A bad credit remortgage allows anyone who has a bad credit rating due to a county court judgment, loan or credit defaults, rent or mortgage arrears, bankruptcy, or a debt management plan to find a lower rate on an existing mortgage. Bad credit remortgages are also known by the terms adverse credit remortgage, poor credit remortgage, subprime remortgage and credit impaired remortgage.
The high-street lenders (large mainstream mortgage lenders) have strict criteria for mortgage lending, and it has gotten even stricter over the last couple of years since the credit crunch. If you have a bad credit rating, you will need to look to a more specialist lender in order to get the best mortgage rates. The reason for this is that if you have a bad credit score, you present a greater risk to the lender and they see you as being statistically more likely to default on your payments. The high street lenders would be so cautious about lending to you that the interest rates they would propose would be extremely high to counter this risk. Despite the downturn, there are still a number of mortgage lenders that specialise in bad credit remortgages, and these would normally be more suitable for your needs.
Although criteria is now stricter, mortgage lending is still a competitive business and if you?re willing to spend the time and effort shopping around, you can save thousands of pounds. It's a given that with a bad credit rating your interest payments will be higher, but if you take out a sub prime remortgage and you make all of your payments in full and on time for three years, you will have improved your credit score. At that point, you may wish to remortgage with a mainstream lender and get a more favourable interest rate.
However, when you are looking at potentially remortgaging again in a few years' time, you should be aware of early redemption penalties on your current mortgage deal. There is typically a fee for leaving after the introductory period, and you could be charged what is called a redemption penalty. These are charged so that you have to pay if you wish to repay the loan early or if you pay more than the calculated monthly payments. If you do not see it in your mortgage documents, ask the lender specifically about what type of fees that are associated with leaving after the introductory rate increases.
Although if you have been through a debt management plan or had a CCJ filed against you it is likely that you have a poor credit rating, you may be surprised to find that missed credit card payments and loan defaults in the past have not counted against you to the extent that you thought. It is therefore a good idea to check your credit report before you start applying for bad credit remortgages, because this means that you get to see what the lender will see when they receive your application and run a credit check on you.
If you would like to find a mortgage adviser that specialises in bad credit remortgages, simply fill out our short remortgage form and we will put you in touch with a qualified adviser from the SimplyFinance network who will be able to answer your queries and search the market on your behalf.