Remortgaging With Bad Credit: Your Options

Yes, you can usually remortgage with bad credit. If your mortgage payments are up to date and you are not borrowing more, a new deal with your current lender may not need a credit check at all.

Credit problems since you took out your mortgage do not trap you on your lender’s standard variable rate. You usually have two routes: stay with your lender on a new deal, or move to a lender that accepts your credit history.

Which is better depends on what went wrong, when, and whether you want to borrow more. For the wider picture on switching deals, see our complete UK remortgage guide.

Can you remortgage with bad credit?

Usually, yes, by one of two routes. A product transfer with your current lender often avoids a new credit check if you are up to date and not borrowing more. Moving lender means a full application, where specialist lenders accept defaults, CCJs and older arrears. How recent and how serious the problems are decides the rate.

Is a product transfer with your current lender easier?

A product transfer is a new deal with the lender you already have. If you are not borrowing more and your mortgage payments are up to date, many lenders offer one with no new affordability assessment and often no credit check. Credit problems elsewhere, such as a default on a credit card, may not matter.

The government’s Mortgage Charter records that signed-up lenders support customers who are up to date to switch to a new deal at the end of their fix without another affordability check. That does not cover borrowing more or changing the term.

The catch is that you only get your lender’s range, which may not be the cheapest available. And if you are in arrears on the mortgage itself, your lender may not offer a new deal until the arrears are cleared. See our product transfer vs remortgage guide.

When does moving to a new lender make sense?

Moving lender means a full application, including a credit search. Mainstream lenders accept minor, older problems. Specialist lenders accept more serious and recent ones, usually at a higher rate. Moving can make sense if:

• your lender’s product transfer rates are poor
• you want to borrow more, for example to clear debts
• your credit has improved since you last applied

How do lenders view each credit problem?

Credit problem	How lenders usually see it on a remortgage
A few late payments on credit cards or loans, now up to date	Often acceptable to mainstream lenders if more than 12 months ago
Defaults or CCJs	Size, date and whether settled matter. Small, older, settled entries are widely accepted by specialists
Missed mortgage payments	Treated most seriously, because it is the same type of debt. Recent mortgage arrears narrow the options sharply
Debt management plan	Accepted by some specialists, especially if well run or completed
IVA	Usually needs to be completed, or a long clean track record. Fewer lenders
Bankruptcy	Usually needs to be discharged, often for several years

Most entries stay on your credit file for six years. See our guides to mortgages with a CCJ, mortgages with a default and mortgages after late payments.

What might it cost?

Specialist rates are usually higher than the best mainstream rates. How much higher depends on how serious and recent your problems are, and on your loan-to-value. More equity lowers the rate.

The point is to compare the total cost, not just the rate. Use our remortgage calculator for your own figures, and see today’s mortgage rates for the wider market.

Should you remortgage to consolidate debts?

Some homeowners remortgage to pay off the debts that caused their credit problems. It can lower monthly outgoings, but it turns short-term debt into long-term debt secured on your home, and you can pay much more interest in total. Lenders also want to see that the underlying cause has been dealt with. Read our guide to remortgaging for debt consolidation first.

If you are in financial difficulty now, free debt advice is available from MoneyHelper.

How can you improve your chances?

1. Get all three credit files from Experian, Equifax and TransUnion. Lenders may use any of them.
2. Correct errors and make sure settled debts show as satisfied.
3. Keep every payment up to date, especially your mortgage. Six to twelve months of clean history makes a real difference.
4. Register on the electoral roll at your current address.
5. Avoid new credit applications in the months before you apply.
6. Prepare a short explanation of what happened and what has changed. Specialist underwriters read these.
7. Start early. Specialist applications can take longer. Begin around six months before your deal ends.

Which situations do lenders see most?

These are illustrative situations, not Option Finance client outcomes.

What are the common myths?

“I have to wait six years.” No. Specialist lenders consider recent problems. Waiting can get you a lower rate, but it is not required.

“My lender will refuse me a new deal.” If your mortgage payments are up to date and you are not borrowing more, many lenders offer product transfers regardless of credit problems elsewhere.

“One decline ruins everything.” A single decline does not stop you applying elsewhere. Several in a short time can make the next lender cautious, so apply where your case fits first time.

Frequently asked questions

Speak to Option Finance about remortgaging with bad credit

Tell us what is on your credit file and when your deal ends. We will tell you straight whether to stay with your lender or move, and what rate is realistic.

Book a free initial consultation using the enquiry form below. See our remortgage advice, adverse credit mortgage advice and guide to mortgages with a debt management plan.