Getting a remortgage with adverse credit is a daunting task and it is increasingly becoming a widespread problem in UK. An adverse credit remortgage is a type of mortgage, which is particularly used by people who have adverse remarks in their credit history.
Adverse credit ratings are rising as people are finding it difficult to repay the loans they took in order to remedy their financial exigencies. The credit ratings are remarks given by your previous creditors based on your repayment history. If you are punctual and prompt in repaying the installments they give you a positive remark and a negative rating incurs, if you miss their installments and are erratic in the repayment schedule.
Lenders are wary of this negative or adverse credit rating. They find it risky to lend any amount to such persons and reject their applications in most of the cases.
While, applying for an Adverse credit remortgage, the borrower has to face two kinds of situations. In the first case, although he has an adverse credit rating against him, he can offer something like a house or home equity as a collateral to the remortgage. In second case the borrower with the adverse credit history doesn't have anything to offer as collateral or the value of collateral is not adequate to guarantee the loan.
The lenders, if they find that they can get something as collateral for the remortgage offer, are prompt in lending as compared to a situation where they have to lend solely on the basis of creditworthiness of the borrower. The lenders are comfortable by the fact that if the borrower defaults in payments, they can repossess the collateral. Depending on the collateral and creditworthiness, lenders fix interest rates, lending amount and the repayment schedules.
Remortgaging involves changing the mortgage without changing the existing house or property. Adverse credit remortgage can be used for getting a better deal on mortgage from a different lender. It can also be used to get an improved deal on mortgage from the existing lender. Adverse credit remortgage may also be used to provide funds or to get a loan on the increased equity in home or property. They are very useful in consolidating existing debts from various sources into one single manageable loan. Emergency expenditures like the purchase of a car, a holiday, some reconstruction or medical bills can be funded by such remortgages.
Getting an adverse credit remortgage to finance these purchases is considered a wise option because remortgage offers lower interest rates and easy repayment options as compared to other methods of borrowing.
People with adverse credit should be very cautious while taking a remortgage. Mortgage lenders in UK are squeezing such people with higher interest rates and unreasonable terms and conditions.
Remortgaging involves many fees, which increase the cost of the process. There are early redemption penalties, re-appraisal of property, solicitor fees, office and conveyance charges, which have to be taken into consideration while taking an adverse credit remortgage. The fact that a borrower has an adverse credit rating makes the situation even worse for him. As the lending market in UK is very competitive the borrower is advised to shop around for lenders, which offer zero product fees, cashback, free basic property valuation and minimum fee for legal and other expenses. A good lender, who provides adverse credit remortgage will negotiate the best possible deal on prepayment penalties for its client. Finding such a lender is not easy but ultimately it will be worth the effort.
For most of us, if we have something to offer as collateral, getting an adverse credit remortgage will be quite easy. The new lender will ask for all the documents and complete the formalities. If everything goes smoothly, it won't take long to get an adverse credit remortgage.