How Do You Get a Remortgage With Bad Credit?
When an existing mortgage is replaced with a brand new loan from a different lender it is called a remortgage. While this is similar in nature to refinancing, the major difference is that a different lender is used for a remortgage. With refinancing, the original lender can provide the new loan in addition to a different lender. A remortgage can be used to release some of the equity in the house. Equity, simply put, is the difference between what the borrower owes and the market value of the house. That can occur if the value of the house rises or if the borrower has paid down the loan. Either way, a remortgage loan can still be obtained for that purpose.
As with everything, a good credit score will guarantee that banks, credit unions, and other mortgage lenders will fight to get your business. The better the score, the better the interest rate, conditions, and terms and so on. But what about getting a bad credit remortgage? A bad credit score is not necessarily the end of the world. It just means that terms, conditions, and interest rates will not be nearly as good, and there will be fewer lenders competing for your business. To lenders, bad credit equals higher risk to the lender.
Since there are fewer choices when getting a bad credit remortgage, the initial inclination is to go with anything that looks good just to get a remortgage. Something to look out though for is lenders offering crazy low rates to people with bad credit. Small loan service companies or ones that have not been in business for a long time should be treated as suspect also. You need to have a very clear understanding of the details of a remortgage. If you do not, you could be in for a nasty surprise down the road when the original lender has closed up shop. These are legal, binding contracts. It is very important to understand every single word included in a remortgage contract. Reputable bankers, credit unions, and other mortgage lenders will take the time to walk through a contract and answer questions to make sure everything is understood.
A lot of people with bad credit assume that they will not get a good interest rate or that they will be the target of a scam. This is not a good reason to put off applying for one. If you are not meeting your mortgage on a timely basis, then a remortgage should be a consideration, even in the short term while you build up your credit. The remortgage may be a bit stricter on loan repayment. This minimizes risk to the lender. Again, if you get a remortgage that fits your budget needs, then you can build up a good credit score while paying the new mortgage on time every month. And when you get that new and improved credit score, the benefits increase exponentially and so do your options.