If you’re planning to remortgage, you’ll want to know that you’re getting a worthwhile deal. Most people remortgage to save money, so going through the process when you’ve got poor credit can make it harder to get good results.
If your credit rating is sub-par, your remortgaging options will be limited. Expect higher levels of rejections, as well as higher costs for the mortgages you can get approved for. Poor credit remortgages can require more preparation.
Your credit score will impact your chance of success, as well as the rates you’ll be offered.
Read on to learn more about poor credit remortgages and how you can find the best products.
We update all our guides regularly. If you are researching remortgages and we haven't got an exact guide that helps you, keep coming back as we update daily.
A poor credit rating is a sign that you’re not great at handling your money. For whatever reason, you might have fallen behind on your payments. Perhaps you missed bill payment dates, or couldn’t afford to clear debts. Whatever went on, your credit score is likely to have gone down as a result.
If you have poor credit, lenders are rightfully cautious. Your credit score is influenced by your financial dealings, with a poor credit rating being indicative of financial struggles. Paying your bills on time will make your credit score better, whilst your financial missteps will cause your credit file to look worse.
A poor credit rating can have a big impact on your remortgaging experience. Some lenders won’t feel comfortable offering a mortgage, whilst others will charge you higher prices. These higher prices offset the risk that you might not pay back what you owe.
If you have poor credit, it’s harder to find suitable mortgages. Of course, poor credit remortgages aren’t totally impossible to find. Whilst some lenders will turn you away, others will be willing to accept you on agreed mortgage terms.
The difficulty comes in finding remortgaging options that are still worthwhile with higher interest rates since the whole point of remortgaging is usually to cut monthly costs.
If your credit score’s already low, you’ll need to be extra cautious. You might like a fixed-rate mortgage, where your costs will stay the same every month. With a fixed-rate mortgage, there are no unexpected surprises. Fixed-rate mortgages are the best choice if you’re not so good at coping with a fluctuating budget.
If you’re choosing a variable mortgage, think carefully about the extra risks. Variable mortgages are unpredictable, so may not be suited to people with poor credit that may already struggle at times.
You might like to remortgage with your current lender if you can find a rate that saves you money. Alternatively, you may consider looking at new mortgage providers.
Though your chances of remortgaging are somewhat reduced with poor credit, there are still a large number of lenders willing to take on the risk. By increasing their mortgage rates and charging higher prices, a lender can offset their risk.
If you have poor credit, you’ll pay more for your mortgage than someone with a good credit rating. That’s a fact that you’ll need to accept if you want to remortgage with poor credit.
Though some lenders won’t approve poor credit remortgages, many will approve applications. It helps that you’re simply swapping one debt for another, moving from an existing mortgage to a new agreement, so you’re not actually taking on more debt.
It’s unlikely that you can release equity whilst remortgage if you already have poor credit. This is because releasing equity usually requires a larger loan. Some lenders may approve a mortgage of this type, and this might be something you consider if you’ve got other debts to pay back.
If you have a poor credit rating, but don’t immediately need to remortgage, why not take some time to work on improving your credit score? Your credit score can start to climb within a matter of months, though it will take much longer to have a dramatic impact. Start improving your credit score by making sure that you pay your bills on time.
If you have other debts, reduce these where you can so a new mortgage will be more affordable.
If your existing mortgage term is coming to an end, you’ll likely be moved to your lender’s Standard Variable Rate. An SVR mortgage is amongst the most expensive, so it’s not a long-term ideal, but waiting on this mortgage whilst your credit score improves may be a worthwhile decision.
These mortgages don’t tend to have early repayment fees, so you can remortgage as soon as it’s financially viable.
If you're really struggling to improve your credit rating, and perhaps struggling to pay your existing bills and mortgage charges, you might need to take a more active approach to improve your credit score. Debt management charities can help you with your money, finding ways to get your payments back on track.
There may be several other options for reducing your debts before you put your property at risk. Clearing your debts can take several years, but it's easier with some support.
Remortgaging often involves several different fees and charges. Often, these charges aren't as high as the savings you'll make by remortgaging. If you have poor credit, your mortgage costs are higher, and the savings might not be worthwhile.
Before remortgaging, make sure that you're acting in a way that's financially sensible. Calculate potential savings and potential costs to make sure that you're getting a good deal. There are very few good reasons to remortgage your property if it doesn't save you much money. Of course, if you have poor credit, then saving money by remortgaging could be exactly what you need!
Here's an example of the typical variance between mortgage rates for excellent, good and poor credit scores, although these will of course vary. The below is assumed on a remaining balance of £80,000 for 20 years.
|Mortgage Type||Monthly Repayment||Total Interest Paid|
|Excellent credit score - 3%||£444||£25,467|
|Good credit score - 4%||£485||£36,307|
|Poor credit score - 5%||£528||£46,749|
Numbers compiled by Money Savings Advice
The difference between an excellent credit score and a poor one can be £20,000 in interest costs over the 20 years, so if you can find a way to improve your score before you remortgage you will be significantly better off.
If you want to remortgage with bad credit, there’s nothing to stop you from trying. Be aware that you’re more likely to have applications rejected, and that any approved mortgages are likely to cost more than they would for someone with good credit. Lenders will raise the interest rates they’re charging, offsetting the risk you represent.
If you don’t need to remortgage, you might want to delay your decision for a while. You can work on improving your credit score before you try to remortgage your property. Your credit score might start to improve in a matter of months, though significant change can take several years, and you might like to seek help to manage debts.
If your poor credit score is a result of financial struggles, then consider fixed-rate remortgaging. With this, your monthly payments will always stay the same with no unexpected surprises. If you’re not quite ready to make a decision, a Standard Variable Rate is incredibly flexible though a high cost to sit on for too long.
Here at Money Savings Advice, we have partnered with some of the UK’s leading mortgage brokers. They have already helped thousands of people get the best remortgage deal and they can do the same for you.
Choosing an independent adviser means they won’t recommend a mortgage unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.
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