An adverse credit remortgage can best be described as a home mortgage loan that has been specifically designed for people with bad credit. As with a conventional remortgage, this type of remortgage product will allow a borrower to obtain a new mortgage in order to repay an existing one. This will typically allow a consumer to either lower their interest rate, extend the term of the loan, both of which will lower their current monthly mortgage payments, or even to borrow additional funds for other purposes such as home repairs, renovations, or to consolidate a number of other debts.
It must be said that the banks and lender that offer adverse credit remortgages are highly unlikely to offer interest rates and terms that are competitive with a traditional remortgage for a customer who has a good credit standing. This is typically because a borrower with bad credit is viewed as a higher lending risk, and therefore this will reflected in the terms and rates offered.
An adverse credit remortgage will involve obtaining a second home loan from a new lender, although the same property will be utilized as security against the loan. This is where it differs from a standard remortgage, as often this will simply involve the restructuring of terms with the current lender. When a borrower obtains a remortgage they will generally need to repay their existing mortgage off in full.
Often when a customer is looking to remortgage, their property may have appreciated in value, and this may allow them to borrow additional money for just about any other purpose. One of the major benefits of obtaining an adverse credit remortgage is that it allows a borrower to repay an old mortgage that may carry bad terms, and this will immediately see an improvement in their credit record. This, of course, may even make it possible for a borrower to have greater access to other consumer credit in general.
As mentioned, an adverse credit remortgage will typically be offered at a higher interest rate due to the perceived risk a lender is taking, although this may allow a borrower to secure a fixed rate, thus helping them to budget for their mortgage payments for a predetermined period of time. Many borrowers find that mortgage payment problems and bad credit start because of a variable rate mortgage loan, which will see increased payments in line with increased market rates.
The other benefits of an adverse credit remortgage is that it can help a borrower rid themselves of the stigma associated with foreclosure, they will be provided with greater stability, and therefore greater security, low fees for the service, the possibility to consolidate other debts before they are late on their payments, and usually no credit check will be required.
When applying for an adverse credit remortgage a consumer should always check to see what the exact rate and payment will be, and to ascertain whether this rate and payment will fluctuate over the term of the loan. It is also important to check what fees and charges a lender has for providing the new remortgage. This will allow a borrower to determine whether completing a remortgage is financially viable for them, and particularly whether this will put them in a better financial position.
Many traditional lenders now offer adverse credit remortgages, but the most popular method of obtaining this type of home loan financing is through an online lender. A potential borrower can typically provide a few personal and financial details, complete a short application, and can be approved within a matter of minutes. A lender, however, will generally ask for further information and documentation to support the details provided.
Many people choose to approach a mortgage broker when they are looking for an adverse credit remortgage. This is because they know they will have to shop around to firstly, find a lender that is willing to help them, and secondly, to find the most competitive terms and interest rates. However, by using a mortgage broker they can complete the majority of the leg work for borrower and find the best deal possible. A broker will also help a customer package up their application and documents, thus allowing for a smoother and quicker remortgage process.
The adverse credit market has changed a lot over the past few years, and this is very much down to the credit crunch and global economic recession. More and more lenders have come to realize that many people have had their finances, and indeed their credit rating, affected, and therefore they are more willing to lend to people with adverse credit. This, of course, makes it a little easier to obtain an adverse credit remortgage than it may have been previously.