When it comes to a bad credit remortgage there are a few ways we can look at assessing your case. As such, I thought the best way to explain how we look at your bad credit mortgage options was to give a real life example.
In 2016 we received a call from a couple who had built up around £70,000 worth of loans and credit cards in order to pay for their daughter’s wedding. Their Mortgage was a similar amount (£70,000) but they had a lot of equity in their home.
Their main priority was to get their monthly repayments down as they had very little spare money left over each month.
Due to some bad credit in the form of historic defaults our Mortgage options were a little more limited at the time than they are now but we managed to find a lender at a rate of around 4%.
We submitted a Decision in Principle and all passed ok.
It took a couple of weeks for the customers to get their paperwork together and (unbeknown to Mortgage Success) during that time they had missed a couple of payments on some bills due to struggling with their debt.
When it came to submitting the full application, the customers no longer met (unbeknown to us) the lenders criteria and so their application was declined as the credit issues were no longer historic and had become current.
Option one of having one monthly repayment was now not an option due to a combination of the recent and historic adverse.
*As a side note, bad credit worries can be a source of considerable stress and it is a difficult task many people are apprehensive about but my advice is to act sooner rather than later.
Millions of people in the UK have historic bad credit but when it is no longer in the past and it becomes ‘current’, the options become increasingly limited.
If I can not Re-mortgage what are my other options?
Rather than looking at a bad credit re-mortgage, we looked at a Secured loan (otherwise know as a 2nd charge home loan) to combine all of the loans and credit cards in to one payment.
By combining all the credit they would then have 2 payments each month rather than closer to 10, but more importantly a lower overall payment each month, which was the original motivation and desired outcome.
The major downside is the overall cost when we pursued this. The Mortgage and secured loan combined were slightly more expensive than the just a straight forward remortgage.
Had the circumstances not changed during the application the outcome would have been the full re-mortgage.
However the upside of the option left open was that their main mortgage remained on the high street and so they could ensure that their Mortgage was always on a reasonable rate and it was only the secured loan part (for the credit consolidation) that would be on a higher rate.
In the long run, it could even work out in this instance that the bad credit remortgage would actually be more expensive and so looking at the bigger picture the secured loan may turn out to be the better of the 2 options.
A third route to consider is that if no additional money is needed, a relatively straightforward product switch with your current lender could be an option.
Nowadays, it is rare that a lender will want to do any further checks if you are just switching products (i.e. no other changes being made to your mortgage such as further borrowing). It should just be a handful of questions and then selecting a new product. This is something we can help with if you still prefer a broker to manage everything.
If you are looking for a re-mortgage and have bad credit, get in touch.
There are various ways we can look at your application. If Plan A does not work out, there may be other ways at a similar cost or even if your circumstance change and the options become more expensive but still allow you to achieve what you wanted to, at least let Mortgage Success research the whole UK market and inform you of your options.