How do I get off my high mortgage interest rate with a Remortgage, even with bad credit
The history of High Mortgage Interest Rate products. It’s fair to say that the mortgage interest rates in the UK have been hovering around the 4 to 5% range for new mainstream customers for a couple of years now. However, the good news is that this week has seen the return of leading banks to the late 3% bracket. So if you are 2% over the new business mortgage rates, it could be deemed as being stuck on a high mortgage interest rate.
What Can Be Done to Reduce a High Mortgage Interest Rate with Bad Credit?
The conduct of your credit history is likely to determine the level of interest you have to pay, but this does not prevent you from reassessing your options from time to time to see if you’re eligible for an improved mortgage. A good place to start is enlisting the services of a professional mortgage broker, such as Niche Advice, who can access mortgages from across the market.
You can also talk to your existing mortgage provider, who may be able to offer a product transfer or product switch. Most mainstream building societies and banks have this facility; however, it can be more of a challenge if your mortgage is with a specialist adverse credit lender, as they can sometimes sell their mortgage books/customers on to other firms, and the new provider may not be able to offer such benefits.
The conventional way of addressing being stuck on a high mortgage interest rate is to try to remortgage to a better-priced mortgage lender.
Have Things Improved Since Your Original Mortgage Application?
It is common for lenders that allow adverse credit to also have greater tolerances around the length of your employment and self-employment; shorter track records on things like contract renewals and regularity of bonuses, etc. It could be now have two years’ trading history, or a year’s worth of contracting experience, or indeed an annual bonus paid for the second time – all of these things lean towards mainstream lending rather than being stuck on a high mortgage interest rate.
The credit issues themselves may be older. Mainstream lenders typically look more favourably on problems such as missed payments and defaults that are two or three years old and have been settled. CCJs, IVAs and Bankruptcies may need older but be guided by your professional Mortgage Broker, such as Niche Advice.
It is likely that your property has increased in value, although not guaranteed. The way that UK mortgage rates are set is largely dependent on the amount of equity you have in a property, and typically for every 5% worth of equity, the rates open to you improve until you get down to around 50% loan-to-value, where the best prices apply. So you see there are options to Remortgage if your on a High Mortgage Interest Rate.
Has Your Early Repayment Charge Reduced Enough to Remortgage?
If you are out of a fixed period, it’s likely you’re free to move to another lender without any penalty charge at all. Is also common for early repayment charges to reduce during the fixed period, often on anniversaries. You will need to check the terms of the contract in your Mortgage Offer document. If you are on an exceptionally high rate, even paying a penalty could be beneficial, but you need to be guided by your professional Mortgage Broker, such as Niche Advice.
Can I Remortgage with Bad Credit if My Income Has Dropped?
The good news is that mainstream lenders generally apply higher income multiples than specialist lenders, so even if your income has gone down, it may well be that you still meet their affordability assessment.
In addition, there are greater tolerances that can be applied if you are not looking to borrow any more money, and are simply retaking the same mortgage amount. This is specifically to help a group of mortgage holders described as “mortgage prisoners”, which you may well fall under, and the Government is keen to press Mortgage Lenders to accept.
Can I Still Remortgage with a Bad Credit Profile?
There is no need to despair; there are many Mortgage Lenders that will consider credit issues. As a rule of thumb, you need to be clear of new problems in the last three months and possibly longer, depending on the extent of the issues. And, the good news is that new business rates are generally lower than variable rates for specialist lenders.
Can a Guarantor Help Me Remortgage with Bad Credit?
Guarantors can help support your mortgage affordability, generally they need to be on excellent incomes as they will need to demonstrate they have the means to support two households. It will not, however, remove your credit problems from the mortgage assessment; in fact, their credit profile also needs to be factored in.
How Much Could You Save by Leaving a High Mortgage Interest Rate Behind?
The tables below illustrate the extra funds you will have in your pocket, which could be life-changing and make your money worries stress-free, rather than being stuck on a high mortgage interest rate.
Monthly payments at 4% rather than 6%
| Mortgage balance | Interest rate 6% | Interest rate 4% | Monthly saving |
|---|---|---|---|
| £100,000 | £716.43 | £605.98 | £110.45 |
| £150,000 | £1,074.65 | £908.97 | £165.68 |
| £250,000 | £1,791.08 | £1,514.95 | £276.13 |
| £500,000 | £3,582.16 | £3,029.90 | £552.26 |
Monthly payments at 4% rather than 8%
| Mortgage balance | Interest rate 8% | Interest rate 4% | Monthly saving |
| £100,000 | £836.44 | £605.98 | £230.46 |
| £150,000 | £1,254.66 | £908.97 | £345.69 |
| £250,000 | £2,091.10 | £1,514.95 | £576.15 |
| £500,000 | £4,182.20 | £3,029.90 | £1,152.30 |
Based on a repayment mortgage over 20 years.
So, being stuck on a High Mortgage Interest Rate is not sensible or enjoyable, so don’t delay. Consult with a professional Mortgage Broker, such as Niche Advice, to explore the options available to you.
If you’re struggling with your current credit. and ongoing rates and you don’t feel that you can read mortgage, feel free to contact the citizen advice Bureau.
