Remortgaging With a Bad Credit History Will Limit Your Options

Bad credit could mean that you’re turned away by many mortgage providers. Your credit score will always affect your ability to get a loan, but with a mortgage, the problems are even more pronounced because it’s such a large loan you’re applying for.

Even if you’ve had a mortgage already, and have managed to stay on track, a bad credit score will keep lenders from trusting you.

Having bad credit might stop you from remortgaging, or limit your remortgaging options. If you have bad credit and want to remortgage, spend your time finding different mortgage deals or improving your credit score.

Read on to learn more about remortgaging with bad credit.

Looking for other information on Remortgages? This guide has info on 'Bad Credit Remortgages Guide'. We have also writen extensively about:

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We update all our guides regularly. If you are researching remortgages and we haven't got an exact guide that helps you, keep coming back as we update daily.

Have You Got Bad Credit?

Your credit score is a three-digit number that simplifies the details on your credit file. When you apply to remortgage, a lender will look at your credit score and credit file and use these to make their decision.

Typically, your credit file is a record of your financial dealings. If you’ve always paid your bills in time and don’t have many lines of credit, your credit score is likely to be higher. A good credit score shows that you’re not stretching your money too far. Bad credit scores are usually a sign of poor money management or ongoing debt problems.

If you’ve got bad credit, it might be because you’ve borrowed more than you can afford. You might have debt that takes up a significant portion of your income. Bad credit scores also apply to people that miss debt and bill payments, and to those that apply for credit several times in quick succession.

Your credit score and credit file are records of financial behaviour. If you’ve behaved in ways that show you’re not great with money, a lender is less likely to trust you. It’s not unusual though – 18% of the people who go to debt charity StepChange with debt problems are homeowners, so don’t feel like you’re on your own. There are always options available to help you.

What Does a Bad Credit Score Show?

Bad credit might show that you’ve kept up your mortgage payments at the expense of other bills, or that you’ve needed to borrow money in order to keep up with your mortgage. A poor credit score is usually indicative of some kind of budgeting problem, whether it’s just that you’ve just mismanaged your money, or you haven’t had enough to get by.

Most mortgage providers won’t trust you if you’ve got bad credit. A poor credit score is, understandably, a sign that you might miss mortgage payments. That’s a problem that most lenders don’t want to deal with.

Even though mortgages are secured against your property, and they could just repossess your home if you do fall behind, that’s a lot of effort for the lender to go through.

Can You Remortgage With Bad Credit?

Whilst many lenders might turn down your application, you’ll still be able to remortgage. One of the benefits of remortgaging is that, unlike with other types of a loan application, you’ve got your property to back you. Lenders know that you’re just replacing one mortgage debt with another, and have the reassurance that they can take your house if you’re unable to keep up with repayments.

A mortgage is a secured debt, with your property as the security. This helps, as lenders know that they have access to a way to get their money back if you can’t repay them. Always stay aware that however you remortgage, you will risk losing your home.

In exchange for the increased risk, mortgage providers will want to make lending worthwhile. Usually, the risk is balanced by higher interest charges so they can make more profit from their customers. If you have bad credit, expect higher interest rates on any remortgaging offers.

You’re likely to pay more than someone that remortgages with a much better credit rating.

Why Remortgage With Bad Credit?

Remortgaging with bad credit is not an ideal solution. It’ll probably cost a lot more, with higher interest rates and charges applied. You won’t have the same range of choice as other people, and you might be turned down by your favourite mortgage providers. In short, bad credit remortgages don’t sound appealing.

You might still decide to remortgage with bad credit because of the benefits of doing so. Many people remortgage to cut their mortgage payments, and that might be something you need. If you’re struggling to keep up with your monthly mortgage payments, remortgaging to a more affordable deal could help you to get back on track.

You might also remortgage to release equity, though this increases your overall debt and might mean that you’re rejected almost everywhere. If you can release equity and get hold of more money, you might use this to clear other debts elsewhere.

There are benefits to bad credit remortgages, even if they’re harder to find. This could mean that you’re happy taking chances and seeing what options are available.

Alternatives to Bad Credit Remortgages

If you have bad credit, remortgaging might not be easy. It could be in your interests to improve your credit score before you attempt to remortgage.

Your credit score is flexible and fluid. It can change in a matter of months if you adjust your money habits. If you can get on track with bill and debt payments, your credit score will start to get better. Though you’ve got bad credit, even waiting a few months could help you to find better mortgages.

In many cases, a short-term change won’t be enough to boost your credit rating. If you’re struggling with debt and have done a lot of damage, you’ll need to do more to make things right. If you don’t need to remortgage straight away, speaking to a debt charity and getting back on track should be your highest priority.

It may take a few years to clear all your debts, but the end result will be that you’re financially stronger and have many more remortgaging options.

Bad Credit Remortgages Options

If you have bad credit and don’t want to wait, consider your remortgaging options. A fixed-rate mortgage may be the most suitable since your interest rates won’t change every month. If you’ve struggled with managing your money in the past, remortgaging to a fixed rate deal can make your monthly payments more predictable and easier to budget for.

Only remortgage with bad credit if the better rates make it worthwhile. Remortgaging often comes with fees and charges, perhaps even including early repayment fees to get out of your current agreement, so the savings you’ll make will need to be worth it once everything else is factored in.

You might want to remortgage to consolidate your debts by borrowing more next time to cover them, but this won’t be easy, and you’ll need to be prepared for rejection.

One thing to note – if your debt problems are serious, and you’ve had a County Court Judgement against you, any remortgage deal may include terms that force you to repay your debt as part of the agreement.

Lenders will charge higher interest rates to offset the risks of bad credit remortgages, so you might find that remortgaging now isn’t actually worthwhile at all. If that’s the case, do what you can to improve your credit score for the future.

How Can Money Savings Advice Help You With A Remortgage?

Here at Money Savings Advice, we have partnered with some of the UK’s leading mortgage brokers. They have already helped thousands of people get the best remortgage deal and they can do the same for you.

Choosing an independent adviser means they won’t recommend a mortgage unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.