Bad Credit RemortgagePosted on September 2nd, 2010 William No comments
As with a standard mortgage, the rates you can find with bad credit will be considerably worse than if your credit was better, if you can find them at all. However, that doesn't mean that it doesn't make sense to remortgage, particularly if interest rates are lower and your credit has improved since you got your original mortgage. Sometimes, when you've made mistakes in the past but are now making an effort to pay off your debt, high interest rates can make it difficult to even make a dent; in this case, a bad credit remortgage can be your best option for getting on top of your debt. Additionally, by taking out a different type of debt and using the money to make good on your existing debt, you can actually improve your credit! Finally, if you've built up considerable equity in your home and can do a cash-out remortgage while still retaining a good bit of equity, this lowers the risk to the lender (because the house is worth more than you owe them), which makes it easier for them to approve the loan.
If you haven't yet, start by reading the page on remortgages; you want to be familiar with what they are and how they work before continuing.
Remortgages require many of the same documents as for a first mortgage or refinance. Expect to need your last two tax returns and the original W2s, your two most recent pay stubs, and current bank account statements. Additionally, if you're using additional income that's not shown in the above documents, you'll need proof of that income.
Even though you realize you're looking for a bad credit remortgage, you still want to request your credit report ahead of time and look for mistakes; you don't want your credit to appear worse than it actually is. Be sure to give yourself enough time to get any mistakes corrected before you need the remortgage to go through.
A bad credit remortgage is essentially a secured loan, and a secured loan will always have better terms than an unsecured loan. Just be sure that you use the money to pay off your higher-interest-rate debt so that you're improving your circumstances rather than getting yourself in deeper. Additionally, if you're approved for a remortgage, you can always try using that as leverage to renegotiate the terms on your existing mortgage, allowing you the benefit of taking the remortgage without the hassle and fees of actually doing so.