If you are in the market for a bad credit remortgage, two situations are assumed. The first is that you have had debt management or credit repayment issues within the last few years, and the second is that you want a better mortgage deal or to use your home equity to raise cash, hence the need to find a better deal.
The term 'bad credit' implies that you have a bad credit score. A credit score is the rating that a lender will give you when determining whether or not to lend money to you. It's worth mentioning that a credit score is not used in exactly the same way by each lender. Some lenders that specialise in bad credit remortgages will actually look for customers with a lower credit score because this is their target market and the one that best suits their product range.
This low score is the result of several factors, the most common of which being that you have missed a number of repayments on credit cards, loans or a previous mortgage. If you have poor credit, lenders will charge you a higher interest rate to borrow money because you have shown yourself to be a riskier prospect for them. Due to the fact that you will not get as good a deal on your remortgage interest rate with a bad credit remortgage as with a standard remortgage, it may be in your best interest to postpone the bad credit remortgage and work to improve your credit rating before applying.
Experian, the UK's largest credit reference agency, suggests that your first step should be to know exactly what your credit report looks like to a potential remortgage provider. If a portion of your credit history does not seem right to you, question it because mistakes can happen from time to time. You can get a free trial subscription to Experian, or apply for your credit report as a one-off, which should cost you no more than a couple of pounds.
Secondly, you should take a close look at your monthly incomes and outgoings and work out a budget whereby you pay all of your bills in full and on time. Late payments, county court judgements and debt management programmes that you have been entered into do not stay on your credit report for more than six years and although a few years may seem like a long time to wait for a remortgage, you may find that the improvement to your credit score means that you save enough on your interest rate to make it worth the wait.
Some of the more popular reasons to remortgage are to get a lower interest rate and therefore reduce your monthly payments, consolidate high-interest loans, and release the equity built into your property. A downside to remortgaging, especially with a bad credit remortgage, is the fees. Often you will have to pay an early repayment fee on your original mortgage, and then pay all of the start-up costs (product fee, legal fees, etc.) on a new bad credit remortgage.
If you are in a position to apply for a bad credit remortgage and would like to seek advice from an experienced mortgage broker, simply fill out our short remortgage form and we will connect you with a qualified adviser from the SimplyFinance network. They will talk you through your options and find the best deals in the market for your personal circumstances.