Bad Credit Remortgage

Can you get a remortgage after bankruptcy or with a County Court Judgement (CCJ), Individual Voluntary Agreement (IVA) or Default?

Having any of these on your credit file will affect your mortgage choices, but it certainly doesn’t rule out lending altogether. For CCJs and Defaults, the more historic the registration, the better chance there is of securing a mortgage. The date that it was resolved (if it has been) is also important, because some lenders will insist on it being resolved prior to application. We also need to consider the number of CCJs and/or Defaults a client has in total, the more you have the less choice of lenders that are available. Lastly the value of the CCJ or Default can also be a factor, and the larger the value, the less choice of lenders there will be.

For Bankruptcy and IVA it can be a bit trickier, but we can still apply for a mortgage, it has a lot to do with timing again. You won’t be able to apply until you’ve been officially discharged from bankruptcy, which usually takes about twelve months. For IVAs, lenders have been known to lend during an IVA if it’s conducted satisfactorily, but it’s much easier if you’ve completed it before applying. 

The mortgage assessment will follow very strict guidelines so the rest of your application needs to be very strong, so it’s important that your application is presented in the best possible manner to a suitable lender, which is where brokers come in. Each year that goes by your bankruptcy or IVA becomes less relevant and lenders are more likely to approve your mortgage with a lower deposit and on lower interest rates. 

If you’ve been discharged from bankruptcy for around four years, most lenders will view you as no different to anyone else. After six years any credit issues will drop off your file. With all these scenarios the larger the deposit you have, the easier it is to overcome these issues and find a suitable mortgage lender.

Can you remortgage with a Debt Management Plan?

You can whilst you’re still in a Debt Management Plan. Lenders will want to see that you’ve maintained the payments on the plan in a satisfactory way and you will need to leave a larger amount of equity in the property. 

You’ll need to obtain statements from the company managing your Debt Management Plan showing the outstanding balance, if you decide to remortgage whilst you’re in the plan. 

What deals and rates are available if you’re remortgaging with bad credit?

That’s a difficult question to answer accurately because the rates are reflective of the risk the lender is taking, and that risk is quantified by the amount of equity available in the property and the level of adverse credit. 

Somebody who’s missed a credit card payment on the odd occasion in the last year would achieve a much better rate than somebody who has just finished an IVA. For somebody with very light adverse issues and lots of equity, we may be able to get them through with a high street bank at normal rates. For something a bit more serious, like a missed mortgage payment, you’ll need a 15% deposit and probably be paying about 0.65% more on the rate of the best equivalent high street products.

Someone that’s in a Debt Management Plan with three CCJs in the last two years and three missed mortgage payments two years ago, would need a 20% deposit and could expect to pay around 2.5% more than the equivalent high street rate.

Are there many bad credit remortgage lenders?

Yes, there are a good few. There is less choice than if you didn’t have any adverse credit, and are sometimes referred to as subprime lenders or adverse credit lenders. They are comfortable lending to clients that fall into this category and they understand that sometimes there’s a good reason behind why people end up with Bad Credit.

How do I improve my credit score before remortgaging?

The key points to improving your credit rating that we’d recommend are to check your credit report, make sure the information is correct and that all of your accounts and credit cards are listed. If details look wrong you may need to contact the credit reference agency to correct this. 

Check any financial links and associations to other people, as their credit score can have an influence on yours. Be registered to vote, as if you’re not on the electoral roll, simply registering to vote will improve your credit score. It takes minutes and you can do it online. Pay all your bills by direct debits so you don’t miss any payments. 

Prove you can manage your debt if you’ve never borrowed money, as you may have a low credit score or not have any credit history. Applying for a credit card and paying the balance in full every month will gradually improve your score. If you have got lines of credit, bear in mind that if you’ve got too much unsecured credit it can be considered a sign that you’re living beyond your means so try to lower your use of unsecured credit to below 50% of the amount available to you.

How do I apply for a remortgage with bad credit?

Always use a broker as the process can be extremely confusing if you try to do it on your own. The only difference from a standard application is that you’ll need to prove to your advisor why and how the adverse credit occurred, as the lender will want to see that. 

The lenders we’ll be approaching are less likely to be familiar names, but they are still governed by the Financial Conduct Authority.

If you feel you’ve got bad credit, make early contact with a broker. Don’t assume you can’t get a remortgage. Let us look at your file early and put a plan in place either to help you better your financial position and repair the credit rating or help you with your mortgage requirements. The initial consultation is at no cost to the client.

Your home may be repossessed if you do not keep up with your mortgage repayments.