How to Remortgage with Bad Credit in 10 Steps

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Having bad credit won’t necessarily mean you are unable to get a mortgage. At Willows we work with a host of specialist lenders that are open to accepting applications from people with IVAs, CCJs and defaults on their credit file.

We explain how you can remortgage with bad credit in ten short steps, giving you a clearer idea of how you can gain access to the funds you need.

1. Speak to Your Current Lender

The first thing to do is to get in touch with your current mortgage lender. You will need to gather information like:

How much money is left on your mortgage.
Your current interest rate.
If you are tied into any long-term deals – if so, what are the terms?
How much are the early repayment charges (ERCs)?

In some cases, ERCs are only applied to the length of the initial fixed rate or discounted period. Either way, it is important that you clarify this with your current lender before you proceed.

2. Get a property value estimation

Whilst this can’t be used as an official estimation, it will prove useful to understand the size of the mortgage you might be able to get.

To get an approximate valuation of your property, go to websites like Rightmove or Zoopla and find similar properties to your own that have been recently sold.

You can use the sold prices as a guideline for how much your property may be worth on the current market, which will give you a rough estimation of the current value of your property.

3. Check Your Credit Profile

You should get an update on where you stand credit wise before you attempt to remortgage. If you are struggling to get a copy of your credit report, get in touch with us and we can arrange one for you free of charge.

When reviewing your credit report, look for things like:

Any old addresses that are still active on the report.
If there are any unfair defaults that can be challenged.
Any links to people you no longer have a joint account with.
Cancel any unused credit and store cards still listed as active.
Any other mistakes or incorrect information.
Note any missed payments, CCJs, IVAs and defaults – record any explanations as to why these occurred as they may be needed for your application.

Your credit score can be negatively impacted if incorrect or outdated information remains ‘live’ on your credit report, so it is important to resolve as many as you can before you remortgage.

4. Decide How Much You Need to Borrow

The first few steps of this process should give you an initial idea of how much you will need to borrow.

If you are borrowing for a planned home improvement project, get some quotes from builders as that will give you an idea of the cost involved.

Another example would be if you are hoping to use the money to consolidate your debts. You can use the information on your credit report to help you arrive at a figure you would like to merge into your mortgage.

You may also find it helpful to create a budget that accounts for all your income and outgoings each month. This will tell you how much you can reasonably afford to put aside for the new payments.

5. Gather Proof of Income

When you apply to remortgage, lenders will want up-to-date information about your financial situation.

It’s a good idea to prepare the documentation ahead of time, as this will help you avoid any unnecessary delays during the application.

Employed applicants: Most lenders will ask you to submit payslips from the last 3 months.
Self-employed applicants: You’ll likely be asked for the last two annual tax returns and overviews.

If you have recently become self-employed, most lenders will accept information that covers the first year of trading.

6. Get a Mortgage Broker

To get a broader picture of what is available on the mortgage market, you may find it helpful to have a chat with a broker.

At Willows, we keep the process as simple and hassle-free as possible, so we concentrate on getting you the most suitable deal.

We start by collecting some basic information about your income, mortgage and property. This helps us to potentially match you with any options that may be a good fit for your finances.

For example, if you’re looking to borrow more than the property value, or your income is £20,000 and you require a £500,000 mortgage, we can quickly advise if we’re unable to help—saving you valuable time.

If the initial information suggests we can help, the next step is to gather a little more information so we can match you with quotes that are in line with your needs.

Get in touch if you want to find out more about how we work and what we can do to help you get started.

7. Broker Submits Application for a Decision in Principle (DIP)

The broker will then submit your application to their panel of lenders to find the most suitable option for you.

A credible broker will collect all the relevant explanations about your credit history from you to submit to the lender. If a manual referral is needed, they will present your application to the lender in the best possible way.

The earlier this is done the better, as it helps to prevent any unexpected delays later in the process.

If you are happy with the quotes provided by the broker, they will give you a copy of the mortgage illustration, also known as an ESIS (European Standardised Information Sheet) which includes all the mortgage information.

You will also be given a recommendation letter giving you more details about why this particular lender and product were selected

At this point, you will have what’s called a Decision in Principle (also known as a mortgage DIP). This means the lender is indicating that, based on the information you’ve provided, they are likely to have a mortgage option available for you.

8. Submit the Full Mortgage Application

At the Decision in Principle stage, key information such as income and property value is provided to the lender based on the applicant’s declarations. At the full mortgage application stage, we submit evidence to support this information—for example, by providing payslips and conducting a property valuation

If a referral has been made due to the credit profile, the lender should already be aware of this, and they should also be in receipt of the explanations you have provided about previous bad credit events, along with anything else they need to complete their assessment.

9. Receive Your Mortgage Offer

Once your application has been reviewed in full and accepted by the lender, they can now send across a formal mortgage offer.

This document will include things like the:

Loan amount
Interest rate
Repayment terms
Any other relevant details

Take your time to read through the document to ensure you fully understand the terms. If you have any questions at this point, get in touch with your designated broker who will be able to help.

10. Mortgage Completion

If you accept the offer, then the final stage should be fairly quick and straightforward. In many cases it should only take a few days, although it can depend on the lender.

The funds can then be transferred to your designated bank account and the repayments will start from the date stated on your new mortgage agreement.

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