Remortgage with bad credit

If you have a poor credit history it can be a huge barrier to getting your mortgage application approved. Many of our customers come to us for a remortgage with bad credit as they have been unable to get approval elsewhere.

Although you might struggle to remortgage with bad credit, with the right lender it is possible to do. If you have previously taken out a mortgage with bad credit, but have since improved your credit score, then you might find that you can save money by switching to a different provider with a better interest rate.

Why a remortgage?

A remortgage is the process of taking out another mortgage on your home. This can be done for a number of reasons:

  • To get a better deal. However, if your credit score has worsened then it’s unlikely that you will be able to find anything better than your current deal.
  • To raise money. This is done by releasing equity tied up in your property by taking out a new mortgage which is larger than your existing one.
  • Debt consolidation. Many people remortgage and use the money raised to restructure their existing debts.

 

Is it worth remortgaging if you have bad credit?

Unless you have improved your credit score, it may be worth staying with your current lender. If your credit score has got worse or stayed the same then it’s highly unlikely you will be able to get a better deal elsewhere.

If you’re not in an ideal situation to remortgage then you should look to improve your credit score. You can then look at remortgage options once your credit file reflects this improvement.

You should also take into consideration any penalties – Early Repayment Charges (ERC’s) – that you might incur. Before deciding to remortgage you should work out whether these charges will eat into any of the potential savings you could make through remortgaging.

How do I know if I have bad credit?

Your credit score is the most important piece of information about you when applying for any type of finance. If you’re not sure, you can check your credit score easily online through online credit providers including Experian and Equifax.

How can I improve my credit score?

There are a number of things you can do to help improve your credit score. This can increase your chances of being approved for a remortgage, giving you access to cheaper deals. One thing you can do right away to positively impact your credit score is ensuring you’re on the electoral register. Registering to vote allows lenders to easily verify your identity and address. The more security lenders have in terms of your information, the more confident they will feel about lending you money.

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Why Clever Mortgages?

At Clever Mortgages we can offer you the support and advice required to ensure you get the right mortgage for your first home.  We provide access to a comprehensive range of mortgages from across the market. We are also authorised and regulated by the Financial Conduct Authority (FCA) and adhere to the Treating Customers Fairly (TCF) guidelines, so you can be confident that we will treat you with integrity and only recommend products that meet your needs.

Mortgage types

A fixed rate mortgage is where your interest rate stays the same for a set time period (usually between 2-10 years). As a result your repayments are exactly the same each month, regardless of what happens to other mortgage rates. These types of mortgages are popular with first time buyers and people looking to budget each month, especially those who have suffered from a poor credit history.

The main downside to a fixed rate mortgage is that if mortgage rates go down you can be paying a higher amount than you would on a variable rate mortgage. However, this can also go in your favour and if interest rates increase you can be paying less than you would on a variable rate.

Every lender will have their own standard variable rate (SVR), which is considered their basic mortgage. This interest rate goes up and down, usually in line with the Bank of England’s interest rates but the lender is free to raise this at any time.

This means that your monthly payments can go up or down depending on what the interest rate is at a given time. Some months you could be paying more whilst other months you could be paying much less.

A discount mortgage is when a reduction is applied to the lenders Standard Variable Rate (SVR) for a certain length of time (typically 2-3 years). Discount mortgages are attractive as they can allow you to pay slightly less than the bank's standard rate. However as the SVR can still fluctuate they are not ideal for people who are looking to stick to a strict long term budget.

A tracker mortgage is basically a type of variable rate mortgage.  What makes them different from other variable rate mortgages is that they follow – track – movements of another rate, the most common rate that is tracked is the Bank of England Base Rate.

A capped mortgage is the same as a variable rate mortgage; however the interest rate can never rise above a set “cap”. These mortgages can work well for people who can budget for different mortgage repayments each month but want the reassurance that their payments will never go above a certain amount.

Offset mortgages are linked to a savings account as well as your current account. Your savings will be 'offset' against the value of your mortgage, and you'll only pay interest on your mortgage balance minus your savings balance. These types of mortgages work well for higher earners or people who have a good amount in savings that they want to use towards paying their mortgage.

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