Remortgaging your home may, in some circumstances, help you review your current mortgage deal or manage your finances differently, depending on your individual situation and affordability.
However, if your credit history has been affected by financial difficulties, your options may be more limited, and remortgaging may not be suitable for everyone.
In this guide, we explain how remortgaging works if you have bad credit, what lenders typically consider, and the factors that may influence your ability to switch deals.
What does remortgaging mean?
Remortgaging is the process of switching your existing mortgage to a new deal, either with your current lender or a different provider.
Homeowners may consider remortgaging for a range of reasons, including:
- Moving to a different interest rate
- Changing monthly repayment amounts
- Raising capital from their property
- Consolidating existing debts
- Moving off a standard variable rate (SVR)
Whether any of these are appropriate will depend on your personal circumstances, financial position, and long-term goals.
Can I remortgage with bad credit?
It may be possible to remortgage with bad credit, although your options could be more limited compared to someone with a stronger credit history.
Mortgage lenders assess risk when reviewing applications, and your credit report is one of several factors considered. You may be seen as higher risk if you have experienced:
- Missed or late payments
- Defaults or County Court Judgments (CCJs)
- Individual Voluntary Arrangements (IVAs)
- Bankruptcy
Some lenders specialise in considering applicants with more complex credit histories, but acceptance is not guaranteed and will depend on your overall circumstances.
When can you remortgage?
Many homeowners begin exploring remortgage options around six months before their current deal ends.
In some situations, it may be possible to remortgage earlier, although early repayment charges and other costs may apply.
Whether this is suitable will depend on your existing mortgage terms and financial position.
You can find out more about remortgaging earlier and whether it might apply to your situation in our guide on remortgaging early.
How much can I borrow to remortgage?
The amount you may be able to borrow will depend on factors such as:
- Your income
- Your outgoings
- Your credit history
- Your property value
Lenders carry out affordability assessments and may apply stricter criteria where there is adverse credit.
Online calculators can provide general estimates, but they do not take into account all aspects of your personal situation.
How does a remortgage work with bad credit?
The remortgaging process is broadly similar regardless of credit history, although lenders may carry out more detailed checks.
You may find that:
1. Some lenders specialise in adverse credit
Certain lenders may take a more flexible approach and consider your wider financial situation, not just your credit score.
2. Interest rates may be higher
Where there is increased risk, lenders may offer higher interest rates.
3. Affordability checks remain essential
Lenders will assess your ability to repay based on income, outgoings, and existing commitments.
4. Loan-to-Value (LTV) is important
Higher levels of equity may improve the range of options available, although this is not guaranteed.
Can you remortgage to pay off debt?
Remortgaging to consolidate debt is an option some homeowners consider, but it is important to understand both the potential advantages and risks.
Remortgaging to consolidate debt can, in some cases, reduce monthly repayments. However, it may significantly increase the total amount repaid over time, as mortgage terms are typically much longer than unsecured borrowing.
Potential considerations include:
- Monthly payments may reduce in some cases
- Multiple debts can be combined into a single repayment
- Budgeting may become simpler
However:
- You could pay more interest overall
- Your home may be at risk if repayments are not maintained
- It may not be suitable for all circumstances
Careful consideration and independent advice are important before proceeding.
What do lenders look for in remortgage applications?
Lenders typically assess several factors, including:
Your credit history
They will review your credit file, including the type, severity, and timing of any issues.
Your income and employment
Stable and consistent income may support your application.
Your current mortgage conduct
A history of maintaining mortgage payments may be viewed positively.
Equity in your property
Lower loan-to-value ratios may provide access to a wider range of options.
How do people remortgage?
Depending on your situation, there are several types of remortgages available:
Like-for-Like remortgage
Switching to a new deal without borrowing extra. This is often the easiest option if your goal is simply to reduce your rate.
Equity release mortgage
You may be able to roll existing debts into your mortgage. This can simplify repayments, but it’s important to consider the long-term cost.
Capital raising remortgage
If you want to release equity for home improvements or other expenses, some lenders may allow this, even with bad credit.
If your goal is ultimately to save money, you may need to switch mortgage lenders to get a better deal. However, if you are switching to a new lender, you will need a solicitor to remortgage who can take care of the legal work.
How to improve your chances of remortgage approval
There are steps you can take to improve your credit score for better mortgage terms or remortgage approval. While approval is never guaranteed, some steps may help strengthen your application:
- Check your credit report for errors
- Reduce outstanding debts where possible
- Avoid making multiple credit applications in a short period
- Maintain consistent payment history
- Seek guidance to understand your options
Will bad credit affect my interest rate?
In many cases, a history of adverse credit may result in higher interest rates.
The rate you may be offered will depend on factors such as:
- The severity of past credit issues
- How recent those issues are
- Your loan-to-value ratio
- Your overall affordability
If your financial situation improves over time, you may have access to different options in the future.
How to remortgage with bad credit
Remortgaging with bad credit can be more complex, and outcomes will vary depending on individual circumstances.
A qualified professional can help assess whether remortgaging may be appropriate for your situation, but it is important to understand that it may not be suitable for everyone.
Exploring your options carefully and considering both short-term and long-term implications is key to making an informed decision.
At Mortgage Saving Experts, we focus on helping you navigate your options with confidence. As an experienced remortgage broker, we’re here to support you whether you’re looking for a better deal, consolidating debt, or simply exploring what’s possible. There are solutions out there, and you don’t have to figure it out alone. We are authorised and regulated by the Financial Conduct Authority.
