I thought it would be a good idea to give a couple of Bad Credit Remortgage Examples.
These examples are where we have been able to help people obtain remortgages despite them having bad credit as it may help when understanding the potential options available to you.
Remortgage Example 1
One of our first customers in 2013 came to us with a Bridging Loan Mortgage on the property at a rate of 12%. At the time he had a fairly recent default and a couple of late payments and a lot of Pay day loan usage.
In todays world, that is quite minor, however back in 2013 the market had not really opened up following the recession of 2007 and lenders were not really open to Defaults, Pay day loans or even 1 or 2 late payments, and that is one of the reasons I thought this would make a good success story as it shows that even if a difficult market – like the one we are in at the moment with Covid-19, there are things a specialist Mortgage broker can do compared to an average mortgage broker who is used to dealing with “normal” cases.
We managed to get him a new bridging loan at a rate of 10%. He was on that deal for around 10 months which just gave us a bit of breathing space to allow the default to become a little older and to give him a gap of 6-12 months of no pay day loan usage.
When that deal came to an end, we managed to get him a Mortgage at a rate of 5.5% which was still on the high side, but in 2015, the market was only just starting to warm up. The customer was on this deal for 2 years which meant in 2017, his bad credit issues were now over 3 years old and we managed to get him on the high street at a rate of around 2%.
To look at the positives, we helped the customer reduce his interest rate from 12% to 10% and then to 5.5% in less than 12 months and then down to around 2% over the next 2 years. That is a significant drop for anyone.
This is a great example to show how we can help to reduce your rates and work with you to get you back on track over a couple of years, most people in the current climate looking for remortgages with bad credit fall between 3% and 6% rates initially and then we look at rates closer to 2-3% once that deal comes to an end.
Remortgage Example 2
Another way we can help when looking to remortgage is to look at a Secured Loan. In 2018 we received an enquiry from a couple with over £100,000 in loans and credit cards. Whilst their credit file was actually not that bad, there were only a couple of late payments in terms of bad credit, so by no means extreme, the fact that there was a lot of debt combined with the arrears was difficult to overcome however.
Their current Mortgage of around £100,000 also was on a relatively normal rate and so we had an option of moving the full £200,000 to a specialist lender who could accept bad credit and allow that amount of debt consolidation, albeit at a rate of around 4.5% or keeping their main mortgage on the high street at a rate of maybe 2.5% and then doing a secured loan for the unsecured debt at around 5.5% and therefore getting the payments down and wrapping all of the debt up in to 2 repayments each month.
The plan here is quite simply to get them back on track, It gives them some breathing space between the late repayments and in the meantime puts them in a position where they are not stretching themselves every month. It also makes the case a little more appealing to a high street underwriter as soon as we can evidence that the debt once manageable will not be built up again. That then means we can remortgage the current mortgage and a secured loan to a lender all of which will then be at normal rates.
Based on the sums, the secured loan route is probably more expensive, but there is not a lot in it and I am a big believer of leaving the applicants main mortgage on the high street where it is not significantly more expensive to do so. If we enter a recession or lenders pull out of the market, in this case, half of their debt will be at a competitive rate and will be able to switch products to new deals every time it needs renewing. With a specialist lender, that is less likely to be an option if the market tightens up.
Third Bad Credit Remortgage example
A while back we did a Mortgage for a customer who had some credit issues about 2 years prior which included a relatively high value default of over £1,500. We managed to help him after a previous broker had said they were unable to help. At the time the rate was on the high side of around 5.5% with a specialist bad credit lender, which was fixed for a 2 year period.
Once those 2 years were up, the customer came back to us to help him with his remortgage. Because the bad credit issues were now 4 years old and he had kept his credit file clean since in addition to that he also had 2 years evidence of mortgage payments which can help, we were able to get him a remortgage on the high street at a rate of around 2.5% which also included him increasing the balance of his mortgage in order to build an extension. In the space of 2 years, he had gone from a specialist bad credit lender to a high street lender and more than halved the rate of interest he was paying on his mortgages.
Summary
When it comes to remortgaging with Bad Credit, there are various ways to overcome it, that could be a mortgage or it could be a secured loan. There is no right or wrong way to do it and the reason for the examples above was to show that there are reasons to go down either route, it may be necessity, price or flexibility.
What we try to do is to understand your circumstances and what you want. We will generally do the research looking at all options and come back to you with some ideas of what is available, we can talk them over and decide which way to move forward.
When it comes to Bad Credit Remortgages We Can Help.
If after reading about these Bad Credit Remortgage Examples, you are looking to remortgage for any reason – such as debt consolidation, find a better deal, home improvements etc and you have bad credit, please get in touch, we are more than happy to discuss your options.