Lenders are understandably a bit more cautious about offering you a remortgage if you’re in arrears with your existing mortgage, and there will usually be a minimum amount of time that will need to have elapsed since you were last in arrears.
Nationwide, will only look at arrears that are a minimum of 6 months ago, however, you can’t have had more than 3 months of arrears in total.
Other lenders are more cautious, with most preferring between 12-72 months to have elapsed since you were last in arrears, and some simply refuse an application based on any mortgage arrears.
If you’ve been declared bankrupt then it’s incredibly unlikely that you will find a lender unless it’s been discharged. Even then, only 1 lender will consider applications within a year of discharge.
The majority of lenders require that bankruptcy was discharged between 2 and 3 years ago, with some of the main high street lenders, such as Natwest unable to lend unless it was discharged over 6 years ago.
Much like bankruptcy, it will be very difficult to find a lender if you’ve had a home repossessed in the past, however, there are a few that will be willing to look at this after a certain amount of time has elapsed post-repossession.
There are typically only specialist lenders and products in this arena, so a broker will be essential.
Alternatives to consider if you can’t remortgage
There are a few alternatives that you could consider, depending on why you’re remortgaging.
The majority of lenders won’t carry out additional affordability or credit checks if you’re simply looking to change your product with them.
Therefore you could potentially consider a product transfer with your existing lender (assuming they have a product that suits your needs) if you’re remortgaging – just keep in mind that you’re obligated to inform them about any changes to your affordability.
Reasons to choose a product transfer include…
- To lock in a new fixed-rate deal due to the previous one ending
- If you’re remortgaging for more flexible terms, such as the ability to overpay and take payment holidays
- If you want to change the type of your mortgage from interest-only to repayment or vice versa
If you’re remortgaging to borrow more, it’s unlikely your lender will be willing to increase your borrowing without carrying out affordability and credit checks.
Second Charge Mortgage
If you want to refinance in order to release equity from your home for a large purchase, there may be some lenders willing to offer you a second charge mortgage, rather than a remortgage.
The rates are typically higher, however, if you do wish to consider this route, an experienced broker will be able to ensure you get the most competitive rates available to you.
Some lenders may be willing to consider letting you remortgage if you’re able to provide a guarantor.
The lender will usually use either a charge on their property or their savings to provide additional security on your remortgage.
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What to do if you have been declined for a remortgage
Firstly, resist the temptation to re-apply right away. If you have been declined for a remortgage because you have bad credit, launching into another application straight away could further impact your credit files.
There’s no guarantee you’d get a different outcome the next time around, and too many applications for finance in a short time can be a concern to lenders.
Instead, speak to a bad credit mortgage broker about your options. They will suggest ways to improve your creditworthiness and make sure you’re paired with the ideal lender next time around, increasing the likelihood of approval.
Refinancing a buy-to-let property with bad credit
Having 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.
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Get matched with a bad credit remortgage broker
Remortgaging with bad credit is very possible, so long as you approach the right lender. It’s finding them that can be a bit trickier! With so many lenders on the market, and many of those inaccessible to the general public, a mortgage broker that specialises in bad credit remortgages specifically is your best bet.
We work with a broad spectrum of mortgage brokers across the country, who specialise in many different niches of mortgage lending. Our free broker matching service will pair you with the expert that has the most experience with bad credit remortgages, saving you time, hassle and disappointment.
Simply call now on 0808 189 2301 or make an enquiry and we’ll get the ball rolling immediately. Your initial consultation will always be free and you’re under absolutely no obligation.
Speak to a Bad Credit expert
Maximise your chance of approval with a broker who's a specialist in remortgages with bad credit
It may take a little longer to secure the right lender, but once you’ve been put in touch with a lender that’s willing to lend in your circumstances, the process will be the same as it is for any other applicant. Remortgages typically take around 6-8 weeks to complete.
If you are approved for a remortgage the first time, the application process will not negatively affect your credit rating at all, although if you are switching to a new lender who performs a hard credit check, this will show up on your files.
The only scenario where this is likely to be an issue is if you are declined for a remortgage. Other prospective lenders will be able to see the hard credit check and might consider a recent rejection to be a red flag.
With this in mind, it’s recommended that you understand the eligibility criteria fully before you apply, and a remortgage broker can help you do this. Arranging a free, no-obligation chat with a broker through us won’t leave any marks on your credit reports.
If you are releasing equity, expect your mortgage lender to ask you what the funds are for. Some mortgage providers impose restrictions on certain scenarios – for example, an LTV cap if the funds are for debt consolidation.
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