Can I Remortgage My Bad Credit Mortgage Once My Credit Score Improves?

Many homeowners in the UK with bad credit mortgages often wonder if it is possible to remortgage once their credit score improves. The good news is that the answer is generally yes, but the process may be a bit more complex than for someone with a strong credit history. This article will explore the factors that affect your ability to remortgage a bad credit mortgage, as well as the steps you can take to improve your chances of success.

Understanding Bad Credit Mortgages

A bad credit mortgage, also known as a subprime or adverse credit mortgage, is a type of mortgage designed for individuals with poor credit histories. These mortgages often come with higher interest rates and less favourable terms than traditional mortgages, as lenders perceive borrowers with bad credit as higher-risk.

As your credit score improves, you may become eligible for more competitive mortgage products with lower interest rates and better terms. Remortgaging your bad credit mortgage can potentially save you money and provide you with more financial flexibility.

The Impact of Improved Credit Scores on Remortgaging

If your credit score has improved since you first took out your mortgage, you may now be eligible for more competitive deals. This is because lenders view borrowers with better credit scores as less risky, which can lead to lower interest rates and more favourable terms. However, keep in mind that an improved credit score alone doesn’t guarantee that you’ll be approved for a remortgage.

Remortgaging with an Improved Credit Score

The short answer is yes; you can remortgage your bad credit mortgage once your credit score improves. As your credit history gets better, your chances of securing a better mortgage deal increase. Lenders will be more willing to offer you a loan with a lower interest rate, which will ultimately save you money in the long run. Here are the steps you can take to remortgage your bad credit mortgage once your credit score has improved:

Review Your Credit Report: First and foremost, you should review your credit report regularly to ensure that all the information is accurate and up-to-date. This will help you identify any errors or discrepancies that may be negatively affecting your credit score. If you find any mistakes, contact the credit reference agency to have them corrected.

Improve Your Credit Score: To secure a better mortgage deal, you’ll need to demonstrate a consistent track record of responsible borrowing. Make sure you pay all your bills on time, reduce your outstanding debt, and avoid applying for new credit unless absolutely necessary. This will gradually improve your credit score over time.

Research Mortgage Lenders: Not all mortgage lenders are willing to work with individuals with a history of bad credit. However, as your credit score improves, you may qualify for loans from a wider range of lenders. Research and compare different mortgage providers to find one that offers the best rates and terms for your situation.

Consult a Mortgage Broker: If you’re unsure about which mortgage lender to choose, consider working with a mortgage broker. A broker can help you navigate the mortgage market and find the best deal for your circumstances. They can also provide advice on how to improve your credit score further and increase your chances of securing a better mortgage.

Apply for a Remortgage: Once you’ve found a mortgage lender that offers a better deal, you can apply for a remortgage. Be prepared to provide documentation to prove your improved financial situation, such as payslips, bank statements, and an up-to-date credit report. Keep in mind that a remortgage application will involve a hard credit check, which may temporarily impact your credit score.

Factors That Affect Your Ability to Remortgage

Credit Score: The most important factor in determining your ability to remortgage is your current credit score. As you work to improve your credit, you may become eligible for better mortgage deals. Make sure to check your credit report for any errors or discrepancies and address any issues that may be negatively impacting your score.

Loan-to-Value (LTV) Ratio: The LTV ratio is the percentage of your property’s value that you are borrowing. A lower LTV ratio is generally more favourable, as it indicates that you have more equity in your home. This can improve your chances of being approved for a remortgage and help you secure better interest rates.

Employment and Income: Stable employment and a steady income can reassure lenders that you are able to meet your mortgage repayments. If your financial situation has improved since taking out your bad credit mortgage, this may increase your chances of being approved for a remortgage.

Existing Debt: Lenders will also consider your overall debt levels when evaluating your remortgage application. Reducing your outstanding debt can help improve your chances of getting approval.

Mortgage Arrears: If you have missed mortgage payments in the past, this may affect your ability to remortgage. However, if you have been consistent with your payments since taking out your bad credit mortgage, this can demonstrate your commitment to managing your finances responsibly.

Final Thoughts

The answer to the question, “Can I remortgage my bad credit mortgage once my credit score improves?” is yes, it is possible. However, it’s essential to carefully consider the factors mentioned above before deciding to remortgage. If you’re unsure whether remortgaging is the right choice for you, it’s always wise to seek professional financial advice to help you make an informed decision.

Get a free initial consultation from a mortgage broker.

Related articles:

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How to get a mortgage on a low income

How Much Deposit Do You Need for a Mortgage?

Top Tips for a Successful Bad Credit Mortgage Application

How Long Does It Take for a Mortgage to Be Approved?

Mortgage Affordability Rules-The Impact on Bad Credit Borrowers

From Exchange to Completion: How Long Does It Take and What Can Go Wrong?

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