The Finance Blog

A bad credit remortgage is simply a term used to describe a remortgage for a borrower with a poor credit rating. An individual's bad credit rating can relate to a number of different factors including single incidents and an accumulation of different ones - County Court Judgements, Credit Card and Store Card defaults, Mortgage and loan arrears, mortgage default, hire purchase default, an Individual Voluntary Arrangement (Or trust Deed in Scotland), or even a previous bankruptcy.

There are many lenders within the United Kingdom today who will consider lending to those individuals with bad credit. Up until a few years ago, this segment of the market was serviced primarily by specialist, or 'sub-prime' lenders however more recently many of the major banks and building societies have also come on board to provide such mortgages.

The sub prime mortgage industry is still booming despite the recent well documented troubles within the United Kingdom mortgage industry. To many lenders, bad credit remortgages offer a very lucrative business proposition as it is common for the interest rates applied with these types of mortgages to be a great deal higher than their prime counterparts. Up until the middle part of 2007, many people regarded bad credit remortgages as being very easy to obtain - Regardless of how severe a borrowers credit history was. As long as they were able to satisfy the lender's affordability criteria and as long as there was sufficient equity within the property then more likely than not there would be a bad credit remortgage product to service the individual.

However in the wake of the Sub Prime mortgage crisis in the United States and the subsequent 'credit crunch' that has been brought about; many lenders have closed their doors to certain bad credit remortgage products narrowing the amount of bad credit borrowers that are able to obtain them. The focus within the industry today is very much on responsible lending.

All mortgage lending is based on strict set of risk assessment criteria. The general rule of thumb is quite simply that the higher the lending risk involved then the higher the interest rate applicable. Risk does not solely relate to a borrower's credit record however this does play a large part when underwriting an application. Equally important is the security offered for the mortgage - In most cases this will be the borrower's property in question. This relates to many different factors including the location of the property, housing market conditions, whether the property is situated in a high risk flood area, the condition of the property, the future saleability of the property.

  

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