Remortgage With Mortgage Arrears

How Mortgage Arrears Affect Your Remortgage Options

Mortgage arrears are viewed particularly seriously by lenders because they relate directly to your ability to make mortgage payments, which is the very commitment you are asking a new lender to trust you with. While other forms of adverse credit such as missed payments on credit cards or utility bills are concerning, arrears on a mortgage carry extra weight in the assessment process.

The impact of mortgage arrears on your remortgage options depends on several key factors. The first is whether the arrears are current or historical. Current arrears, meaning you are still behind on your payments, are far more problematic than arrears that have been fully cleared. Very few lenders will consider an application where the borrower is still in arrears on their existing mortgage.

The second factor is the severity of the arrears. A single month where a payment was late is treated very differently from a sustained period of arrears where you fell several months behind. Lenders typically measure arrears in terms of the number of months of missed payments and the maximum amount outstanding at any one time.

The third critical factor is timing. Recent arrears carry much more weight than those from several years ago. Arrears within the last 12 months are particularly problematic and will severely restrict your options. Arrears from two to three years ago are less impactful, and those from more than three years ago may be treated relatively leniently by some lenders.

Your overall credit profile also plays a role. If your mortgage arrears are your only adverse credit entry and everything else on your file is clean, lenders will view you more favourably than if the arrears sit alongside other problems such as defaults, CCJs or high levels of unsecured debt.

Despite these challenges, the specialist mortgage market in the UK does cater for borrowers with mortgage arrears. Understanding where you stand and what lenders are looking for is the first step towards finding a viable remortgage solution.

Current Arrears Versus Historical Arrears

The distinction between current and historical mortgage arrears is crucial when it comes to remortgaging, as the two situations present very different challenges and options.

Current mortgage arrears means you are presently behind on your payments and owe your lender money that should have already been paid. This is the more difficult of the two scenarios because it raises immediate concerns about your ability to manage mortgage payments. Most lenders, including many specialists, will require you to clear your arrears before they will consider a remortgage application.

However, there are a small number of lenders who may consider applications from borrowers with current arrears in certain circumstances. These typically require that the arrears are minor, perhaps one to two months behind, that you have a clear plan to bring the account up to date, and that there are strong mitigating factors such as a temporary income disruption that has now been resolved.

In some cases, remortgaging can actually be the solution to current arrears. If your current mortgage rate is very high and a remortgage would reduce your monthly payments to a more affordable level, some specialist lenders may view the remortgage as a way of preventing the situation from worsening. This requires careful advice from a specialist broker.

Historical mortgage arrears that have been fully resolved are treated much more favourably. Lenders want to see that you fell behind, addressed the situation, brought your account up to date, and have maintained a clean payment record since. The longer the period of clean payments after the arrears, the better your options become.

When assessing historical arrears, lenders will look at how many months you were behind, the maximum amount of arrears, when the arrears occurred, how long they lasted, and whether there is a reasonable explanation for what happened. Having this information clearly documented and ready to present can streamline the application process.

What Lenders Look for in Applications With Mortgage Arrears

Specialist lenders who consider applications from borrowers with mortgage arrears have specific criteria that they use to assess risk. Understanding these criteria can help you prepare your application and target the most suitable lenders.

Arrears status. The most important question is whether the arrears have been cleared. Most lenders require a clean status on your current mortgage, meaning all payments are up to date with no outstanding arrears. The longer you have been back on track, the better your prospects.

Number of missed payments. Lenders categorise arrears by the number of monthly payments missed. A single missed payment is treated very differently from six or twelve months of arrears. Some lenders will accept up to three missed payments in the last two years, while others may accept more if the arrears are older.

Recency of the arrears. When the arrears occurred is critical. Most specialist lenders have specific criteria around recency, such as no arrears in the last six months, no more than one missed payment in the last 12 months, or a maximum of three missed payments in the last 24 months. The further in the past the arrears are, the more options you have.

Pattern of payments. Lenders look at the pattern of your mortgage payments, not just individual missed ones. A single missed payment followed by consistent on-time payments tells a very different story from a pattern of irregular payments over an extended period. A clear pattern of recovery and responsible management is what lenders want to see.

Equity and LTV. As with most adverse credit situations, having significant equity in your property improves your options. Lenders who accept applications with mortgage arrears typically require higher equity levels than for standard applications. LTV caps of 70% to 80% are common, though some lenders may go higher for less severe cases.

Overall affordability. Lenders need to be satisfied that you can afford the new mortgage payments. They will assess your current income, expenditure and existing commitments. If the remortgage will actually reduce your monthly payments, this can work strongly in your favour as it reduces the risk of future payment difficulties.

How to Improve Your Chances of Remortgaging With Arrears

If you have a history of mortgage arrears and want to remortgage, there are several practical steps you can take to strengthen your application and improve your chances of being approved at a competitive rate.

Clear any outstanding arrears first. If you are currently in arrears, prioritise bringing your account up to date before applying. Even a few months of clean payments after clearing arrears can make a significant difference to your options. If you are struggling to clear the arrears, speak to your current lender about a repayment plan.

Build a track record of on-time payments. Once your arrears are cleared, focus on maintaining a spotless payment record for as long as possible before applying to remortgage. Every month of on-time payments strengthens your position. Set up a direct debit for your mortgage payment to eliminate the risk of accidental late payments.

Prepare your explanation. Write a clear, honest account of why the arrears occurred. Include the specific circumstances, such as job loss, illness, relationship breakdown or other factors. Explain what has changed since then and why you are now in a stable financial position. Supporting evidence, such as a letter from your employer confirming your current role or medical documentation, can strengthen your case.

Check your credit report. Obtain your credit report from all three main agencies and check that the arrears are accurately recorded. Ensure that any payments you have made to clear the arrears are reflected correctly. Dispute any errors and keep evidence of corrections.

Reduce other debts. Paying down credit cards, overdrafts and personal loans before applying improves your affordability calculation and demonstrates responsible financial management. It also reduces your overall debt-to-income ratio, which lenders consider when assessing your application.

Consider your LTV position. The more equity you have, the better your options. If you can make overpayments to your current mortgage or if your property has risen in value, this can move you into a better LTV band. Even a small reduction in LTV can open up additional lender options.

Get specialist broker advice. A broker with experience in adverse credit mortgages can assess your specific situation and identify which lenders are most likely to approve your application. They can also advise on timing, helping you decide whether to apply now or wait for your position to strengthen further.

Remortgaging to Escape High Rates After Arrears

One of the most compelling reasons to remortgage after mortgage arrears is to escape a high interest rate that may be contributing to your financial difficulties. Many borrowers who have experienced arrears find themselves trapped on their lender's standard variable rate, which can be significantly more expensive than the fixed or tracker rates available through a remortgage.

If your arrears were partly caused by unaffordable mortgage payments, remortgaging to a lower rate can be both a financial lifeline and a way to prevent future payment problems. Specialist lenders understand this dynamic and some specifically design products to help borrowers in this situation.

When considering a remortgage to reduce your payments, it is important to compare the total cost carefully. The interest rate on a specialist deal will be higher than the best mainstream rates, but the key comparison is between the specialist rate and what you are currently paying. If your current SVR is, for example, around seven percent, even a specialist rate of four or five percent would generate meaningful savings.

You should also consider the impact on your mortgage term. Extending your mortgage term as part of the remortgage can further reduce your monthly payments, making them more affordable. However, this does mean paying more interest over the life of the mortgage, so it should be considered as a short-term measure to stabilise your finances rather than a permanent solution.

Your broker can model different scenarios showing how various combinations of rate, term and borrowing amount would affect your monthly payments. This allows you to find the right balance between affordability and overall cost, ensuring that the remortgage genuinely improves your financial position.

It is also worth asking your current lender whether they would offer you a product transfer to a lower rate. Some lenders will offer existing customers a new deal even after a period of arrears, particularly if the arrears have been cleared and you have demonstrated a return to regular payments. A product transfer avoids the need for a full remortgage application with a new lender.

Getting Professional Help With Mortgage Arrears

If you are currently in mortgage arrears or have recently experienced them, getting professional advice is important not just for your remortgage prospects but for your overall financial wellbeing. There are several sources of help available in the UK.

Specialist mortgage brokers. A broker who specialises in adverse credit mortgages can assess your situation and advise on whether a remortgage is viable now or what steps you need to take to make it viable in the future. They have access to the full range of specialist lenders and understand the criteria each one applies. Look for a broker who is authorised and regulated by the Financial Conduct Authority.

Free debt advice services. If your mortgage arrears are part of a wider debt problem, organisations such as Citizens Advice, StepChange and the National Debtline offer free, confidential advice. They can help you understand your options, negotiate with creditors, and create a plan to get back on track. These services are entirely free and will never try to sell you a financial product.

Your current lender. If you are struggling with payments, your lender has a duty to treat you fairly and to consider options that might help. These can include temporary payment reductions, payment holidays, extending the mortgage term, or switching to interest-only payments for a period. Contact your lender as early as possible if you are having difficulties.

The Money and Pensions Service. This government-backed organisation provides free, impartial money guidance through its MoneyHelper website and helpline. They can help you understand your mortgage options, budget effectively, and access other support services.

Whatever your situation, acting sooner rather than later gives you the most options. Ignoring mortgage arrears will not make them go away and can lead to more serious consequences, including potential repossession proceedings. Early engagement with your lender and professional advisers gives you the best chance of finding a positive solution.