Whatever You Call It? Don’t Worry – it is very normal!
There are many terms that label those with missed payments, poor credit file scores, CCJ’s on their record or any other number of things, all the way through to defaults on store cards. Whilst it is perhaps easy for us to say do not worry, please know, that you are not alone. There are 15 million people in the United Kingdom, that have “bad credit”, 7 million of those, are from within the last 3 years!
It is a difficult time, but there are solutions!
The Mortgage Broker work with many customers that require a remortgage, and have helped hundreds, if not thousands, successfully reduce their outgoings, or debt consolidate – through the use of a remortgage. Please get in touch with our team to have an open conversation with someone who understands, doesn’t judge and will simply work tirelessly to find you the right outcome for your needs.
15 Million The estimated number of people in the UK that have "Bad" or "Adverse" Credit 1 Million of those, are due to remortgage in the next 12 monthsIs a Bad Credit Remortgage an Option for You?
Are you struggling to get a remortgage because of bad credit? This is a challenge that many homeowners are facing right now. Securing a remortgage when you have bad credit can seem next to impossible. You might be wondering ‘can I remortgage with bad credit?’ and you may be feeling powerless to improve your situation, but don’t despair because there is help available to you.
With the right advice and guidance you may find that remortgage options are available to you in spite of your bad credit score, allowing you to remortgage with repayments you can manage, better rates and the opportunity for debt consolidation.
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What Is a Bad Credit Remortgage?
A bad credit remortgage is specifically aimed at customers who require re mortgages or wish to change their current mortgage terms, but unfortunately have bad credit.
If you have a poor credit score due to missed payments, defaults on loans, CCJs (County Court Judgments) an IVA (Individual Voluntary Arrangement), bankruptcy or other financial marks against you, then high street banks may refuse you a mortgage (or remortgage) leaving you wondering where to turn for help.
This is where a bad credit remortgage can come in.
Specialist bad credit remortgage lenders will assess your circumstances differently to typical high street banks and will look to find a way to help you – provided you can meet certain important criteria.
How Does Bad Credit Affect Your Chances of Remortgage?
When you apply for a mortgage (or remortgage) a lender will check your credit worthiness in order to assess your financial health and to calculate what risk you represent to them.
Your credit score gives a lender a snapshot of your financial behaviour and provides them with valuable insight into the likelihood of you making your mortgage repayments based on your credit history.
If you have a poor credit score then lenders may view you as a high risk customer and as a result may offer you less favourable rates and terms, or even decline your application for a remortgage altogether.
Can You Remortgage if You Have Bad Credit?
Yes, the good news is that even with poor credit you may still be able to obtain a remortgage deal that suits you. Although a bad credit score presents a definite challenge, there do exist bad credit remortgage lenders who will be more understanding of your situation and will be willing to offer you a remortgage. However, you will need to meet their eligibility criteria and provide appropriate documentation. Here is what they may require:
- Proof of income
Showing that you have a regular income and that you can meet the repayments is an important first step in securing a bad credit remortgage. Providing the lender with payslips and bank statements can help reassure them that you are financially able to meet your financial obligations.
- A good LTV (loan-to-value ratio)
If the value of your property is higher than the outstanding balance on your current mortgage, the lender will view this favourably and this may help you to secure better terms on your remortgage.
- A higher deposit amount
Bad credit remortgage lenders will often require a larger deposit. This allows the lender to reduce their financial risk, so if you can save up and provide the lender with a larger deposit, this will definitely help with your application.
What Kinds of Bad Credit Affect a Remortgage Application?
There are several things that can cause a bad credit score, such as:
If you default on a credit card or bank loan this will show on your credit file and cause your credit score to be negatively affected.
County Court Judgments are a result of legal action against you for an unpaid debt and represent a serious negative mark on your credit file
An Individual Voluntary Arrangement is a formal agreement with a creditor to repay a debt and this will affect your credit score.
A Debt Management Plan is a more informal arrangement to repay a debt over time. Although not a legally binding agreement, it may affect your ability to obtain more credit.
Becoming bankrupt is a way to clear some or all of your debts but although it may offer financial relief it is not without consequences and it will show on your credit file making it difficult to get credit or a mortgage.
How Do Lenders Evaluate a Bad Credit Remortgage Application?
A careful assessment will be made of your current financial situation, your credit history and credit score. Lenders are trying to determine how much of a risk you represent to them. The severity of your bad credit as well as how much equity you have will also be taken into account when their calculations are being made.
It’s important to note, however, that even if you do have a poor credit score, even bankruptcies, you may find that some lenders will still be willing to offer you a remortgage deal, especially if your financial circumstances have become more stable over time. That’s why it’s important to find the right lender who will be more understanding of your individual situation.
What Steps Can You Take To Secure a Bad Credit Remortgage?
Although not a guarantee, there are certain steps you can take to improve your chances of obtaining a remortgage deal in spite of having bad credit:
- Assess your current financial situation
Make an honest evaluation of the state of your finances; your income and expenditure, your debts and any equity you may have. Before you approach a lender, get a copy of your credit file and see if there are any things on your report that are inaccurate or out of date. Any improvements you can make, no matter how small, can make a difference.
- Get together any documentation you need
Lenders will usually require:
Proof of income documents – bank statements, up-to-date pay slips, or tax returns statements if you are self-employed
Details of your current mortgage – this will include the outstanding loan amount, the interest rate and terms
Your credit report – the most recent, up-to-date credit report from a major credit reference agency such as Experian, Equifax or others.
- Find a mortgage broker
Choosing a mortgage broker who specialises in bad credit re mortgages can be an important step along the way to obtaining the remortgage deal that you want. Remortgaging with bad credit can be a complex and frustrating experience; a good mortgage broker will have the knowledge, contacts and experience to help guide you through the process.
- Make your application
When you have selected the lender you want to use, submit a formal application and provide them with all the necessary documentation. At this stage you should be prepared for the lender to make a thorough review of your financial situation and credit.
- Be approved (hopefully)
If you are successful in your application, the terms of your remortgage will be finalised; this will include the repayment period and interest rate. Be sure to review everything carefully before moving forward and accepting the remortgage offer. Read the small print and make sure you are clear on the agreement.
There are ways that you can improve your credit score and in doing so secure a better mortgage deal. Here are some tips to help boost your credit score: Ensure your payments are made on time: Late payments can negatively impact your credit so try to make timely repayments in order to promote a healthy credit score. Improve your debt-to-income ratio: If you are able to pay off any outstanding debts – and increase your income if possible – you will have a superior balance of debt to income. Lenders will view this more favourably and make it more likely they will make you a remortgage deal offer. Avoid taking on any new debt: Making a credit application will temporarily lower your credit score, so avoid making any new credit applications when you are trying to apply for a remortgage. Correct any errors on your credit report: Be sure to review your credit file carefully and get any inaccurate or out of date information removed. This should improve your credit score accordingly.Can You Improve Your Credit Score?
How Long Does It Take To See Results?
It may take a while for any improvements to be reflected in your credit score, sometimes several months, but every small change can make a marked difference and can help you get better mortgage terms. It is definitely worth the effort to improve your credit score wherever possible.
What Are the Benefits of a Bad Credit Remortgage?
If you currently have bad credit, it may seem a little daunting to consider applying for a remortgage. You might feel like your situation is hopeless, but you still have options available to you and there can be some benefits that come with a bad credit remortgage, such as:
Potential savings in the long term
You may well start off with higher interest rates, but over time your remortgage could save you money when compared to your current mortgage deal. As your credit score improves you may be able to negotiate a better deal.
Potential for debt consolidation
A bad credit remortgage could be a way to consolidate any existing debts into your remortgage, thus making your debt repayments easier to manage than multiple repayments.
Taking control of your finances
Remortgaging can help you to stabilise your financial situation, make your debts more manageable and less stressful and over time improve your credit score.
Frequently Asked Questions
This is a very common FAQ. You may be wondering:
- Can I remortgage with an IVA?
- Can I remortgage with a CCJ?
- Can I remortgage with a DMP?
A bad credit score can be caused by things such as bankruptcy, an IVA (Individual Voluntary Arrangement), CCJs (County Court Judgements), a DMP (Debt Management Plan) and more. Such things leave a negative mark on your credit and can make lenders consider you to be too high risk when you apply for a mortgage or remortgage.
However, don’t despair because there are certain ‘bad credit remortgage lenders’ who will still be willing to consider your remortgage application and be more understanding than typical high street lenders.
Yes, unfortunately your bad credit remortgage application could be declined.This will depend on several factors including: the eligibility criteria of the lender, the severity of your bad credit, the circumstances and stability (or lack thereof) of your income, and other conditions. However, certain specialist lenders may be able to offer you a remortgage deal where others are unwilling.
Yes, lenders will perform a credit check when you apply for a remortgage. This is part of the process of assessing your credit-worthiness. A good credit score can mean better terms whereas a poor credit score can mean less favourable terms or even a rejection of your remortgage application.
How To Get the Best Remortgage Deals With Bad Credit
When you have bad credit it can be a challenge to get the remortgage deal you’re after, but it’s not impossible. Working with a specialist broker can take the stress out of your application and greatly increase your chances of successfully obtaining your remortgage.
Here at The Mortgage Broker we will work hard to help you find the best bad credit mortgage lender for your needs. We are highly experienced in all aspects of mortgages and remortgages, even in the cases of bad credit, and we understand that everyone’s circumstances are unique and needn’t necessarily be a barrier to you achieving the remortgage that you seek.
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Take Control of Your Finances With a Bad Credit Remortgage
Having bad credit needn’t be an insurmountable obstacle to achieving your financial goals. If you are looking to be approved for a bad credit remortgage, get better terms, or consolidate your debts, our friendly team at The Mortgage Broker is here to help.
Contact us today for a free consultation and let us make your application for a bad credit remortgage as stress free as possible.