How to Get a Remortgage with Adverse Credit

How a Bad Credit Mortgage Loan Can Reduce Mortgage Repayments

Aug 26, 2009

Remortgage with Adverse Credit, U.S. Government

Do you have a bad credit history due to missed and late payments on credit agreements? Find out how to get a remortgage with adverse credit. Reduce mortgage repayments.

No matter how bad a person's credit history, it remains possible to get a remortgage with adverse credit. Issues with credit occur when a borrower fails to comply with the terms of the credit agreement. Problems can emerge from as little as a late payment on a credit card bill. A bad credit mortgage company will charge a higher APR due to the greater risk posed to the lender.

Remortgage with Adverse Credit Tips

Home equity. Provided the loan-to-value (LTV) is below 75%, a bad credit mortgage company will normally be prepared to consider the application. This is because their money can be easily recovered through a forced sale should the loan ever be defaulted on.
Low income multiple. Whilst self certification mortgages were all the rage a couple of years ago, most bad credit lenders will now only offer 3.5 times the income of the applicant. The days of 6 times income loans are gone for the foreseeable future. This is to reduce mortgage repayments in order to comply with Financial Services Authority (FSA) guidelines. Affordability is critical in order that payments are sustainable, especially for a remortgage with adverse credit.
Credit report. It is possible to order a copy of an Experian credit report for just £2 or view it online for free under a 30 day trial offer. Look for inaccurate data and get this corrected before making an application. Applying for a mortgage with adverse credit is hard enough without battling against inaccurate information. A borrower must also make sure that they are on the electoral register.
Mortgage broker. Although it will add approximately 1% to the loan value, using a mortgage broker to trawl the market for the best deal will help considerably. In the current market, finding a suitable home loan with bad credit is daunting. Intermediaries are not only a valuable source of advice and assistance, they also have useful industry contacts for difficult cases.

Standard Variable Rate Mortgages

Continuing to make repayments at Standard Variable Rate (SVR) isn't necessarily a bad thing as it is only about 2% above the Bank of England base rate. However, the current low interest environment won't last forever so it may be sensible to lock-in to a fixed-rate mortgage before base rates rise. Whether this is the right option will depend on the applicant's credit rating when the previous mortgage was taken out.

Remortgage with Adverse Credit Vs Standard Variable Rate

Those who have acquired bad credit since their last remortgage may be better-off continuing with repayments on their existing loan agreement. A bad credit mortgage company will charge a premium (higher rate of APR) for any remortgage with adverse credit so the Standard Variable Rate (SVR) mortgage currently in-place may actually be cheaper. Check with a mortgage broker.

It is still possible to get a remortgage with adverse credit, but it is a lot more difficult than it used to be. A bad credit mortgage company will be looking for some assurance that repayment is affordable to the borrower and that their money can be recovered through a resale in the event of default.

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.

The copyright of the article How to Get a Remortgage with Adverse Credit in Home Mortgages is owned by Asa Ghaffar. Permission to republish How to Get a Remortgage with Adverse Credit in print or online must be granted by the author in writing.