Can I remortgage my house even though I now have bad credit?
Remortgaging your property is a good idea, as you can generally get a better deal and save yourself money if you move your mortgage every few years. You might worry that if you have bad credit you will struggle to get a new mortgage though…
Well the good news is that it is entirely possible to refinance, even if your credit has taken a turn for the worse; however, it certainly won’t be as easy as doing so with good credit.
The first thing to remember is that you got a mortgage the first time around, which means that your credit was good enough. Presumably since then you have hit a rough patch which has hurt your credit rating. Here are a few points to consider:
1. You have been making payments
You’ve probably been making regular mortgage payments for a few years now and even if you have had some serious difficulties in the past couple of years that payment history might make you more mortgage worthy than when you first bought a house.
2. It’s not just about your credit
A bank’s main priority is to make money from you while limiting the risk of non-payment and re-possession. For that reason they need to see that you can afford the mortgage. As long as you currently have a job and sufficient income you should be in good stead.
3. Lower your loan to value ratio
The more of the house you own, the more secure the bank’s investment (since they can take it off you if you don’t pay). So if you have any savings that you can put in as a lump sum that can make a big difference. Lowering your LTV from 90% to 85% will make a big difference.
4. Don’t go after the best deals
The best deals will have the strictest credit control criteria. Instead look into which deals have the softest credit checking. This won’t necessarily be advertised, but asking is a good start and asking around online might be helpful too. Try to avoid making too many applications as each one will hurt your credit.
5. Pay off some debts
If you have any outstanding debts you can clear, that will help your credit and might just tip the balance. Try to scrape together whatever money you can to clear off your personal loans and then wait for your credit file to update before you apply. This is usually around 60 days but you can check with the credit agency on their website.
6. Just wait a while
If you have gone through some tricky times recently, simply waiting a while might help. In most cases you don’t have to remortgage urgently anyway, so wait for 6 months while your credit improves slightly and try to clear those debts at the same time. The extra time might make the difference between getting accepted and not.