Remortgages with bad credit during the cost of living crisis

Remortgaging with bad credit to beat the cost of living increases: Everything you need to know

It can seem like all our lives have been on hold for the last two years. Many of us have resisted making plans, and many of us have seen existing plans changed or cancelled. The focus for lots of homeowners has been on ensuring they can make their mortgage repayments. However, if you’re coming to the end of your current mortgage deal you may be starting to think about remortgaging. Or you may even be considering a remortgage in order to save or raise money.

Thinking about remortgaging is often stressful, you might be wondering how long does a remortgage take and you may be experiencing additional pressure if you’ve had financial difficulties over lockdown. Many people think the cost of living and poor credit history means they’re stuck on a high interest standard rate deal, but according to Adam Hinder of Simply Adverse, there are options in the market for bad credit remortgage deals.

Remortgaging with bad credit could mean facing extra challenges. Before we look at what they may be, let’s examine why you might want to remortgage in the first place.

Why remortgage?

• Introductory deal coming to an end

If your introductory deal is coming to an end, you’ll be keen to avoid moving to your lender’s Standard Variable Rate, which will inevitably be higher than the interest rate you are on. Your lender will usually contact you as your deal comes to an end, but you may find that other lenders will be able to provide a more attractive mortgage. It’s worth remembering that any mortgage payment holiday won’t have affected the end date of your introductory deal

Even if you are not currently coming to the end of your introductory deal, you may still feel that it could be advantageous to remortgage. If this is the case for you, bear in mind that you may be liable to penalties for leaving your current deal early.

• Looking for a lower interest rate

As interest rates come down it can be tempting to look around for a better deal. This may be particularly true if you fixed your interest rate at the beginning of your introductory term.

• Looking for more flexibility

Whether it’s the option to overpay or the opportunity to take payment holidays, if your existing mortgage doesn’t offer flexibility you may start searching for one that does. Flexibility may be an attractive option if your working pattern has changed over lockdown.

• Raising capital

If you have equity in your property, remortgage could offer you the chance to release some of it. Whether you’re thinking of redecorating, renovating or could just do some with extra cash, this could be the answer.

• Debt consolidation

If you’re level of debt has increased over lockdown it could be tempting to remortgage in order to pay it off. However, before even considering this you are advised to talk to a professional, as in most cases you will changing unsecured debt into secured debt.

Causes of bad credit

It’s estimated that around 6 million UK adults missed a household bill payment during the first few months of lockdown, while figures from StepChange, a debt charity, suggested that, by June 2020, £6.1 billion of personal debt had accrued. Some missed payments, such as mortgage, loan and credit card repayments, will be noted by lenders and will appear on your credit report, with this in turn potentially impacting your ability to access credit in the future.

On the plus side, County Court Judgments greatly reduced over the first 6 months of the year, although this arguably had less to do with greater financial security, and more to do with a considerable decrease in court activity.

If you have any concerns about whether your creditworthiness has suffered during the pandemic then you should consider requesting a copy of your credit report. While lenders look at multiple factors when considering an application, your credit report can give you an overview of how a lender may view you.

What else could affect your application?

• Mortgage payment holidays

Of you elected to take a mortgage payment holiday during the pandemic you will know that this will not appear on your credit report. However, lenders will be able to tell that you have taken the holiday when they look at the other evidence you submit in support of your application. Some lenders may consider that taking a payment holiday is an indication that you are, or were, facing some financial difficulties. This will be of greater concern if you extended the holiday beyond the initial 3-month period. While it’s not impossible to be able to secure a remortgage deal after a payment holiday, it may then be more complicated.

• Bounce back loans

If you have a company that has taken a bounce back loan, lenders may take a much closer look at your application. While the biggest concern has been that individuals are intending to use their loan as their deposit, which won’t be relevant for a remortgage application, underwriters will also want to be sure that the uptake of the loan is not due to significant concerns about the liquidity of the company.

How can you make the remortgage process less complicated?

It often appears that the most straightforward way to remortgage, particularly after the end of an introductory deal, is to stick with your current lender. If you stay with your current lender you can usually apply quickly and easily online, and they are less likely to ask for a valuation on your property. With the extension of lockdown measures, which could make valuations trickier to obtain, it can be tempting therefore to go with this option.

However, your current lender may not have the most appropriate deal or best rates for you. In addition, the application could be made more difficult if your financial circumstances have changed during the pandemic. In these cases, you may be better served speaking to a specialist bad credit mortgage broker, who may be able to source a range of not on the high-street remortgage deals.

As well as access to these deals, a professional broker will be able to weigh up any advantages against possible disadvantages such as early repayment penalties. This saves you time and hassle, as well as helping you avoid possibly expensive oversights.

We are living in uncertain times since the pandemic, with interest rates and prices rising fast, so it’s more important than ever to be able to remortgage. Although financial stress could make this even more of a challenge, there’s no reason why you still shouldn’t be able to find a remortgage with bad credit.