Remortgaging without a perfect credit score

ended 11. May 2021

A journalist we know @ the i paper is writing an article entitled ‘Remortgaging without a perfect credit score’ and wants some views from brokers about what borrowers should do, where they could find help and how they can maximise their chances of getting approved. Qs include:

  • How can a homeowner get the best remortgage rate?
  • Is it harder to remortgage if your income has dropped this past year?
  • How can a borrower boost their credit score? Is there any support available?

Any other snippets of advice welcome!

8 responses from the Newspage community

“It's crucial to have an accurate value of your property when applying for a remortgage. Too high and, when the lender comes to value it, they may turn down the loan or impose a higher interest rate. Too low and you could end up applying for a higher rate than you're really eligible for. “Online tools like Zoopla can prove a good starting point for a more accurate estimate than you might get from an estate agent’s window. Increasingly, brokers have access to technology such as Hometrack that can help borrowers with property value estimates, too. “A key factor in the rate of interest charged on any mortgage is the Loan to Value (LTV), calculated as a percentage of the mortgage amount vs the value of the property. A lower LTV is seen as less risky for the lender and so typically leads to a lower mortgage rate."
"Boosting you credit score isn't as difficult as people think but it does take time to see the improvements. There are a few simple things you can do, starting with downloading your credit file and reading through it thoroughly, making sure everything is correct and, if not, contacting the credit agency in question and getting it updated. "Always be sure to get on the electoral register, keep your credit utilisiation below 50% and do not, under any circumstance, miss any repayments. Just keep your report clean and watch your score improve. "The best remortgage rates are usually reserved for people with better credit scores and those with what we call low loan to value (LTV), meaning you are borrowing as little as possible against the value of your home. "The key is to be prepared and not miss the end of your existing mortgage, as it can be costly if you end up on your lender's standard variable rate, which is usually considerably higher than a fixed rate. "It's good to see lenders being more understanding about falling income since the pandemic started, although many will want to see that your income is back to normal before they will give you a mortgage. If your income is still below pre-Covid levels, it will make it that little more difficult to get a mortgage."
"The key to getting the best mortgage rate is having access to the whole of the market. It is vital that borrowers shop around as rates really can vary. "While mortgage rates are still super low, lenders do tend to fish in the same pool, hence a good credit rating and proof of income are key in obtaining market-leading rates. "The pandemic has made it more difficult to obtain a mortgage if you have been furloughed or work in an industry that has been hit particularly hard by the crisis, such as travel or hospitality. "Regularly checking your credit history can make a real difference to ensure that everything is correct. "Other aspects can improve a credit rating such as being on the electoral roll, ensuring that you do not exceed any lending limits and keeping the number of credit searches within a short period of time to a minimum."
"The best way to boost your credit score is to ensure you are on the electoral roll at your current address: this can very quickly and effectively have a significant impact on your score. "Another key factor is to make sure that all credit facilities, such as bank accounts, credit cards, personal loans or car finance, are registered to your current address. "Each time you move property, it is important to update the relevant credit reference agencies through your various accounts. "Also, avoid unnecessary credit searches such as mortgages in principle that leave a hard footprint; an excessive amount of these in a short space of time can have a negative impact on your credit score."
"When it comes to remortgaging, I would always advise that borrowers do three things. Firstly speak to their existing lender to see what they will offer, then secondly do a little research themselves online to get a feel for what else is available. "Finally, I would always recommend speaking to an independent mortgage broker to make sense of all the options, scan the many broker-only deals around, and also check the suitability and small-print of each product. A good broker will still direct you back to your existing lender if that is the best option. "This process could save you hundreds, if not thousands of pounds over the remaining mortgage term with very little time and effort. "If your income has dropped, this may well limit your choice when it comes to remortgaging. The good news is that most lenders now have a good selection of Product Transfer rates for existing borrowers where they do not re-underwrite on the basis of income so it is worth checking these products out. "That said, there are still some excellent choices for borrowers on the market at the moment and any decent broker will be able to quickly assess whether you can remortgage elsewhere or if you should stay with your existing lender. "I would always recommend you keep tabs on your credit score, especially if you are thinking about taking out a mortgage. It is important to make sure there are no errors on your report and act to improve your score where you can before you come to apply for a mortgage. "Making sure you are on the voters' roll at your current address helps and make sure every bill is paid on time. Setting up direct debits for everything is a good way to ensure nothing is missed. "It may help to get a credit card and use it sparingly each month, making sure you have a direct debit set up to pay the outstanding amount off at the end of each month. This helps to build up a healthy credit profile of borrowing money and paying it back on time. "If you do not have a perfect credit score then do not worry, there are a raft of lenders out there who credit check rather than score and specialist lenders who are able to look at borrowers with a range of credit blips."
"When it comes to rates and lender criteria in a market as choppy as this, a homeowner's first port of call should always be a reputable independent mortgage broker. "Yes, of course I'd say that but a decent broker will help navigate you through the intricacies of a remortgage and ensure you are getting the best possible deal. "It is potentially harder to remortgage if your income has gone down, but if this is the case arranging a rate switch with the borrower's existing lender can be an option. "The big mistake that many consumers make? Buring their heads in the sand and slipping onto a lender's standard variable rate. Very often, this just leads to a client throwing money down the drain when an hour or two speaking to a broker could save them hundreds of pounds a month. "Lenders will always look more favourably on borrowers who are on the electoral roll so they can easily verify that they exist, and people who are good at managing credit and paying their bills on time each month. In short, no missed payments! "Mainstream lenders are also wary of people who are 'credit hungry', so no maxing out credit cards and avoid very expensive monthly outgoings like cars in relation your income."
"If your income has fallen drastically, then the amount a lender will be willing to offer you will drop. There are many factors at play in getting approved for a remortgage, including how much you want to borrow, whether your financial circumstances are temporary, and how much of your mortgage you still have to pay. "There are advantages to remortgaging: getting a more flexible deal, lower interest rates if your home's value has improved, and not being limited to your existing lender's products - but it is absolutely imperative that the deal is right for you. "Similarly, a mortgage product transfer with an existing lender can suit some individuals, and eligibility checks are not always as stringent, particularly in relation to income, although brokers will always carry out affordability checks. "A sensible approach is boosting your credit score: making sure you pay your bills on time, registering with the electoral roll, checking for any fraudulent activity, and paying off any outstanding debts are all useful ways to help get an approval over the line."
"While it's a positive change to see so many consumers now monitoring their credit profile with Experian or Equifax, it is worth noting that there's no such thing as a universal credit score. "When assessing your application, mortgage lenders will factor in your payment history for any other debts you have, how much deposit you have, whether your income fluctuates, and the cost of living in your area before they make a decision."