The question of whether a remortgage is possible when you have bad credit is a common one.
The short answer is yes, but it will be somewhat more challenging than remortgaging with good credit. Think Plutus has helped clients secure remortgages when they have bad credit, even if previous applications have been declined.
Can I remortgage with bad credit?
Most high street lenders will be very cautious when it comes to bad credit remortgages, which can cause many brokers to avoid pursuing them. There are several reasons for this:
- Applicants with bad credit are automatically deemed higher risk
- It’s tougher to get a bad credit remortgage approved
- A bad credit remortgage will involve more work
- Some brokers will think the application will be a waste of time
Applicants with bad credit may find themselves getting the cold shoulder from brokers and lenders alike, meaning they won’t receive the advice they need. This will never happen with Think Plutus because it means perfectly suitable applicants are told that they won’t be eligible for a remortgage.
It is easier to secure a remortgage with bad credit than to get approved for a mortgage on an entirely new property. The fact that you have an asset in the property you own significantly lowers the risk for lenders.
The expert advisers at Think Plutus have a wealth of experience in mortgages with poor credit. What’s more, they have whole-of-market access with no ties to any specific lender. This means we have access to lenders who frequently accommodate applicants with bad credit – even when applications are particularly complex. If there is even the slightest chance of you being able to remortgage, Think Plutus will find the right lender.
Does the nature of credit issues affect a remortgage with bad credit?
Many clients ask us if certain credit issues have a greater impact than others when seeking to remortgage with bad credit. In simple terms, you should assume that more severe credit issues will increase your perceived risk with lenders. That said, every situation is unique and there is no one-size-fits-all answer.
We can tell you that we’ve helped a diverse range of clients secure remortgages with bad credit, encountering all manner of credit issues along the way. Even applicants with multiple credit issues can still secure a remortgage with the right approach and an appropriate lender. The issues can include having little credit history, defaults, missed payments, CCJs, debt management plans , IVAs, payday loans, mortgage arrears, bankruptcy and repossession.
Is a remortgage with bad credit a good idea?
There can be many benefits to remortgaging, but your current financial situation and reasons for remortgaging are key. It is recommended that you speak in detail with a qualified adviser with experience in dealing with mortgages. The main reasons people look to remortgage include:
- Obtaining a better rate
- Raising capital for a purchase
- Consolidating debts (known as a bad credit mortgage refinance)
- Releasing equity for home improvements, investment, etc.
- Let to buy
- Divorce/relationship breakdown
Whatever your reasons for seeking a remortgage with bad credit, you can enquire today to get the ball rolling.
How to remortgage with bad credit
Every situation is unique, so the route to a remortgage with bad credit is not always the same. Sometimes, the process is relatively straightforward, while other cases can be more challenging. Here is a general outline of the steps required to get a remortgage with bad credit.
1. Analyse your credit report
Checking your credit report is always the first step when you have adverse credit issues. Lenders will always do this, so it’s good to know where you stand – this will enable you to assess your situation, and it will guide your next steps. Where a credit file is particularly bad, it may be necessary to take steps to repair it before submitting an application.
With a copy of your credit file to hand, you will be able to see everything that has been recorded. Sometimes, clients are surprised to learn that certain credit issues are not there, though you may still be required to declare any known credit issues to your lender. For example, you may have had issues with your bank like overdraft problems. It is not uncommon for banks to keep a record of this internally without registering it with credit agencies. This can mean that your credit score with your bank is lower than that from a credit agency.
Some people assume their credit file will be such a mess that a remortgage isn’t even worth considering, only to discover that it isn’t that bad at all. The three main credit agencies that lenders use to check your credit report are Experian, Call Credit and Equifax, and sites like Check My File can provide all three reports in one place. Checking your credit report will not have an impact on your credit score.
2. Look over your options
It is important to take a strategic approach to ensure you find the best remortgage deal. Many people with adverse credit simply approach their bank or the nearest high street lender, only to be offered a terrible rate or be flat-out declined. This is a very damaging move because these high street lenders are not usually equipped to deal with a remortgage with adverse credit, so you are severely limiting your chances.
You’ll need the help of a specialist adviser to remortgage with bad credit. If you decide to go it alone and you are declined, your credit report will be damaged further, and your time and money will be wasted. We strongly recommend seeking the help of a mortgage adviser to support you through the remaining steps.
3. Calculate your LTV
Your loan to value is based around the value of your property. An estate agent can help you with this, as they usually offer free market valuations that will give you an approximate value to work with. Be advised, however, that during a remortgage process your lender will send a surveyor to carry out an in-depth valuation of your property.
Once you know the value of your property, you can calculate how much equity your remortgage will yield, giving you your LTV. It’s important to know that there is less risk associated with a low LTV than a high one. For the purposes of a remortgage with bad credit, a low LTV will be an easier target for you. An LTV of 75% or less should make it much easier to get your remortgage approved, even with more severe credit problems. Think Plutus can help you work all this out.
4. Calculate your affordability
Affordability is based on income. Getting an understanding of this will help you visualise the financial limits of your mortgage. An adviser can assess your income accurately to let you know the amounts you are likely to be offered by lenders. A mortgage maximum amount is likely to be around 4x your income, but some lenders may consider offering up to 5x.
Bear in mind that, as lenders differ from one another, the way they assess your income will not always be the same. Some lenders only include your contracted hours, while others will consider things like overtime and bonuses. Furthermore, some lenders are better suited to self-employed applicants than others.
5. Place your application with the right lender
Once everything else has been established, you will have a clear understanding of the key considerations of your remortgage. However, you may still feel unclear as to which is the best lender to meet your needs. Lenders are not always forthcoming about the criteria they use when they assess applications. The advisers at Think Plutus deal with these lenders on a daily basis, so they have a good knowledge of the criteria they have. This enables us to spot the best possible lender with ease.
At this stage in the process, your mortgage adviser will research the market on your behalf and return to you with the most appropriate products from lenders that will give you the best chances of success. There is no better way to give yourself a strong chance of being approved and securing the product that is the best fit for you.
What if my credit is too bad for a remortgage?
If another lender or broker has turned you down, perhaps it’s time to speak to a specialist mortgage adviser. If Think Plutus is unable to find a mortgage option for you because you have recent, severe credit issues, we won’t simply turn you away. We will advise on how you can repair your credit score in order to improve your chances of approval for a remortgage.
Sometimes, it’s as simple as adjusting your LTV to reduce your perceived risk with regards to lenders. It’s far easier to secure a remortgage with an LTV of 75% than shooting for, say, 90%. You won’t always find the most competitive rates for a remortgage with bad credit, so don’t be shocked when the rates are somewhat higher than normal.