Remortgaging with bad credit can be difficult and often stressful, however working with a specialist bad credit mortgage broker can make all the difference. Whether you have defaults, poor credit history, an IVA, a DMP or debts, our specialist brokers know which lenders can help, giving you the best chance of getting your mortgage.
The Impact of Bad Credit
Having bad credit can significantly impact your remortgaging options. Lenders consider your credit score as an indicator of your ability to repay the loan. If you have a low credit score, it signals to lenders that you may be a higher risk borrower, and they may be hesitant to offer you favourable terms or approve your application.
Bad credit can lead to higher interest rates and fees when remortgaging. Lenders may view you as a higher risk borrower and charge higher interest rates to compensate for that risk. Additionally, they may also impose additional fees or charges, such as arrangement fees or valuation fees, which can increase the overall cost of remortgaging.
Steps to Improve Your Credit Score
Before considering remortgaging with bad credit, it's important to take steps to improve your credit score. Improving your credit score can increase your chances of getting approved for a remortgage and help you secure better terms and rates.
One of the most effective ways to improve your credit score is by paying your bills on time. Late payments can have a negative impact on your credit score, so it's crucial to make all payments by their due dates. Additionally, reducing your overall debt and keeping credit card balances low can also help improve your credit score.
Finding the Right Lender with Bad Credit
When looking to remortgage with bad credit, it's essential to research lenders that specialise in working with borrowers who have less-than-perfect credit. These lenders understand the challenges that come with bad credit and may be more willing to work with you to find a suitable remortgaging option.
When researching lenders, it's important to look for reputable ones. Check their reviews and ratings, and ensure they are regulated by the appropriate financial authorities. Reputable lenders will be transparent about their fees and terms, and they will provide clear information about the remortgaging process.
Preparing your Financial Documents
When applying for a remortgage, you will need to provide various financial documents to support your application. These documents typically include proof of income, bank statements, and proof of identity.
To make the application process smoother, it's important to organise and prepare these documents in advance. Keep all your financial documents in one place and ensure they are up-to-date. This will help you provide accurate information to the lender and avoid any delays in the application process.
Alternative Options for Bad Credit Borrowers
If you have bad credit, there may be alternative remortgaging options available to you. One option is government-backed loans, such as FHA loans in the United States or Help to Buy schemes in the UK. These programs are designed to help borrowers with lower credit scores or limited down payments access affordable mortgage options.
Another alternative option is shared ownership schemes, where you purchase a share of a property and pay rent on the remaining share. This can be a viable option for borrowers with bad credit who may not qualify for a traditional mortgage.
It's important to weigh the pros and cons of each alternative option before making a decision. Consider factors such as interest rates, fees, and long-term affordability when evaluating these options.
Negotiating Better Terms and Rates with Lenders
Even if you have bad credit, it's still possible to negotiate better terms and rates with lenders. Start by researching the current market rates and comparing them to the rates offered by different lenders. Armed with this information, you can negotiate with lenders to secure a better deal.
When negotiating, emphasise your commitment to improving your credit score and highlight any positive changes you have made. Lenders may be more willing to offer better terms if they see that you are actively working towards improving your financial situation.
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Working with a Specialist Mortgage Advisor
Seeking professional advice can be beneficial when remortgaging with bad credit. A financial advisor or specialist mortgage broker can provide guidance and help you navigate the complexities of the remortgaging process.
A professional can assess your financial situation, review your credit history, and provide personalised advice tailored to your needs. They can also help you find reputable lenders who specialise in working with borrowers with bad credit.
Avoiding Common Mistakes
When remortgaging with bad credit, it's important to avoid common mistakes that can hinder your chances of getting approved or result in unfavourable terms. One common mistake is not researching lenders thoroughly. It's crucial to compare rates, fees, and terms from multiple lenders to ensure you are getting the best deal possible.
Another mistake is not properly preparing your financial documents. Incomplete or inaccurate documentation can lead to delays in the application process or even rejection. Take the timeto gather all the necessary documents and ensure they are accurate and up-to-date.
Costs and Fees
Remortgaging comes with various costs and fees that borrowers need to be aware of. These costs can include valuation fees, legal fees, arrangement fees, and early repayment charges.
Valuation fees are charged by lenders to assess the value of your property. Legal fees cover the cost of hiring a solicitor or conveyancer to handle the legal aspects of the remortgage. Arrangement fees are charged by lenders for setting up the new mortgage. Early repayment charges may apply if you are still within a fixed-rate or discounted period on your current mortgage.
It's important to budget for these costs and factor them into your decision-making process when considering remortgaging.
Maintaining Good Credit after Remortgaging with Bad Credit
After successfully remortgaging with bad credit, it's crucial to maintain good credit to ensure long-term financial stability. Continue to pay your bills on time and avoid taking on too much debt. Regularly check your credit report for any errors or discrepancies and address them promptly.
Additionally, it's important to avoid applying for new credit unnecessarily, as multiple credit applications can negatively impact your credit score. Instead, focus on building a positive credit history by using credit responsibly and making timely payments.
Remortgaging with bad credit can be challenging, but it's not impossible. By taking steps to improve your credit score, researching lenders, preparing your financial documents, exploring alternative options, negotiating with lenders, seeking professional advice, avoiding common mistakes, understanding costs and fees, and maintaining good credit after remortgaging, you can increase your chances of finding the right lender and securing favoruable terms.
Remember that improving your credit score takes time and effort, but the benefits of remortgaging with better terms and rates can be well worth it in the long run.
Key Takeaways
- Bad credit can limit remortgaging options and result in higher interest rates and fees.
- Improving credit score through timely payments, reducing debt, and correcting errors can increase remortgaging options and lower costs.
- Researching and comparing lenders who specialise in bad credit remortgaging can lead to better terms and rates.
- Gathering and organising financial documents, such as income and debt statements, can streamline the remortgage application process.
- Alternative remortgaging options, such as a guarantor or secured loan, may be available for those with bad credit.
