Remortgage With Past Mortgage Arrears

Can You Remortgage With Past Mortgage Arrears?

Yes, you can remortgage even if you have past mortgage arrears recorded on your credit file. While some high street lenders may automatically decline applications from borrowers with any history of mortgage arrears, many mainstream and specialist lenders take a more nuanced approach and will consider the full picture of your financial circumstances.

The critical factor for most lenders is how long ago the arrears occurred and whether they have been fully resolved. Mortgage arrears that happened five or six years ago and have since been cleared will be viewed very differently from arrears that occurred within the last twelve months or remain outstanding.

Lenders will typically want to understand the reasons behind the arrears. Circumstances such as redundancy, illness, relationship breakdown or other temporary financial difficulties are generally viewed more sympathetically than a pattern of persistent financial mismanagement. Being able to demonstrate that the situation was temporary and has been resolved can significantly improve your prospects.

Your current financial position is equally important. If you now have stable income, have maintained a clean payment record since the arrears, and have built up reasonable equity in your property, many lenders will look past the historical issues and focus on your present ability to meet repayments.

It is worth noting that mortgage arrears are considered more seriously than arrears on other types of credit because they relate directly to your home. Lenders reason that if you fell behind on your mortgage before, there is a higher risk of it happening again. However, this does not mean you will be refused outright, particularly if you can show that your circumstances have fundamentally changed.

How Lenders Assess Past Mortgage Arrears

Understanding how lenders evaluate past mortgage arrears can help you prepare a stronger application and set realistic expectations about the deals available to you.

Timing of the arrears. This is typically the most significant factor. Most lenders categorise arrears by how recently they occurred. Arrears from more than six years ago will have dropped off your credit file entirely and should not affect your application at all. Arrears from three to six years ago will carry less weight than those from the last one to two years.

Severity of the arrears. Lenders will look at how many payments were missed and the total amount of arrears accumulated. Missing one payment is viewed very differently from falling three, four or more payments behind. Some lenders specify the maximum number of months in arrears they will accept, often expressed as a status level on your credit file.

Whether the arrears are satisfied. Having cleared the arrears in full is significantly better than having outstanding arrears. Most lenders will not consider applications where mortgage arrears remain unpaid, though some specialist lenders may consider this if the amounts are small and there is a clear plan for repayment.

Your payment history since. Demonstrating a consistent record of meeting all your financial commitments since the arrears occurred is essential. Lenders want to see that the arrears were an isolated event rather than part of an ongoing pattern of financial difficulty.

Overall credit profile. Your mortgage arrears will be considered alongside all other information on your credit file. If the arrears are the only negative mark and your credit history is otherwise clean, you will have considerably more options than if there are multiple adverse entries.

Loan-to-value ratio. The amount of equity in your property plays a major role. A lower loan-to-value ratio reduces the risk for the lender and can help offset concerns about your credit history. If you have built up significant equity, this can open up more competitive deals even with past arrears on your file.

Types of Remortgage Deals Available With Past Mortgage Arrears

The range of remortgage products available to you will depend on the severity and recency of your past mortgage arrears, but there are options across the spectrum.

Near-prime deals. If your arrears were relatively minor, occurred more than two or three years ago, and your credit file is otherwise clean, you may qualify for near-prime products. These are offered by lenders who sit between the mainstream high street and the specialist adverse credit market. Interest rates on near-prime deals are typically slightly higher than the best high street rates but can still represent excellent value.

Specialist adverse credit remortgages. For more significant or recent arrears, specialist lenders offer products specifically designed for borrowers with adverse credit histories. These lenders have underwriters who manually assess each application rather than relying solely on automated credit scoring, which means they can take your individual circumstances into account.

Fixed rate products. Many specialist lenders offer fixed rate remortgage products, which can be particularly valuable if you want certainty over your monthly payments. Fixed terms of two, three or five years are commonly available, allowing you to rebuild your credit profile during the fixed period.

Variable rate products. Tracker and discount rate products are also available from specialist lenders. These may offer lower initial rates than fixed products but carry the risk of payments increasing if interest rates rise.

Regardless of the type of deal you choose, the interest rate you are offered will reflect the level of risk the lender associates with your application. As a general rule, the more recent or severe the arrears, the higher the rate is likely to be. However, even higher specialist rates are often considerably better than a standard variable rate, which is what many homeowners end up paying when their existing deal expires.

It is also important to consider the total cost of the remortgage, including any arrangement fees, valuation fees and legal costs. Sometimes a slightly higher rate with lower fees can work out cheaper overall than a lower rate with substantial upfront costs.

Steps to Improve Your Chances of Remortgaging

If you have past mortgage arrears and want to remortgage, there are several practical steps you can take to strengthen your application and potentially access better deals.

Check your credit report thoroughly. Before applying for any remortgage, obtain copies of your credit reports from all three main UK credit reference agencies: Experian, Equifax and TransUnion. Check that the arrears are recorded accurately and that any payments you have made to clear them are properly reflected. Errors on credit files are more common than most people realise, and correcting mistakes could improve your score.

Add a notice of correction. If there were mitigating circumstances behind your arrears, such as illness or redundancy, you can add a notice of correction to your credit file. This is a short statement explaining the circumstances and is visible to any lender who checks your credit. While it will not change your credit score, it can influence a human underwriter who is manually reviewing your application.

Build a track record of reliability. Every month that passes without any missed payments strengthens your position. Ensure that all your current financial commitments, including your mortgage, credit cards, loans and utility bills, are paid on time without exception.

Reduce your outstanding debts. Paying down credit card balances, loans and other debts improves your debt-to-income ratio and demonstrates that you are managing your finances responsibly. It also increases the amount a lender may be willing to lend you.

Increase your equity. If possible, making overpayments on your existing mortgage to build up more equity can open up better remortgage deals. Even a small reduction in your loan-to-value ratio can make a meaningful difference to the rates available.

Gather supporting documentation. Prepare evidence of your current income, employment stability and financial position. Having payslips, bank statements and details of your existing mortgage ready will speed up the application process and demonstrate to lenders that you are well prepared.

Seek specialist advice. A mortgage broker who specialises in adverse credit remortgages will have access to lenders and products that you cannot find on the high street. They will know which lenders are most likely to approve your application and can present your case in the most favourable light. Always ensure any broker you use is authorised and regulated by the Financial Conduct Authority.

How Long Do Mortgage Arrears Stay on Your Credit File?

In the UK, mortgage arrears remain on your credit file for six years from the date they were recorded. This is the standard retention period for all types of adverse credit information under the rules set by the credit reference agencies.

Once the six-year period has elapsed, the arrears will be automatically removed from your credit file and should no longer affect your ability to remortgage. However, some mortgage application forms ask whether you have ever had arrears or other credit problems, regardless of whether they still appear on your credit file. It is important to answer these questions honestly.

The impact of the arrears on your credit score will gradually diminish over time, even before they are removed. Arrears that are four or five years old will carry significantly less weight in credit scoring models than those that occurred within the last year or two. This means your remortgage options should improve as time passes, even within the six-year period.

If you are close to the six-year mark, it may be worth waiting a few months for the arrears to drop off your file before applying. This could open up significantly better deals and save you money over the term of your new mortgage. A broker can advise you on whether waiting is likely to be worthwhile in your specific situation.

It is also worth understanding the difference between the arrears being recorded and any default that may have been registered as a result. If your lender issued a formal default notice, this is a separate entry on your credit file with its own six-year retention period, which may run from a different date than the arrears themselves.

Using a Specialist Broker for Mortgage Arrears Remortgages

Working with a specialist mortgage broker is strongly recommended if you have past mortgage arrears and want to remortgage. The adverse credit mortgage market is complex and varies significantly between lenders, making professional guidance particularly valuable.

A specialist broker will have detailed knowledge of which lenders accept applications from borrowers with past mortgage arrears and what their specific criteria are. This is important because each lender has different thresholds for the number of arrears months they will accept, how recently the arrears can have occurred, and what other credit issues they will tolerate alongside the arrears.

Applying to the wrong lender can result in a declined application and an unnecessary hard search on your credit file, which can further reduce your credit score. A broker can help you avoid this by steering you towards lenders who are most likely to approve your application based on your specific circumstances.

Good brokers will also help you understand the true cost of different remortgage options, including interest rates, fees, early repayment charges and any other costs. They can model different scenarios to show you which option offers the best value over the term you are considering.

When choosing a broker, look for one who is authorised and regulated by the Financial Conduct Authority and who has demonstrable experience in the adverse credit mortgage market. Many specialist brokers offer a free initial assessment where they can review your credit file and give you an honest appraisal of your options before you commit to anything.

Remember that while a broker can significantly improve your chances, they cannot guarantee approval. The final lending decision always rests with the lender. However, a skilled broker will only recommend lenders where they believe your application has a realistic chance of success.