Your credit score arguably plays the most important role in finding an ideal mortgage . Lenders often turn down borrowers with poor credit scores as they are not willing to take any risks in lending them money. It is therefore important to make all your credit payments on time and maintain a good credit score as it is vital for remortgaging your property.
However, if the damage is already done and you have acquired bad credit, there is no need to lose hope. People often feel that their chances of getting a remortgage deal go down to zero in the case of bad credit. This is certainly not the case. Rest assured that it is possible to remortgage with bad credit in UK by working with the right Remortgage brokers.
In most cases, people with bad credit are not able to find the right remortgage deals because borrowers are not aware of the any lenders who can help them. The best way to navigate through the situation with bad credit is to work with a skilled remortgage broker. Capable mortgage brokers would scan the complete market and find you the best possible deals even if you are stuck with bad credit.
Here is a little bad credit guide for you to understand how you can work your way around remortgaging your property with bad credit.
What is considered bad credit in your credit file?
Bad credit is the result of a poor history of credit repayments and/or defaults that are reported to credit agencies on the behalf of the borrowers.
Here are the factors that lead to bad credit and show the same in your credit file:
- Late credit payments
- Low credit score
- Defaults in making credit payments
- Mortgage arrears
- CCJs (County Court Judgements)
- Debt management plans
- IVA (Individual Voluntary Agreement)
Each of these factors would affect your credit report and credit score in different ways. Looking at the nature of the factors leading to bad credit, it is often difficult to be able to remortgage your property with bad credit. However, it is not impossible.
Lenders are often careful while dealing with borrowers having bad credit as they assume that late payments and defaults are likely to occur in the future as well. This either results in lenders refusing to give you any money or helping you remortgage at sub-prime rates.
However, a lot of these decisions depend on the severity of the factors listed above. If the causes of your bad credit are not too severe, you may have more remortgage options for your situation than you think.
Few of the frequently ask questions are.
Is it possible to remortgage with a low credit score?
One of the biggest issues faced by borrowers with bad credit is having a low credit score. Your credit score dictates a lot of your borrowing decisions. Before giving you a remortgage deal, lenders would determine your credit score and make assessments by checking your credit history.
While all mortgage lenders would assess your credit history, not every lender would give you a credit score themselves. There are a few specialized lenders who are more lenient than others and provide remortgages with poor credit scores.
If you are willing to remortgage your property while having a low credit score, make sure you work with a remortgage broker who can get you in touch with lenders who are not too strict when it comes to the borrowers’ credit scores. While you may need to pay higher interest as compared to a normal lender, a capable broker would ensure that you get a deal that is best according to your circumstances.
Is it possible to remortgage with defaults in credit payments?
Defaulters often find it difficult to remortgage their properties and get the right remortgage deals. Today, it is relatively easier to get a mortgage with defaults than before. While it is definitely not smooth sailing, there are mortgage lenders in the market who specialize in providing mortgage and remortgage to borrowers with defaults.
However, this does not give you a guarantee of getting a remortgage deal if you are a defaulter. Lenders take a lot of factors into consideration before approving your application and offer mortgage.
Apart from LTV (loan to value), LTI (loan to income), and the size of your deposit, here are some of the most important factors considered by a mortgage lender while assessing your application with credit defaults:
- The type of default
- The severity of default
- The time of default
- Is the default satisfied and done with?
- The number of defaults
Of all these factors, lenders are most considered with the time and severity of your default. If these details suit the criteria of the concerned lender, you would be able to get a remortgage deal despite having defaults.
Is it possible to remortgage after bankruptcy?
Just like any other factor leading to bad credit, bankruptcy causes a lot of problems to borrowers in getting mortgage or remortgage. While most mainstream mortgage lenders are likely to reject your application if you are bankrupt or have a history of bankruptcy, there are a handful of specialized lenders who help such borrowers remortgage their properties.
How to get the best bad credit remortgage rates?
Here are some of the most beneficial tips to keep in mind if you are willing to get the best remortgage rates with bad credit:
- Do not approach your bank – As the mortgage market is too competitive, banks are encouraged to create credit reports for every customer willing to get a mortgage or remortgage. Also, banks are not likely to entertain your application if you have bad credit. Getting a credit report generated by a lender who is likely to reject your application would only harm your credit further.
- Understand your bad credit – Understanding the reasons behind your bad credit would help you focus in the right direction and straighten out the aspects that have been affecting your credit.
- Calculate LTV – Many mortgage lenders base their decisions on the LTV over the credit of the borrower. If you have a good LTV, you can still manage to get a remortgage with bad credit.
- Increase your credit score – Finally, if you want to remortgage your property with bad credit, make sure you increase your credit score as much as possible by making timely repayments and avoiding any further defaults.