Remortgage With Bad Credit

Can You Remortgage With Bad Credit?

Yes, you can remortgage with bad credit. The UK mortgage market includes a wide range of lenders, from high street banks to specialist providers who specifically cater to borrowers with adverse credit histories. The options available to you will depend on the nature and severity of your credit issues, how recently they occurred, and your overall financial situation.

Lenders assess bad credit on a case-by-case basis, and what one lender considers unacceptable, another may be willing to overlook. The most common types of adverse credit that lenders encounter include:

• Missed or late payments — Occasional missed payments on credit cards, loans, or utility bills are relatively common and many lenders will consider applications with a small number of missed payments, particularly if they occurred more than 12 months ago.
• Defaults — A default is recorded when a creditor formally closes your account due to non-payment. Some lenders will accept applications with satisfied defaults, especially if they are older than two or three years.
• County court judgements (CCJs) — A CCJ is issued by a court when you fail to repay a debt. Satisfied CCJs are viewed more favourably, and lenders are more willing to consider them once they are over 12 months old.
• Individual voluntary arrangements (IVAs) — An IVA is a formal agreement with creditors to repay debts over a set period. Some specialist lenders will consider applications from borrowers who have completed an IVA.
• Bankruptcy — While bankruptcy is the most severe form of adverse credit, there are lenders who will consider applications once you have been discharged for a minimum period, typically three to six years.

The Financial Conduct Authority (FCA) regulates all mortgage lenders in the UK, which means that even specialist bad credit lenders must follow the same responsible lending rules. This ensures that you will not be offered a mortgage that you cannot afford, regardless of which lender you use.

How Bad Credit Affects Your Remortgage Options

Bad credit affects your remortgage in several key ways, and understanding these can help you set realistic expectations and plan your approach. The main impacts are on the interest rates available, the amount you can borrow, and the range of lenders willing to consider your application.

Interest rates

Borrowers with adverse credit typically pay higher interest rates than those with clean credit histories. This is because lenders view bad credit as an indicator of higher risk, and they price their products accordingly. The difference can range from a fraction of a percentage point for minor credit blemishes to several percentage points for more serious issues such as recent bankruptcy or multiple CCJs.

Loan-to-value restrictions

Many lenders impose stricter loan-to-value (LTV) limits for borrowers with bad credit. While a borrower with excellent credit might be able to remortgage at 90% or even 95% LTV, someone with adverse credit may find that lenders require them to have at least 15-25% equity in their property. The more equity you have, the more options become available and the better the rates you will be offered.

Lender availability

Some high street lenders have strict credit scoring criteria and may automatically decline applications from borrowers with certain types of adverse credit. However, the specialist lending market has grown considerably in recent years, and there are now many reputable lenders who focus specifically on serving borrowers with imperfect credit histories.

Product range

You may find that the range of products available to you is narrower than for borrowers with clean credit. For example, you might have fewer options when it comes to fixed rate periods, or you may not be able to access certain features such as offset mortgages. However, a skilled broker can help you find the most suitable product from those available.

Despite these limitations, remortgaging with bad credit can still represent a significant saving, particularly if you are currently on your lender's standard variable rate (SVR). Even a rate that is higher than the very best deals on the market could still be substantially lower than a typical SVR.

Steps to Improve Your Chances of Remortgaging With Bad Credit

While you cannot erase your credit history overnight, there are practical steps you can take to maximise your chances of a successful remortgage application and potentially access better deals.

Check your credit report thoroughly

Before applying, obtain your credit reports from the three main UK credit reference agencies: Experian, Equifax, and TransUnion. Check every entry carefully for errors or outdated information. It is not uncommon to find mistakes on credit reports, and correcting these can improve your score. If you spot anything inaccurate, raise a dispute with the relevant credit reference agency immediately.

Register on the electoral roll

Being on the electoral roll at your current address is one of the simplest ways to improve your credit score. Lenders use this information to verify your identity and address, and not being registered can count against you. If you are not already on the electoral roll, contact your local council to register.

Reduce outstanding debts where possible

Paying down existing debts before applying to remortgage can improve both your credit score and your affordability assessment. Focus on reducing credit card balances and paying off any small outstanding debts. Avoid taking on any new credit in the months leading up to your application.

Avoid multiple credit applications

Each time you apply for credit, a hard search is recorded on your credit file. Multiple applications in a short period can make you appear desperate for credit and further damage your score. This is one reason why using a broker is so valuable, as they can identify suitable lenders without you having to apply to multiple companies directly.

Build a positive payment history

Demonstrating that you can manage credit responsibly now is important. Make sure all your current bills and credit commitments are paid on time, every time. Even a few months of consistent, timely payments can make a difference to how lenders view your application.

Save for a larger deposit or build equity

If you have time before you need to remortgage, consider making overpayments on your current mortgage to build up more equity. A lower LTV ratio can open up better deals and offset some of the impact of your adverse credit history.

Why Using a Specialist Broker Makes a Difference

When you have bad credit, working with a specialist whole-of-market mortgage broker can make a significant difference to the outcome of your remortgage. Here is why their expertise matters:

Access to the whole market

A whole-of-market broker has access to deals from across the entire lending market, including specialist lenders who do not deal directly with the public. Many of the best bad credit mortgage products are only available through intermediaries, so going directly to a lender means you could miss out on more competitive options.

Understanding of lender criteria

Every lender has different criteria when it comes to adverse credit. Some are more lenient on CCJs but strict on defaults, while others may be more flexible about recent missed payments but cautious about IVAs. An experienced broker knows these nuances and can match your specific circumstances to the most suitable lender, increasing your chances of approval.

Application presentation

How your application is presented can make a genuine difference. A good broker will know how to frame your circumstances in the most positive light, highlighting the strengths of your application while providing context for any adverse credit events. They can write supporting notes explaining what led to your credit difficulties and what you have done to address them.

Avoiding unnecessary rejections

Being declined for a mortgage creates another negative mark on your credit file, which can make subsequent applications even harder. A broker can help you avoid applying to lenders who are likely to decline your application, protecting your credit score from further damage.

FCA-regulated advice

Mortgage brokers in the UK are regulated by the FCA and must provide advice that is in your best interests. This means they have a legal obligation to recommend suitable products and to ensure you understand the terms and implications of any mortgage you take on. This protection is particularly valuable when navigating the more complex world of adverse credit lending.

Many specialist brokers offer a free initial consultation, so there is no cost in exploring your options and getting professional advice on the best way forward.

What to Expect During the Bad Credit Remortgage Process

The remortgage process when you have bad credit follows a similar path to a standard remortgage, but there are a few additional considerations to be aware of.

Initial assessment

Your broker will carry out a thorough review of your financial circumstances, including your income, outgoings, existing debts, and credit history. They will discuss the nature and timing of any adverse credit events and use this information to identify suitable lenders.

Agreement in principle

Before submitting a full application, your broker may obtain an agreement in principle (AIP) from a suitable lender. Some lenders offer soft search AIPs, which do not leave a visible mark on your credit file. This gives you an indication of whether a lender is likely to approve your application before committing to a full credit check.

Full application and underwriting

Once you proceed with a full application, the lender will carry out a detailed assessment of your finances. For borrowers with adverse credit, this underwriting process may involve more manual review than for standard applications. You may be asked to provide additional documentation or explanations regarding your credit history.

Valuation

The lender will arrange a valuation of your property to confirm it provides adequate security for the loan. This may be a physical inspection or a desktop valuation, depending on the lender and the loan amount.

Legal work

A conveyancer or solicitor will handle the legal aspects of the remortgage, including transferring the mortgage from your old lender to the new one. This process is the same whether you have good or bad credit.

Completion

Once everything is approved, your new mortgage will complete and your old one will be redeemed. The entire process typically takes between four and eight weeks, though it can sometimes take longer if there are complexities to resolve.

Throughout the process, your broker should keep you informed of progress and be available to answer any questions. Do not hesitate to ask for updates if you are unsure about how things are progressing.

Alternatives If You Cannot Remortgage Right Now

If your credit issues are too recent or too severe to remortgage immediately, there are still options worth considering while you work on improving your situation.

Product transfer with your existing lender

Your current lender may offer you a product transfer, which allows you to switch to a new deal without going through a full remortgage application. Because your lender already holds your mortgage, they may not carry out a new credit check, which means your adverse credit history may not be an obstacle. Product transfers do not always offer the most competitive rates, but they can still save you money compared to remaining on the SVR.

Wait and improve your credit

If time is on your side, spending six to twelve months actively working on improving your credit score can significantly improve your remortgage options. During this time, focus on making all payments on time, reducing outstanding debts, and avoiding any new credit applications.

Consider your timing carefully

Most adverse credit entries remain on your credit file for six years. If a particular entry is due to drop off within the next few months, it may be worth waiting until that happens before applying, as this could improve the rates available to you.

Speak to a specialist adviser

Even if you cannot remortgage immediately, a specialist adviser can help you create a plan to improve your creditworthiness and give you a realistic timeline for when remortgaging might become possible. Some brokers will review your situation free of charge and advise you on the steps to take.

If you are struggling with debt, organisations such as StepChange and Citizens Advice offer free, confidential support. It is important to address any ongoing financial difficulties before taking on new mortgage commitments, as failing to keep up with mortgage payments could put your home at risk.