Remortgaging with bad credit: How, why and where

Wherever you look online, there are going to be plenty of warnings and cautionary tales from ‘experts’ about the risks of getting into debt or falling into bad credit. These warnings are not without merit, after all a bad credit rating can have a damaging effect your chances of being able to borrow when you need to and remortgaging with bad credit is often seen as a risk by lenders.

Gaining credit in the future, such as a mortgage or bank loan, is going to be more difficult if your credit rating is on the wrong side of acceptable. If you re looking to remortgage your home, then a bad credit rating is going to affect you too.

If you do happen to be at a point where you want to renew the mortgage your home but you also have a poor credit history, then you are going to struggle. You may get ‘lucky’ with your current lender and offer you a remortgage on the property, but if your credit is not as up to scratch as you might like then that could be a problem.

In order to offset the perceived risk that they would be taking, by offering a remortgage agreement to somebody with a less than perfect credit rating, then they will most likely make an offer at an increased rate of interest… Assuming they make an offer.

If you are not able to get a deal with your current lender, or you want to ‘shop around’ (maybe the increase on interest is too steep?), then there are alternative lenders out there if you do want to remortgage with bad credit such as The Loans Departement. Lenders that are more willing to offer deals to those with bad credit histories do exist and will still lend at higher rates of interest than the standard.

A bad credit remortgage, or a subprime remortgage as they are sometimes called, could be compared to payday loans; interest rates can be steep but sometimes they are the only option if you really do need the credit loan.

Why do people need or want to remortgage with bad credit?

There are lots of reasons why people may want to remortgage their home, even though remortgaging with bad credit can be difficult in of itself:

Raising funds

If your household income has increased, since taking out your current agreement, or the value of the property itself has increased, then you may be able to increase the mortgage. Money generated in this way can then be used to fund other things…

Improvements around the home

Home improvements can increase property value in the long term and it can be a smart investment in the future of the property. Aside from property value, improvements will also make living standards in the home that bit more comfortable

Debt consolidation

If you are remortgaging with bad credit then there is a chance that you have several debts. If this is the case, and you are struggling to pay them off, you can use money gained from remortgaging your home to clear them. Interest rates on mortgages can be lower than is found on credit cards, although this may not be the case with bad credit remortgaging (it is worth checking around with lenders and comparing against the rates you are currently paying on other debts).

The loan can be used for a whole host of other things such as new car, holiday, college and university fees… Just about anything that requires a substantial amount of money that you may not have immediate access to.

Can you repair your credit rating?

Further borrowing when you are already in a bind with poor credit may seem like a bad idea, but it can actually play a large role in repairing your damaged credit rating. All you need to do in make certain that you are responsible and keep up with the payments on the new remortgage agreement.

Keeping up with regular payments and not falling behind with any payments, generally keeping the debt under control, is going to help with improving your credit rating. Late or missed payments will have an negative influence on your rating so be sure neither of these things happen if you do manage to get a new agreement for your home.

Assuming that you are able to manage the debt responsibly, and pay off the loan, then you will be in a much better position later on should you need another loan and you should be offered the standard interest rate.

When should you consider remortgaging

The best time to consider remortgaging with bad credit, or even stellar credit really, is right about when your existing deal is approaching its conclusion. It is at this point when your payments are usually earmarked to rise too. In order to get the best start on your new arrangement, you should be aiming to switch before your current arrangement ends; this will help make the transition go as smoothly as possible.

Remortgaging with bad credit? Finding a bad credit lender

No all mortgage lenders are going to offer credit to somebody with a less than great credit history, possibly not even your own lender. You can search online for those that do though, and there are plenty to choose from.

That said, maybe you prefer to talk to a person rather than a search engine? In that case it can help to talk to a professional advisor about your requirements and individual circumstances. They will be able to talk to you about your options and help find the best deals for you.

Remortgaging with bad credit is not always the easiest thing in the world, and the interest rates are not as favourable, but if it is something that you need, for whatever reason, then it can be done. Remember though, not keeping up with repayments can put your home at risk but if you manage the loan responsibly, it can go a long way to repairing your credit rating.

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