Bad Credit Remortgage

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Remortgaging with Bad Credit

Mark from Total Home Loans joins the Mortgage and Protection podcast to discuss remortgaging with Bad Credit. 

Can you remortgage with bad credit?

A lot of people are under the misconception that bad credit can’t be helped and that you can’t get a good remortgage deal with a poor credit record. That isn’t the case – you can. 

It depends, obviously, on the value of the property, the debt you have and the type of bad credit. Approach a broker – preferably ourselves as we’re specialists – and then we can go through the process with you.

How can I remortgage with bad credit? 

Step one is to go to a specialist for advice. There are many brokers out there and you won’t pay any upfront costs. It may not be that we can help you today, but we can give you the advice to guide you. Maybe you’ll be in a better position in three or six months’ time, but a specialist will be able to advise you on your options – at no cost.

Won’t I be declined?

If you apply for a remortgage without checking the criteria, then yes, possibly you will be declined. But even with the most severe credit issues, there are options. It’s more about the timing. 

If you come to a broker and you’re currently bankrupt or you’ve just come out of bankruptcy, the majority of lenders are not going to be able to help you. But we’ll guide you: we’ll explain what would happen if you apply today, and how it might work in six months or a year’s time. We’ll recommend the best time to approach a lender.

Can you get a remortgage after bankruptcy, with a CCJ, an IVA or a default?

There are a couple of lenders that may be able to help you raise money to buy you out of your bankruptcy. It’s not always the case that you have to wait until you are discharged or it’s paid off. So the answer is yes, you can remortgage after bankruptcy. 

The same goes for an IVA, a CCJ or a default. Depending on the details and the timing, there will be options. A good broker will talk everything through with you.

Can you remortgage with a debt management plan?

Yes, you can. Debt management plans generally come about because at some time in the past you’ve got to a situation where you can’t afford your outgoings. 

The key to getting a mortgage after a debt management plan is to make sure that you don’t get back into that same position again. Our advice will be based on your current affordability: how we manage the payments of that debt management plan.

What deals and rates are available if you are remortgaging with bad credit?

Rates change very, very often so it’s hard to be specific. High street lenders tend to have the lowest rates, and some have allowances for bad credit. 

That’s why it’s key to speak to a specialist like ourselves – we will know what lenders will allow. It’s not always advertised, but we know how flexible each one can be. So you could get a high street rate from a bank or building society.

Otherwise, we would go to the ‘almost prime’ lenders – these aren’t classed as high street lenders, but they’ll give you rates that aren’t that far away. There are one or two very high rate lenders for people in a difficult situation – but that’s usually more to do with the construction of your property than a bad credit situation. Generally, rates are pretty good, especially at the moment where they’re at a historic low. Speak to a broker and get that advice.

Are there many bad credit mortgage lenders? 

There are lots of bad credit mortgage lenders, but it’s like an upside-down triangle I suppose: the more adverse credit you’ve got, the fewer lenders will be there to help. 

So if you are bankrupt, you’ve just come out of bankruptcy or you’re in an IVA, then there are just a few lenders who could help you. The further you come away from the date you went into bankruptcy or you are discharged, then the more lenders are available to help you. So there certainly are plenty of lenders, but it depends on your personal situation.

Is it better to improve my credit rating before remortgaging? 

If you can, then it’s best to pay off your existing debts. Make your monthly payments on time or even overpay to bring down your debts. But some people have had County Court Judgements or defaults or bad credit that they can’t quite get on top of because they’re paying so much out for it. It’s a never ending circle. 

It may be that you might consider, on our advice, that we remortgage you to help you get your finances in check. We then remortgage again perhaps a year or two later to get you back to the high street lenders.

That might help your situation and help you get on top of your debts. Again, it’s all down to advice. It just involves you giving us plenty of information and waiting for us to come back with advice.

How do I improve my credit score before remortgaging?

Improving your credit rating is a case of paying your debts on time and overpaying if possible. If you’ve got any bad debts, any unpaid defaults or county court judgements, settle them as quickly as you can. 

A big challenge is when you have an ‘arrangement to pay’ with a debt, which means that you’re paying a lower amount than is due because you can’t manage your outgoings.

If you then go to a lender, the arrangement to pay tells them that you can’t afford to pay what you already owe – so a lender will be reluctant to take you on.

Again, that initial advice from specialists like ourselves will help you understand the options. So give us a call and discuss it with us and we will advise you what to do.