2011 New Information About Adverse Credit Remortgage
A remortgage is a way to release some equity from your home for any number of purposes. If you have adverse credit however, you might find it difficult to remortgage with a mainstream lender. This put you at a disadvantage but it's certainly no obstacle; in recent years the mortgage market in the world has seen a steady increase in the number of adverse credit lenders; for the consumer, more competition means better rates.
So whether you've had mortgage arrears, discharged bankrupt or any other hiccup in your credit history, you should be able to remortgage, at competitive rates too.
Bad side of a Remortgage
To most people the home is the most treasured possession, therefore when considering a remortgage, you need to weigh up the pros and cons and work out whether it is the correct decision, it helps to know the potential pitfalls:
Early Repayment Charges
If your existing mortgage is a fixed, capped or discounted rate, there is a possibility that an early redemption charge will apply on the loan should you choose to remortgage with another lender. Early repayment charges only apply within a given period of time e.g. 4 years. Depending on your motive and/or the rates you get from the new lender, it might be feasible to pay the charge and remortgage your loan. However, if you work out that it's not feasible, it would make sense to wait until the Early Repayment Charge period has passed before you remortgage.
Why remortgaging
· Typically, people remortgage to get better rates, to consolidate other debts or to raise cash for any other purpose.
· If you have adverse credit, it is unlikely that you would get better rates than what you currently have; adverse lenders tend to charge higher interest rates due to the high risk associated with people with adverse credit.
· Remortgaging to consolidate your existing debt is a sound reason as paying off those debts will also improve your credit rating in the long run.
Introductory offers
· Although not common with adverse credit mortgages, some lenders may offer you an attractive introductory discount rate. You shouldn't overlook this, however, put more emphasis on your long term goal, evaluate the lender's Standard Variable Rate to see whether it would work out cheaper than what you are currently paying.
· Also pay attention to other terms such as Early Repayment Charges; in case your credit rating improves in the future, you may want to remortgage at lower rates. Paying off your debts and making mortgage repayments on time will substantially improve your credit rating.
Alternatives to an adverse credit remortgage
Home owner loan
An alternative to an adverse credit remortgage is to take out a home owner loan; a home owner loan is not connected to your mortgage although it would be secured on your home. Your credit rating plays a part in the interest rate, although approval shouldn't be too hard as long as you have equity in your home.
Consider a homeowner loan if:
•You need small sums of money quickly
•Wish to stay with the same mortgage lender
•Unable to get an adverse credit remortgage
Not ideal if:
•You want to release equity from your home
•Consolidate to one repayment
•Reduce your monthly mortgage repayments
