Remortgage
Remortgage With Bad Credit: What Are Your Options?
It may be possible to remortgage with bad credit, including when your credit problems began after you took out your current mortgage. Options may depend on what happened, and when, mortgage payment history, current affordability and property equity.
A missed mobile phone payment from several years ago will normally be viewed differently from recent mortgage arrears, an active IVA or several unpaid defaults. Before applying, check your credit reports and compare moving to a new lender with any product-transfer options offered by your existing lender.
Can I remortgage if my credit has worsened?
Yes, potentially. Developing bad credit since taking out your mortgage does not automatically prevent you from remortgaging.
When assessing an application, lenders may consider:
The type of credit problem
How much money was involved
When it happened
Whether the debt has been repaid
Whether it was an isolated incident or a pattern
How you have maintained your current mortgage
Your income, spending and existing debts
The amount of equity in your property
Why you want to remortgage
The cause of the problem can also provide useful context. A temporary income interruption followed by a period of stable payments is different from borrowing that is continuing to increase.
However, an explanation does not remove adverse information from your credit record or guarantee that a lender will accept your application.
What counts as bad credit?
“Bad credit” is an informal term covering several different issues, including:
Late or missed payments
Defaults
County court judgments, known as CCJs
Mortgage or secured-loan arrears
High credit-card balances
Debt management plans
Individual voluntary arrangements, known as IVAs
Bankruptcy
Multiple recent credit applications
Lenders do not all treat these issues in the same way. One may decline an application that another is prepared to consider.
The existence of an available mortgage does not necessarily make it suitable. A new deal could carry a higher interest rate or fees that outweigh the benefit of switching.
What will affect my chances of remortgaging with bad credit?
The type of credit problem
A late payment on an unsecured account may be treated differently from a missed mortgage payment. Mortgage arrears can be particularly significant because they relate directly to your ability to maintain housing payments.
Defaults, CCJs, IVAs and bankruptcy are more serious events, but their effect will still depend on their age, value, status and the lender’s criteria.
How recently it happened
Older credit problems may be easier to place in context, especially if you have maintained every payment since.
Recent or continuing problems may suggest that the underlying financial difficulty has not yet been resolved. There is no universal waiting period that applies across every lender.
Whether the debt has been repaid
Some lenders may require a default or CCJ to have been satisfied. Others may consider an outstanding debt in certain circumstances.
Repaying a debt does not immediately remove it from your credit history, but it shows that the balance has been settled and may affect which lenders will consider you.
Your mortgage payment history
Maintaining your existing mortgage can strengthen the overall picture, although it does not guarantee acceptance elsewhere.
Recent mortgage arrears are likely to restrict your options. If you are struggling to make payments, contact your lender promptly rather than waiting until your current deal ends.
Your equity and affordability
Equity is the difference between your property’s value and the amount owed on your mortgage.
For example, if your home is worth £250,000 and you owe £175,000, your loan-to-value ratio is 70%.
A lower loan-to-value may improve the range of mortgages available, but equity cannot overcome every problem. A lender must still be satisfied that the mortgage is affordable.
Product transfer or remortgage with bad credit?
If changing lender is difficult, you may be able to take a new deal with your existing lender. This is known as a product transfer.
For a straightforward switch where you are not borrowing more or making significant changes, the process may involve fewer checks than a full remortgage. This can make it useful when your credit record or financial circumstances have deteriorated.
However:
You will be limited to your existing lender’s products.
The available deal may not offer the lowest overall cost.
Borrowing more may require new credit and affordability checks.
Changing the term, borrowers or repayment method may trigger a fuller assessment.
Your lender’s eligibility rules will still apply.
Compare the rate, fees, flexibility and total cost of the realistic options available. Do not assume that staying with your lender or moving elsewhere will automatically be cheaper.
Should I wait before remortgaging?
Waiting can sometimes improve your position. It may allow you to establish a longer period of reliable payments, reduce your debts or correct errors on your credit reports.
However, delaying is not always the right answer. Your current deal may be ending, and moving onto your lender’s standard variable rate could increase your monthly payment.
Before deciding, compare:
The cost of your existing mortgage until the deal ends.
Any early repayment charge for leaving early.
The product-transfer deals offered by your current lender.
The remortgage options realistically available now.
The likely benefits and costs of waiting.
Starting the review several months before your current deal ends gives you time to investigate problems without rushing into an application.
How to prepare for a remortgage with bad credit
Check all three credit reports
The three main UK credit reference agencies are Experian, Equifax and TransUnion. The information held by each can differ, so checking only one report may leave gaps.
Look for:
Payments incorrectly recorded as late
Debts you do not recognise
Accounts registered at the wrong address
Incorrect default or settlement dates
Old financial links to former partners
CCJs that have been paid but not updated
You can request your statutory credit reports free of charge. If something is wrong, contact the credit reference agency and the organisation that supplied the information.
Avoid repeated mortgage applications
Multiple applications can result in several hard credit searches. This may make an already difficult application harder to place.
Before proceeding, ask whether an initial eligibility check will leave a soft or hard search on your credit report.
Prepare an accurate explanation
Be ready to explain what caused the problem, when it happened, what has changed and whether the debt has been resolved.
Keep any useful evidence, such as confirmation that a debt has been settled. Your explanation must match the information shown on your credit reports, bank statements and application.
Review your budget
Make an accurate list of your income, household costs, loans, credit cards, childcare and other financial commitments.
Having equity in your property does not necessarily mean that a larger mortgage will be affordable. If your monthly budget is already under pressure, remortgaging may not solve the underlying problem.
Can I remortgage to repay other debts?
It may be possible to increase your mortgage and use the additional money to repay loans, credit cards or other debts. This is known as debt consolidation.
It can reduce the number of monthly payments, but there are significant risks:
Previously unsecured debts may become secured against your property.
Lower monthly payments can mean repaying the debt over longer.
You may pay more interest overall.
Mortgage fees and early repayment charges can increase the cost.
Your property may be at risk if repayments are not maintained.
Debt consolidation is not suitable for everyone. If you are struggling with debts or borrowing to cover essential living costs, consider speaking to a free debt-advice organisation before securing more borrowing against your home.
Frequently asked questions
Can I remortgage after a default or CCJ?
Potentially. The lender will consider the event’s date, value, status and surrounding circumstances. Criteria vary and can change, so the position should be checked before applying.
Can I remortgage if my partner has bad credit?
For a joint mortgage, the lender will assess both applicants. One person’s adverse credit can therefore affect the options available to both of you.
Will paying off my debts improve my chances immediately?
Reducing debts may improve affordability, and settling overdue accounts can help the overall position. However, updates can take time and the previous problems may remain visible on your credit reports.
Talk to My Simple Mortgage
If your credit has worsened since you arranged your mortgage, do not assume that you have no options. My Simple Mortgage can review your circumstances and help you compare a product transfer with a full remortgage.
Eligibility, rates and available mortgages will depend on your individual circumstances and the lender’s criteria.
Your home may be repossessed if you do not keep up repayments on your mortgage.
My Simple Mortgage Ltd T/A My Simple Mortgage is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority. My Simple Mortgage Ltd is registered in England and Wales with company number 09275345. Registered office: The Mount, Etruria Road, Newcastle-under-Lyme, Staffordshire, ST5 0SU. The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK. Your home may be repossessed if you do not keep up repayments on your mortgage. The Financial Conduct Authority does not regulate some forms of Buy To Lets.