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Remortgage With Bad Credit

Looking to remortgage with bad credit? Read on to discover how to improve your financial situation to secure a better deal.
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In today’s ever-evolving financial landscape, individuals with less-than-stellar credit scores may find it challenging to secure favourable mortgage terms.

Remortgaging, an avenue worthy of exploration, emerges as a potential problem for those burdened by bad credit. By learning about the intricacies of this process, one can uncover viable opportunities to re mortgage opportunities.  

This article delves into the nuances of remortgaging with bad credit, discovers the potential benefits and offers valuable insights.

Is It Possible To Remortgage With Bad Credit?

Remortgaging with bad credit is challenging but not impossible.

Lenders typically assess creditworthiness before approving a remortgage application. Having bad credit may limit your options and result in higher interest rates. However, several factors determine eligibility.

First, determine your credit score and history. A lower credit score and adverse credit on your profile suggests a higher risk to lenders. 

Next, consider the loan-to-value (LTV) ratio. A lower LTV, ideally below 75%, improves your chances of approval.

Additionally, lenders will analyse your income, employment stability, and overall financial situation.

To increase your chances, seek professional advice from mortgage brokers specialising in bad credit remortgages. They can connect you with lenders who consider applicants with adverse credit. 

Determining A Poor Credit Score/Profile For Remortgaging

Credit Score Range

A bad credit score can significantly impact your ability to remortgage.

Lenders consider credit scores and the content of your credit report an important factor when assessing loan applications, including remortgages. While specific criteria will vary among lenders. 

A low credit score/profile indicates a higher risk for lenders, as it suggests a history of missed or late payments, defaults, or excessive debt. With a bad credit score/profile, you may encounter challenges in securing favourable remortgage terms.

It is crucial to note that lenders assess multiple factors beyond credit profiles when considering remortgage applications.

If you have a bad credit profile, working on it before applying for a remortgage is advisable. Seeking guidance from a financial advisor or a mortgage specialist can provide valuable insights tailored to your specific circumstances.

Key Credit Factors Impacting Remortgage Applications

Certain credit issues can have a significant impact on the process of remortgaging. Here are some of the key credit issues that can affect a remortgage:

1. Credit Score

Lenders typically assess an applicant’s creditworthiness based on their credit score. A higher credit score demonstrates responsible financial behaviour, making it easier to secure favourable remortgage terms.

This plays more of a part with high street lenders due to them having more automated underwriting methods.  

2. Late Payments

Lenders can view consistent late payments on existing credit accounts negatively, potentially leading to higher interest rates or a remortgage application rejection.

3. Defaults And CCJs

Defaults and Country Court Judgements (CCJs) indicate a history of non-payment or poor debt management. These can significantly impact a remortgage application and limit the available options.

4. Debt-To-Income Ratio

Lenders analyse an applicant’s debt-to-income ratio (DTI) to assess their ability to repay a remortgage. High levels of debt compared to a clients income can make lenders hesitant to approve a remortgage.

5. Bankruptcy

A past bankruptcy can severely affect a remortgage application, as it suggests a high level of financial risk. In such cases, finding lenders willing to offer remortgage options may be challenging.

Additional Factors To Consider While Remortgaging

When considering a remortgage with bad credit, mortgage lenders consider various factors to assess the borrower’s eligibility. These factors include:

1. Credit History (already discussed)

Lenders scrutinise the borrower’s credit history to evaluate their repayment behaviour. This includes reviewing the credit score of the individual, payment history, outstanding debts, and any previous defaults or bankruptcies.

2. Loan-To-Value (LTV) Ratio

What is LTV Ratio

Lenders assess the LTV ratio, which compares the mortgage amount to the appraised value of the property. A lower LTV ratio indicates less risk for the lender, potentially improving the chances of approval. This is because it reduces the risk of being in a negative equity situation. 

3. Income And Affordability

The borrower’s income and overall financial situation are examined to determine their ability to meet mortgage repayments. Lenders assess employment stability, income level, and debt-to-income ratio (DTI).

4. Equity

The existing equity in the property can positively impact the remortgage application, as it provides security for the lender. Higher equity signifies lower risk and may increase the likelihood of approval. This relates to loan to value ratio outlined above. 

5. Remortgage Purpose

The purpose of the remortgage, such as debt consolidation or home improvements, may influence lender decisions. Clear and justifiable reasons will always strengthen the application due to lenders responsibilities to assess any additional funds being released.

Think carefully before securing other debts against your home. 

Is It Possible To Remortgage Without A Credit Check?

When considering a remortgage, it is important to understand that most lenders typically conduct credit checks as part of their assessment process. 

A credit check enables lenders to evaluate your creditworthiness and determine the level of risk involved in lending to you. However, there are a few limited scenarios where you can remortgage without undergoing a credit check.

One such circumstance is if you’re staying with your current lender and switching to a new mortgage deal they offer. Since you have an existing relationship with the lender and have already undergone a credit check for your original mortgage, they may not require another credit check for a remortgage.

Strategies To Unlock The Best Bad Credit Remortgaging Rates

Finding the best rates can be challenging when seeking a remortgage with bad credit.

However, securing favourable terms with careful planning and research is possible. Below is a concise guide to try and best inform you on how to obtain the best bad credit remortgaging rates.

1. Understand Your Credit Situation

Before proceeding, obtain a copy of your credit report from a reputable credit reference agency. Analyse it thoroughly to identify any inaccuracies or discrepancies that may be affecting your credit score or profile position.

Understanding your credit situation will help you assess the potential impact on the remortgage rates you can obtain.

2. Improve Your Credit Score

Taking steps to improve your credit score can significantly improve your chances of getting better remortgage rates.

Clear any outstanding debts, pay your bills on time, and avoid making multiple credit applications in a short period. Over time, these positive credit behaviours can enhance your creditworthiness.

3. Research Remortgaging Options

Different lenders have varying criteria for bad credit remortgages, so it is crucial to research the market thoroughly. 

Compare interest rates, loan terms, and fees offered by different lenders. Consider consulting with a mortgage broker who specialises in bad credit remortgage to gain access to a wider range of options.

4. Demonstrate Affordability

Lenders assess the affordability of a remortgage based on your income and expenditure.

Provide accurate and detailed financial information, including proof of regular income and a comprehensive breakdown of your monthly expenses. Demonstrating that you can afford the remortgage repayments can enhance your chances of securing better rates.

5. Consider A Larger Deposit

A larger deposit can reduce the lender’s perceived risk and potentially result in lower remortgage rates. So, save as much as possible as usable capital to reduce your loan to value and access more competitive deals.

6. Seek Professional Advice

Engaging the services of a mortgage advisor or broker experienced in bad credit remortgages can be invaluable. They can provide personalised guidance, navigate the complex application process, and negotiate on your behalf to secure the best possible rates.

7. Defined Reason 

As outlined above a defined reason for any capital raising on top of your existing mortgage as part of the application is essential. Lenders strongly assess the reason you are capital raising and ensure that it meets their lending criteria. 

FAQs

1. Will remortgaging with bad credit improve my credit score?

Remortgaging itself won’t directly improve your credit score. However, making regular mortgage payments on time can demonstrate financial responsibility, potentially benefiting your credit in the long run.

2. Will remortgaging with bad credit affect my interest rate?

Remortgaging with bad credit may lead to higher interest rates due to perceived risk. Lenders assess factors like credit score, affordability, and equity when determining the interest rate. 

On top of this, according to the remortgage data provided by the ONS in the UK, over 1.4 million households may face higher interest rates as they renew their fixed-rate mortgages in 2023.

3. How long does bad credit impact remortgaging?

Bad credit history can impact your ability to remortgage for several years. Lenders typically consider the past six years, but improving creditworthiness over time can enhance future borrowing options. Certain lenders have criteria where as if you have ever had a bankruptcy, IVA or repossession they will not lend to you indefinitely. 

4. Can I apply for a remortgage if I have defaults on my credit file?

Remortgaging with defaults in your credit file is possible. Lenders may consider it if the defaults are older, satisfied, or if you have higher equity in your property.

5. Can I apply for a remortgage if I have a Country Court Judgement (CCJ)?

Remortgaging with a CCJ is difficult, but some lenders may consider it depending on factors such as the amount, age, and whether it is satisfied or not. Higher equity on the property can also help.

Conclusion

To summarise, remortgaging with bad credit can be a challenging endeavour, but it is not an impossible one.

Individuals with poor credit must explore all available options and consult with experienced mortgage brokers who specialise in dealing with such situations. While it may be difficult to secure competitive interest rates or favourable terms, remortgaging can still provide an opportunity to improve one’s financial situation and potentially rebuild credit over time.

Prioritising diligent research, maintaining regular payments, and seeking professional guidance can enhance the chances of successfully remortgaging with bad credit and pave the way towards a more stable financial future.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.

Mortgage & Protection Advisor | 03337892035

I am CeMAP (Certificate in Mortgage Advice and Practice) qualified mortgage adviser with a strong background in Finance. I specialise in providing expert advice on a range of mortgage products, including first-time buyers, remortgages, buy-to-let mortgages and bad credit mortgages.

CeMAP & CERER Qualified Mortgage Adviser

I am CeMAP & CERER qualified mortgage adviser and have helped a number of clients realise their dreams when they thought it would not be possible. I’m skilled at getting mortgages sorted for people with a history of missed payments, CCJs, defaults, debt management programmes, IVAs and bankruptcies.

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