Bad Credit Remortgage

Bad Credit Remortgage (Part 1)

A very warm welcome to today’s episode of the Mortgage Mum Podcast, where I’m here with Tessa who’s going to be asking your questions. I’m excited to cover this topic, because I don’t think there’s enough information out there that feels friendly and informative.

We’re focusing on those of you with bad credit who are wondering whether you can remortgage. We’re answering all the questions you’re searching for online, to give you everything you need to know.

Can you remortgage with bad credit? How does this work?

You can absolutely remortgage with bad credit – it’s just going to be a bit more challenging because we’ve got to find you a lender that’s going to be happy with your particular situation. That may well be off the high street, and you may pay a higher rate in the specialist market.

These are lenders specifically focused on helping those with bad credit who need to remortgage.

Can you be declined a remortgage due to having bad credit?

You absolutely can be declined a mortgage due to bad credit. It depends on the lender’s appetite and their specific criteria. Every single lender is different, so you really need to speak to an advisor who will guide you through this.

It’s all about the relationship you build with your advisor, and theirs with the lender’s underwriters, because it’s not a tick box exercise. We will be explaining to them what happened and why the bad credit is there.

These could be quite emotive conversations for you, but it means we can advocate for you to satisfy a lender that you can keep up the monthly repayments. We reassure them that your credit history isn’t going to repeat itself with the mortgage they give you.

That’s the crux of it – you need to firstly prove you can afford the mortgage, and that you’ve learned from what’s happened. Often bad credit isn’t your fault. It may have been a situation that was out of your control, that’s now rectified.

Unfortunately, people can lose their jobs, and contractors and self-employed workers can find their businesses suffering. When people spend less money, that affects many businesses. Sometimes bad credit is the result of illness, the inability to work due to an accident or someone in your family needing your care.

I really want to remind people that there’s no judgment here. We want to hear your story, however flawed that story might be. We want to help you learn from it and move on – and we can only do that if we know the full picture.

Can you remortgage after bankruptcy?

Yes – but this does change with lenders. I’ve just looked at up-to-date information with one of our top lenders for bad credit. If we are struggling to place a case, we typically speak to this lender, but there are obviously a few others.

If you have experienced bankruptcy, it can be difficult to find a lender for a remortgage, but it’s not impossible. In the mainstream lenders market, they would require a waiting period of at least six years from that bankruptcy date before they’d consider you.

In the specialist market, however, some lenders will look at this as early as 12 to 24 months after the discharge – provided the situation has changed, there’s an improvement in your credit behaviour and you’ve got some equity in your property.

They’ll all have different criteria, and this is where your advisor is so important – we’ll call the lender and have that upfront conversation with the people who make the decisions. We convey our confidence across, and lenders listen to that.

Can you remortgage with a CCJ, IVA or default?

With County Court Judgements (CCJs) and defaults, lenders will look at the size, the frequency and the recency. If they’re small, typically under £500, and over a year or two ago, some lenders will just approve the remortgage.

If it’s larger or more recent, again, we’ll be looking at the specialist market and higher interest rates. You’ll need to show a strong repayment history since the default to improve the chances of us getting that application through.

An individual voluntary arrangement (IVA) can be challenging, because a lot of lenders like the IVA to be completed before they’ll consider your application. If it has been settled for at least 12 months, lenders are happy with that. But again, you can expect higher interest rates and stricter affordability.

If you are still in the IVA, you haven’t settled it and we do find a lender, you may need permission from your IVA supervisor to proceed with a remortgage. It’s particularly important if you’re still making payments towards the IVA to make sure you can satisfy both.

It can be frustrating, especially if we are struggling to help somebody. Often the remortgage is needed because you’re coming off a fixed or tracker rate and going on to a higher rate, which is going to make life harder. If we can’t get you onto a better rate, it starts rolling into the next problem.

How can specialist brokers and lenders help with a bad credit remortgage?

We want to help people afford their mortgage each month. We’re passionate about helping people get back on the right track. We have fought to get a lot of cases over the line, to get a better outcome for the client that means they are more likely to remove bad credit from their file in future.

It’s important to say that the lenders in the specialist market are genuinely passionate about helping people get back on track. They don’t want you to remortgage with them in future – they want to get you off their mortgage after the first term.

Their duty is to help people repair their situation and get them back into the mainstream market. That’s a valuable thing to share here, because people might expect otherwise.

Can you remortgage with a debt management plan?

You can, but your choices may be limited. Some lenders do accept applicants in a debt management plan, provided you’ve got a good track record of repayments.

There are a couple of factors. First is how long you’ve been in the debt management plan. The longer you’ve been in it, the better your chances – because you can demonstrate consistency of your payments.

They’ll also want to know how much other debt is remaining in the plan. If you’ve got a lot still unpaid, they factor that into affordability. That could potentially limit how much we can get you on the mortgage. Will it be enough?

They also want to see equity in your property. If you have bad credit and not much equity, otherwise known as a high Loan to Value ratio, again, that’s more limiting. The lenders have less security to benefit your case here.

Some lenders specialise in debt management plan applicants. They prefer the plan to have been satisfied, and particularly if it was satisfied over a year ago. But there are potentially options even if you’re still in one.

It’s just about the whole story. Why did this happen? Is it going to happen again? Have you learned what you needed to learn? Is the situation different? Have you got more security?

It’s important to know the answers to those questions. If you don’t, be willing to lean into a conversation with an advisor to see if you’re ready to take on another mortgage that’s potentially going to affect your credit file.

Keeping up your mortgage payments is one of the most important things to consider. If you’re not convinced you can manage those repayments in the new scenario, I encourage you to have a really upfront conversation with your advisor to work out the options. If things are potentially going to get worse, what could you do? We will answer that question.

What deals and rates are available if you are remortgaging with bad credit?

You can expect to pay more than the normal deals and rates. I’ll talk a bit about the ‘normal’ mortgage market as we stand in April 2025 – because previously, a 5% or 6% rate would have been classed as a specialist rate.

Now, you’re probably looking at 7% to 9%, depending on how serious the bad credit is. Average interest rates now are between 4% and 6% for a standard mortgage on the high street.

So 7% to 9% is a possible price range there. I can give you some idea of rates now on the specialist market. But as a caveat, today is April 2nd, 2025. By the time you listen to this, it’s probably not going to be completely relevant.

But for customers that haven’t had a default or CCJ in the last two years, we’d be looking at a rate starting at 6.09% up to 7.54%. That’s for a credit file that’s not particularly severe.

For somebody that has slightly more recent issues on their credit file, we’re looking at rates of 7.54% with a particular lender. So you’re probably looking at about 2% to 3% more than the average rates on the market. It really depends on the lender you’re going to use and how much bad credit there is.

On our website, you can see what each rate looks like as a monthly repayment. You can also play around with the term to see what that means, before you speak to somebody. But bear in mind that if you don’t do anything, you’re going to go onto the variable rate, and that can be quite high.

Are there many bad credit remortgage lenders?

There are definitely options. There’s a whole market tailored to this because, unfortunately, since COVID there has been more bad credit. More people are struggling to meet payments, not just on their mortgage, and businesses have struggled and continue to do so.

So unfortunately, there is a need for this in the market. It’s beneficial to try and help people get back to a good position.

Is it better to improve my credit rating before remortgaging?

Obviously, we want you to improve your credit rating, and there are ways you can do that. But, obviously, it’s going to take time. My question back to you would be whether you have time to do that.

Every six months that passes should improve your credit. If you’ve paid off your debt management plan or you haven’t had any defaults for a while, every additional six months in that positive position will help.

Whether you’re six months post a default, 12 months or 24 to 36 months, it makes a massive difference in how a lender views you and therefore what rate you get.

But the key thing is how much time you have before your current deal ends. Have you got time to make those adjustments before making a mortgage application?

Your credit score does come into an application, but not as much as on the high street. It’s a human analysis of whether they’re comfortable to take you on as a mortgage customer. It’s a hands-on underwriting approach, which does take more time.

How can I improve my credit score?

Firsty, by keeping up your payments – making those bill payments, setting up a direct debit and sticking to that. Try to reduce the amount of credit you have. If you’ve got credit cards you’re not using, close them and cut the cards up.

If you have got cards and they’re maxed out, I really recommend trying to reduce the balance. You can be savvy with cards in spreading the debt out, doing balance transfers so you’ve not got one or two cards maxed out and hardly anything on others.

You might struggle to get new credit, for obvious reasons, and I wouldn’t encourage that. Just make sure you haven’t got any errors on your credit report, because sometimes those things can get hidden within all the information.

Your adviser can look at your credit report and go through it with you. We can explain it to you and make sure it’s all as you understand it to be. That’s really important if you are looking at a bad credit mortgage.

How do I apply for a remortgage with bad credit? How can a mortgage broker help?

There are no major differences in the process, but do make sure you’ve given yourself time. Don’t put your head in the sand, because the more time you have to prepare and have conversations, digest, process and decide on the next step, the better.

You definitely need an advisor, in my opinion. You have all the emotional weight of this bad credit, plus the practicalities of finding the right lender and trying to represent yourself. Quite honestly, I think that’s too much pressure for anyone.

There are emotions wrapped around this situation, whether that’s embarrassment, shame or not wanting anyone to know. This horrible thing happened and you’ve got a difficult situation to deal with off the back of it.

It’s okay to feel that. We are trained to help people who are feeling vulnerable to make these decisions. That’s what we’re here for. So lean on us – this is really where we come into our own.

The clients that really need us are those we can have the biggest impact for. We’ll help you get out of the situation you’re in. Even if it’s a long term plan, there’s always something you can be doing and we’ll help you get there.

We’ve helped many clients that started in the specialist market and are now on the high street. They have changed their relationship with money and are thriving – and there’s no reason why that can’t be you.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.